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Is healthcare a right or privilege?

It doesn’t really matter where you stand on this entirely artificial debate. Practicality of modern life is that health care has to be provided, and the only questions are how much, at what costs and with what outcome. Would you agree that providing health care to uninsured via emergency room visits is not cheap, not effective, and does not result in a good patient outcome?

Point #1: Right or privilege, it still has to be done.

Let also consider insured. Your typical insured health care consumer is not a rational market player, with a rare few exceptions consumption pattern is “all of it, all the time, at any cost”. In an individualistic society like US health care will be universally seen as a matter of self-preservation. In such environment pure market force acting via supply and demand cannot regulate the price. People will not turn away from cures or lifesaving treatments no matter what the cost is, so the ‘market’ forces will drive cost up only constrained by efficiency of extracting value from consumers. Ever-climbing cost of health insurance when some of these unconstrained costs get distributed to the insured population is a grim reminder of market system on-going failure.

For example, at this moment the only downward pressure on certain cancer treatments is an average net worth of a likely cancer patient. We see plenty of evidence of this -medically-related personal bankruptcy is still the leading category; even bankruptcies due to housing market collapse did not dethrone it.

Point #2: Health care demand is inelastic; as a result costs are contained only by ‘net worth’ calculations.

So what are actual sources of health care costs? Unsurprisingly end-of-life treatments come up the list, but so are emergency rooms. Administrative costs are obfuscated, but they greatly exceed stated industry average “profit margins” due to cost of doing business in addition to profit is creating unacceptable drag on the system. Still, with all of these costs it is clear that overall costs keep rising. This drives up price of coverage for everyone, cancer survivor and a healthy and fit 20-something looking for accidental coverage. With increasing wealth inequality and due to ‘net worth’ calculations more and more people are getting priced out of any and all coverage.

Point #3: Wealth inequality creates a situation where increased profit taking from well-off consumers makes pricing bottom out of the market a profitable and acceptable business decision.

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Could a single-payer system work in US, and is it preferred alternative to existing system?

You mentioned few key concepts as your objections to single-payer – economies of scale and market price. I addressed market price with Point #2. Let us examine economies of scale.

Health care costs can be categorized in a following way – research and development, delivery of treatments, and manufacturing of pharmaceuticals and devices.

Delivery of treatment is a fixed cost, no matter if you amputating the leg with a rusty saw or delivering laser brain surgery you still have to pay for training, facility and personnel. Implements do change, but I put them into separate category.

Your argument then will have to be refined into R&D and/or manufacturing. At this point mass production is well-understood concept, so we can consider costs of treatment and devices as mostly recouping costs of R&D. To support this assertion we can look at a low cost of generics.

R&D, with US doing something close to 60% of worldwide, is where most of expenses occur. Some of it is publicly funded, but lots of it is private. Covering costs of private research, design and clinical tests is the main source of raising healthcare costs.

So where does this entire R&D budget goes? Well, as with any business decision, it goes toward developing treatments that are most profitable. Point #2 and #3 come heavily into play here.

Point #4: Health care costs, at least in private sector research and development, are not driven by improving patient outcomes or quality of life but by maximizing profits.

So what does Point #4 means? It means that development of new treatments is not prioritized according to reducing suffering or finding new cures for obscure condition. This means that a lot, if not most, of private R&D is spent on gaining marginal improvements for blockbuster profit-generators. From the point of “greater good of a society” -this is not an effective use of our collective resources. Last cancer treatment was good enough; we do not need another one, one that we as a society can no longer afford and are not capable of refusing on individual level. (See Point #2).

With Point #4 in mind, single-payer will definitely reduce private investment into R&D. I demonstrated that this is not money well-spent, but rather money that can generate return. Single-payer will not produce shortages; nobody will take “will not sell” decision, they will simply take a loss and reduce future R&D.

Do you know why single-payer countries can negotiate lower prices? Well, partially because of ‘collective’ aspect of it, but mostly because of a threat of revoking patents and manufacturing generics. For example, if you refuse to sell a drug to Canada, they have a right to revoke your patent and manufacture generics right away.

This is exactly why we need single-payer in US. To rationally distribute health care. To put controls on run-away healthcare spending. To address Points 1-4.

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I am not as concerned with single-payer, as I am concerned with providing universal coverage at a reasonable cost. If we simply take existing system and force universal coverage (Obamacare) then costs will spiral out of control.

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