Single payer vs. universal public coverage through managed competition

Universal Health Coverage? Why?

By Walter McClure, Alain Enthoven, and Tim McDonald
Health Affairs Blog, July 25, 2017

The Congressional health care debate has become a war between two seemingly irreconcilable extremes, coverage versus budget control. Health care is a right, thunders Bernie Sanders (I-VT). There’s no free lunch, roars back Rand Paul (R-KY). We think both sides miss the boat. Forcing health care into this simplistic left-right straitjacket misleads the nation. It is time to recast the issue properly.

Public Investment

Universal health coverage is better viewed as neither owed to us by government nor a govern­ment give-away; both labels misinform. A more insightful analogy is universal public edu­cation. Does government owe people a public education? Is universal public educa­tion a handout to “takers” who ought to go out and buy it on their own?

When universal public education was first proposed, many of the privileged might have said, what do you want to educate “those” people for, you are just throwing away our tax dollars; if people wish education for their children, let them go out and buy it … ignoring that many could not afford it. Fortunately, we did not listen. We wisely invested in public education for all, and the productivity of our workforce boomed.

In the same way, universal health coverage is a wise public investment. Done right, it will return far more to our national prosperity than it costs in tax dollars.

Perverse Incentives

The crucial caveat is “done right.” Neither Medicare, nor Obamacare, nor the unsound private health insurance market have yet done that kind of broad public investment right. All three lack serious incentives on providers to focus on the long-term, reducing cost while raising quality and keeping people healthy; indeed, the incentives are to raise cost no matter the quality. In particular, all three totally lack either means or incentives for patients to iden­tify and choose providers who are better for less over those who are more costly.

The left’s faith in “single-payer” has proven ill-founded; we have had a public single-payer program for 50 years, Medicare, that absolutely controls the over-65 market. Yet despite the best efforts of the agency its costs still balloon out of control. The right’s faith in the private health care and insurance markets has proven equally ill-founded because both are severely unsound and, as Adam Smith taught us, unsound markets do not self-correct. As a consequence, in the same five decades the private market has done no better than Medicare on cost control. Five decades of efforts by both approaches using bureaucratic controls, micro­manage­ment, and token bonuses to make providers efficient have failed to contain run-away cost.

Looking Beyond The Symptoms

If the object is to broaden and improve the productivity of our workforce, then trying to contain cost by butchering eligibility, benefits, or quality of care and coverage is false economy of the worst order.

The correct approach to true cost containment is to drastically improve the quality and productivity of our bloated medical care system.

It’s not that we don’t know how to practice this kind of medicine, ample research studies show we do. It’s that the present system punishes providers with less revenue if they seriously try, and the most efficient are hurt most of all. It rewards those who run up costs regardless of quality. And because most medical care is a judgment call, there is no way that bureau­crats can second-guess doctors into serious cost contain­ment. But, patients, if properly informed and incented and thereby enabled to freely choose providers for value, would hold them to account by their choices far better than any regulators, public or private, ever could.

In other words, the runaway cost and compromised quality of our present health care system are symptoms of a deeper diagnosis: powerful perverse incentives. Policy keeps missing the diagnosis and treating the symptoms

Moving Beyond ‘Single-Payer Versus Private Market’

We need patients choosing among provider groups and delivery systems, not individual services. Patients generally don’t know what services they need, that’s why one goes to medical school; so a market of individual services makes no sense. Choosing a provider group, on the other hand is something we can expect of informed patients. And once provider groups learn that patients are choosing them based on the value they provide, those groups will begin choosing to deliver the services and referrals that get the best results at least cost, and may, desirably, begin to consolidate into more efficient integrated delivery systems. In short, if we turn the present perverse incentives around—by giving patients (1) objective ratings showing which provider groups are better for less, and (2) rewards consumers to choose them over costly providers (both objectives feasible in practice)—we can, slowly but surely, turn our health care system around into the high-quality, efficient system we seek for our children, our workforce, and our elderly.



By Richard N. Gottfried (Chairman of the New York Assembly Committee on Health):
Any set of payment methodologies or delivery system reforms can be done in a way that does good or ill. If we have insurance company payers, they will use their power to serve their interests well, not ours. With a public payer, there is a much better chance that the payer will work for change that is in the public interest. And if the wealthy and powerful are in the same boat as the rest of us, they will make sure they’re in a good boat, and the rest of us will benefit. Yes, a universal coverage system should be “done right.” A single-payer system is how we have the best chance at a system that serves the public, not insurance company stockholders. And a single-payer system enables us to remove financial barriers to care and pay for it fairly, based on ability to pay.

By Don McCanne, M.D.

It’s great that the authors remind us about some of the serious policy defects in our health care system, but there are a few issues here that warrant special comment.

Kenneth Arrow told us why markets do not work well in health care. The efforts to provide patient-consumers with price and quality information have not been very effective, whereas inducing price sensitivity through cost sharing, especially large deductibles, provides an example of an approach that the authors warn us against – “trying to contain cost by butchering eligibility, benefits, or quality of care and coverage.” Unleashing health care shoppers is not the path to value.

The authors have long supported competition between truly integrated health care delivery systems – “managed competition.” But assume each system provides comprehensive services. Oversimplifying, yet making a point by using a graphic construct, imagine four competing integrated systems located on four corners of a central intersection in a large city, each with a full complement of services, including specialized services such as cardiac surgery units or neuroscience centers. That duplication of services obviously is wasteful, not to mention that it would still be difficult to shop which integrated system to join for all future care. Since clustering them is not logical, should we spread them out so they serve the four quadrants of the city? Then health care shoppers are more likely to choose based on geographical considerations since bypassing your own center to go to one of the others would impair access because of transportation challenges, not to mention that having coverage under one system would prevent access to noted specialized services in the other centers. And satellite clinics? Do the four systems provide four competing clinics in each suburb or rural community?

It would be far better to have our entire healthcare system integrated. That can best be done though central planning and separate budgeting of capital improvements. That would greatly diminish the waste that we now have because of duplication in competing systems, while ensuring that access to appropriate facilities and services would be more optimal.

In contrasting free market solutions with a publicly financed and administered single payer system, the authors suggest that these are two extremes of political ideology, creating a “simplistic left-right straitjacket.” But when you look at the important issues in health care such as universality, access, affordability, efficiency, equity, and choice of health care providers, it is the public system and not the private market that is designed to ensure that those goals are met. Think of the freedom in the traditional Medicare program and contrast that with the private insurance system (narrow networks, high premiums, high deductibles, instability of coverage, administrative waste, inequity, etc.), and the straitjacket seems to be in the market.

A well designed single payer system – an improved Medicare for all – would provide a framework in which to incentivize quality and value. Integrated systems such as Kaiser Permanente would still provide services within a single payer financing system, but displacing our entire health care delivery system with a cluster of Kaiser Permanente-type entities is not a practical or efficient solution.

(There are also excellent comments by Sarah K. Weinberg and Johnathon Ross available at the link below.)



By Don McCanne, M.D.

The authors support public universal health coverage while rejecting single payer on the left and private insurance markets on the right as “two seemingly irreconcilable extremes, coverage versus budget control,” yet they advocate for competing integrated delivery systems - Alain Enthoven’s dream of “managed competition.”

Dismissing the “simplistic left-right straitjacket” as if it represented two equally ill-advised extremes is in itself a simplistic approach to health policy. The recent Republican effort to get private health insurance right is only the latest example of the deficiency inherent in the fragmented private insurance and public program model of financing health care. We have had over half of a century of experience to prove that it doesn’t work.

In contrast, a well designed single payer model not only resolves most issues with the financing of health care, but it also improves the distribution and efficiency in utilization of resources (see

The authors’ suggestion that the entire health care delivery system be integrated into individual competing delivery systems, like Kaiser Permanente, does not substitute for many of the design features and goals of a single payer system. Plus the concept introduces new logistical challenges such as inefficient duplication of facilities and services, and failure to cover regions that do not support the business plans of the integrated systems.

Patient choice of integrated delivery systems can certainly be included in a single payer system, but such integrated systems alone cannot duplicate all of the important functions of a single payer system that would ensure true universality, access, affordability, efficiency, equity, and choice of health care providers.

Health care professionals and institutions could still compete on perceived quality and service, but we should use central planning to avoid inefficient, wasteful duplication of facilities and services under the theory that we should be promoting price competition in the marketplace. Public administered pricing based on legitimate costs and fair margins is more effective and more efficient.

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