Many - I would say a large majority - in the progressive community are supporters of single-payer healthcare financing, and for some of them (myself included) nothing but a nearly pure and unadulterated single-payer system is a viable solution to our current healthcare financing mess.
Others consider themselves to be realists, pragmatists, politically astute, or for whatever reason believe that single-payer, although highly desirable, is a pipe dream at this point in time. The main arguments are that some reform is better than nothing in that at least more people will have coverage, and that the insurance industry is just too powerful to cut out of the picture. It is then suggested that there is some way to fashion a reformed system for financing healthcare that pits private insurers against a public insurance system in such a way that a single-payer system will naturally, over time, evolve and we will have a de facto single-payer system.
Starting with such an "evolving" system is most likely a very bad idea. Why?
First off, let's just call it like it is. Private insurers (PI) add absolutely nothing of value to a well-designed single-payer system - anybody who has studied the issue beyond a casual interest would agree with that statement. Most of the problems associated with Medicare, the closest to a single-payer healthcare financing system that we have in the US (besides the VA (1)), are a direct result of the encroachment of privatization on what was otherwise a sound, albeit underfunded, system for financing the healthcare of our older population.(2)
You will often hear people talking about the desirability of the "choice" offered by the PI. If you think about it, however, the only choice you are offered by them is with regard to what level of risk you are willing to take, that is, how best can you try to game the system. All PI offerings are simply variations on what is covered and what the co-pays and deductibles are (and to a lesser extent the life-time benefit cap). If you are young and healthy, there is little reason to pay a large premium to lower your potential out of pocket expenses - your expenses are bound to be low anyway so why bother? But the PI are delighted to offer you a reasonably affordable premium if you take those risks that have been bundled into any number of plans. Someday you will most likely be sick, probably in your old age, but until then you have successfully avoided paying much of significance into the $kitty serving your risk pool (and who's to blame you?). Congratulations!(3)
In the "mixed" system, there are competing insurance products offered by the PI and the public system. How, exactly, this is setup is anyone's guess at the moment - I certainly can't think of any obvious logical way (some have tried (4)). Anyone who can afford insurance pays out of their pocket (possibly through taxation and possibly with employer assistance), and by way of some sort of means test those who can't pay fully or at all are publicly subsidized. Hopefully everyone at least now has access to some sort of coverage., after all, that is the whole point of this exercise.
So what's the problem? Competition is good, isn't it? Having the PI not only compete against themselves but against a publicly offered plan is a brilliant idea, no?
The big problem is, how do the PI make a profit? Certainly the public plan needn't make a profit (that would be extremely distasteful, to say the least, and kind of makes you wonder why we allow the PI to make a profit in the first place). So the PI must be at an immediate disadvantage. How do they currently make a profit? Mostly by filtering out the people who actually use their product, since every dollar spent on healthcare is a loss. This is done by refusing coverage for individuals and raising premiums on groups and individual subscribers.
So we must somehow remove these filters and force the PI to cover anyone. That's a given. But there remains a huge problem with the premiums.
The PI, once they are forced to cover anyone, will be forced to raise premiums on groups and individuals to ensure that there is still something left over after all healthcare (aka "medical losses") is paid for. But, if they actually raise premiums on everybody, why would anyone buy their product if there is a public equivalent that is most likely cheaper? Why would anyone accept that their premium is higher than the other guy's? This no longer makes sense whatsoever, unless the PI are still able to offer "choice" as described earlier.
If they are allowed to offer "choice", then naturally the healthier population will gravitate to the PI, buying cheap insurance that yields a tidy profit and leaves the less healthy to the public sector. This amounts to a direct subsidy of the PI at the expense of the public with no value added to the actual financing of healthcare. It costs the public system in two ways. First, the public system is saddled with the population that is most expensive healthcare-wise, and second, money that would otherwise be paid into the system to pay for the inevitable future expenses of the currently less expensive population is not.
If, in fact, the PI are not allowed to offer "choice", then there is absolutely no way they can compete with a public plan, unless the affordability of the public insurance is purposely reduced to give the PI a "chance". Again, this is in essence a direct public subsidy of the private insurers with no value added to the overall system.
I challenge anyone to come up with a logical solution to either of these roadblocks. I haven't even delved into the problems with policing such a monstrous system, but you can well imagine that the cost will not be trivial. Enrollment into and out of the various plans, public or private, is also a huge cost. Both of these costs are directly attributable to keeping the PI in play.
You still might say that we can at least start with such a system and, under the right conditions (immediate or gradual regulation of the PI filters and premiums) we will have successfully duped the PI and eventually we will have our cherished single-payer system.
There are a few problems here. First, if you think you are going to effectively regulate both the PI filters and premiums without a fight nearly equal to what you are going to get by simply enacting single-payer from the get-go, you are mistaken. The PI are happy to jump on board the "cover everyone regardless of pre-exisiting conditions" provided nothing is mentioned about capping premiums.
Let's imagine that there is some workable system in place, without premium caps or without filters (but not both). In the first case, those whose premiums rise beyond their means will now qualify for the public system. In the second case the PI are able to shuffle people onto the public system at will. In either case, the public system is eventually saddled with more and more costs (just like now) as the PI throw it more and more anchors. The whole thing amounts to our current system on steroids, and has every probability of collapsing distressingly quickly under its own weight and the political pressures from the "free marketers".
This is the wet dream of every Republican - a Democrat-initiated failed reform of "healthcare" (they tend to conflate healthcare financing with actual healthcare, but so do a lot of us). Mixed private/public schemes for reforming the financing of healthcare have been attempted many times and in many states with very poor results (presentation software required), often absolutely miserable results, and never at a net savings which is possible with a single-payer system. The better part of valor is to take the road less traveled.
Let's start with single-payer.
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(1) The VA is a somewhat different kettle of fish as it is multi-tiered (some clients get full coverage, others get some coverage with co-pays) and is fully publicly funded - it also owns and runs the delivery end of things (hospitals, clinics, and providers)
(2) The irony here is that privatization actually increases the overall cost of the system. The same problems are slowly creeping into the Canadian provincial systems, as well, again largely due to privatization and underfunding.
(3) In fact, private insurance is mostly about limiting choice. You have limited choice of providers and your providers are often saddled with decisions made by the insurer as to what constitutes acceptable practice - contrary to what you and your provider would choose.
(4) The Baucus Plan (pdf) strives to make some headway in this regard by creating a "health insurance exchange" (see Chapter II) with happy words like "the insurance market must be reformed" and so on. This will certainly be the most contentious aspect of whatever legislation, should there be some, that comes out of this approach. More fodder for future diaries (sigh). A slightly more obscure attempt is embodied in this white paper. The author sounds like a rabid single-payer advocate if you read his opinion pieces, so it's a bit hard to understand why he even attempts to keep the PI in play. One can speculate, but honestly what he is describing would be completely unacceptable to any private insurer. The Dutch system, undergoing major changes at the moment, is another case study in the "mixed" bag. This will be a good one to watch - I don't expect any miracles...