by Robert H. Frank - NYT - June 8, 2018
Single-payer health care systems deliver better outcomes at much lower cost than those that rely primarily on private insurance, as we do in the United States.
Considerable evidence supports this claim. And because of these cost savings, I said in a recent column, the United States could switch to a single-payer system without requiring painful sacrifices from anyone.
Several readers pointed out an apparent flaw in my argument. Since the biggest savings result from lower payments to service providers, wouldn’t the transition be painful for physicians and other health care professionals?
The answer is less obvious than may appear. It is true that there clearly would be constraints on the income of doctors and other service providers in a single-payer system, and many of them would surely feel aggrieved by any attempt to reduce their salaries.
But cutting their pay directly probably wouldn’t happen, nor would it make sense.
To be politically feasible, any cuts in the purchasing power of doctors and other service providers would have to be gradual and take the form of lower rates of salary growth, not outright salary reductions. People are far less sensitive to reductions in rates of growth than to simple pay cuts, as behavioral scientists have long known.
So the real question is: Would such a gradual shift constitute a painful sacrifice?
For some doctors, it might. But research on the determinants of human well-being suggests that the answer to this question is also somewhat surprising. That’s partly because the long-run link between money and happiness is complex, but also because salary is only one determinant of the satisfaction people derive from their jobs.
Most people believe that having more money would make them happier, but studies of happiness suggest that the truth is more complicated. As the authors of the 2017 World Happiness Report wrote: “People are constantly amazed that aggregate happiness has not risen in the U.S.A. and many other countries, when incomes and educational levels have risen so much and when income and education are associated with greater individual happiness.”
As expected, being poor — often defined as having less than 60 percent of a country’s median income — does indeed make people less satisfied. But once a certain absolute income standard is achieved, satisfaction depends more heavily on how one’s earnings compare with the earnings of others.
This should not seem surprising since, as Charles Darwin recognized, life is graded on a curve. How smart, strong or rich you are matters less than how those attributes compare with those of your closest rivals.
One implication is that the comparisons that matter most are highly local. Even billionaires can feel poor if they spend most of their time with people who earn more than they do.
For doctors to be satisfied with their pay, then, their earnings must be on par with those of their close colleagues. That helps explain why American doctors who work for nonprofit clinics like Mayo, Cleveland, and Kaiser Permanente — and earn less than their fee-for-service counterparts — generally seem content with their terms of employment.
We know, too, that highly qualified people pursue careers as health care professionals even in countries that pay providers substantially less than the salaries we see here.
Non-monetary working conditions are also important determinants of job satisfaction. Switching to a single-payer system promises significant reductions in many of the everyday hassles confronting doctors under private insurance systems.
One difficulty is having to wrangle with insurance companies that deny payment for tests and procedures that their policies seem to cover. If you complain often and loudly enough, you may eventually get paid, but the process takes a toll — not just on consumers but on doctors, too.
Such disputes are a direct consequence of the economic incentives confronting private insurers. Because most consumers lack the detailed knowledge necessary to compare competing coverage options, they focus heavily on price when choosing a provider. Insurers have an incentive to compete for market share by offering the lower prices made possible when they adopt hard-to-detect reductions in the quality of their coverage.
Billing disputes are far less common under single-payer systems. Canadian doctors, for example, are less than one third as likely as their American counterparts to report that they “spend an excessive amount of time on paperwork or disputes related to medical bills.”
In sum, although the switch to a single-payer system would entail lower payments to service providers like doctors, it would also affect their frames of reference and conditions of employment in offsetting ways. International happiness studies offer no reason to conclude that, once it has been fully implemented and absorbed, the switch would require truly significant sacrifices by most American health care providers.
There would of course be exceptions.
As Atul Gawande described in a much-cited New Yorker article, current reimbursement arrangements have encouraged some physicians to view their practices less as centers for healing than as revenue streams. Some have invested in image centers and clinics to which they refer patients for scans and treatment, capturing insurance reimbursements for themselves directly.
Others demand kickbacks for referring patients to home-health agencies. And because most insurers don’t reimburse for phone calls, patients who call with questions that could easily be answered by phone are often told to schedule reimbursable office visits. Physicians who adopt these practices may earn seven- or even eight-figure annual incomes.
Because meaningful health reform would eliminate the incentives for these abuses, we can be sure that at a small number of doctors would suffer steep income declines. These few might scream bloody murder. And, as many Californians may discover, moving immediately to single-payer health care will require a host of trade-offs, some of them painful over the short-term.
So, on reflection, I’d say that the switch to a single-payer system wouldn’t require unreasonable sacrifices from anyone.
Robert H. Frank is an economics professor at the Johnson Graduate School of Management at Cornell University. Follow him on Twitter: @econnaturalist.