Robert Reich: Why a Single-Payer Healthcare System is Inevitable

Private markets for health insurance pose a structural problem, and Obamacare can’t fix it.

Robert Reich

Aetna announced in August that they would discontinue their Obamacare plans in 11 states. (Flickr)

This story first appeared at Rober​Re​ich​.org

In the short term, Obamacare can be patched up by enlarging government subsidies for purchasing insurance, and ensuring that healthy Americans buy insurance, as the law requires. But these are band aids.

The best argument for a single-payer health plan is the recent decision by giant health insurer Aetna to bail out next year from 11 of the 15 states where it sells Obamacare plans. Aetna’s decision follows similar moves by UnitedHealth Group, the nation’s largest health insurer, and by Humana, another one of the giants.

All claim they’re not making enough money because too many people with serious health problems are using the Obamacare exchanges, and not enough healthy people are signing up.

The problem isn’t Obamacare per se. It lies in the structure of private markets for health insurance—which creates powerful incentives to avoid sick people and attract healthy ones. Obamacare is just making this structural problem more obvious.

In a nutshell, the more sick people and the fewer healthy people a private for-profit insurer attracts, the less competitive that insurer becomes relative to other insurers that don’t attract as high a percentage of the sick but a higher percentage of the healthy.

Eventually, insurers that take in too many sick and too few healthy people are driven out of business.

If insurers had no idea who’d be sick and who’d be healthy when they sign up for insurance (and keep them insured at the same price even after they become sick), this wouldn’t be a problem. But they do know—and they’re developing more and more sophisticated ways of finding out.

Health insurers spend lots of time, effort, and money trying to attract people who have high odds of staying healthy (the young and the fit) while doing whatever they can to fend off those who have high odds of getting sick (the older, infirm, and the unfit).

As a result we end up with the most bizarre health-insurance system imaginable: one ever better designed to avoid sick people.

If this weren’t enough to convince rational people to do what most other advanced nations have done—create a single-payer system that insures everyone, funded by taxpayers—consider that America’s giant health insurers are now busily consolidating into ever-larger behemoths.

UnitedHealth is already humongous.

Aetna, meanwhile, is trying to buy Humana in a deal that will create the second-largest health insurer in the nation, with 33 million members. The Justice Department has so far blocked the deal.

Insurers say they’re consolidating in order to reap economies of scale. But there’s little evidence that large size generates cost savings.

In reality, they’re becoming huge to get more bargaining leverage over everyone they do business with—hospitals, doctors, employers, the government, and consumers. That way they make even bigger profits.

But these bigger profits come at the expense of hospitals, doctors, employers, the government, and, ultimately, taxpayers and consumers.

There’s abundant evidence, for example, that when health insurers merge, premiums rise. Researchers found, for example, that after Aetna merged with Prudential HealthCare in 1999, premiums rose 7 percent higher than had the merger not occurred.

What to do? In the short term, Obamacare can be patched up by enlarging government subsidies for purchasing insurance, and ensuring that healthy Americans buy insurance, as the law requires.

But these are band aids. The real choice in the future is either a hugely expensive for-profit oligopoly with the market power to charge high prices even to healthy people and stop insuring sick people.

Or else a government-run single payer system—such as is in place in almost every other advanced economy—dedicated to lower premiums and better care for everyone.

We’re going to have to choose eventually.

Please consider supporting our work.

I hope you found this article important. Before you leave, I want to ask you to consider supporting our work with a donation. In These Times needs readers like you to help sustain our mission. We don’t depend on—or want—corporate advertising or deep-pocketed billionaires to fund our journalism. We’re supported by you, the reader, so we can focus on covering the issues that matter most to the progressive movement without fear or compromise.

Our work isn’t hidden behind a paywall because of people like you who support our journalism. We want to keep it that way. If you value the work we do and the movements we cover, please consider donating to In These Times.

Robert B. Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time magazine named him one of the ten most effective cabinet secretaries of the 20th century. He has written numerous books, including the bestsellers Aftershock and The Work of Nations. His latest is titled The System: Who Rigged It, How We Fix It.

More articles by Robert Reich
Viewpoint
Robert Reich: Trump Won't Get a Civil War Over His Indictment
Donald Trump is as dangerous as ever, and is inciting violence. But the country is not going to war with itself over his own narcissistic cravings.
Robert Reich
LaborViewpoint
Robert Reich: Why Aren’t Democrats Talking About the Real Cause of Inflation?
Casting corporate profiteering as a key driver of inflation would be a political winner for Democrats—and it has the virtue of being true.
Robert Reich
Viewpoint
Robert Reich: Trump Is Getting the Search of His Mar-a-Lago Estate All Wrong
While Trump claims the search was an "assault" orchestrated by forces seeking to stop him from running for president, in reality the Justice Department is just carrying out an investigation into potential crimes.
Robert Reich
Similar articles
FeatureInvestigationGoodman Institute
How Europe Outsourced Border Enforcement to Africa
The European Union is militarizing Africa's internal borders to curb migration, with little regard for human rights.
Andrei Popoviciu
Lockheed Martin Day
FeatureInvestigationGoodman Institute
Inside Lockheed Martin’s Sweeping Recruitment on College Campuses
The engineering degree to defense industry pipeline.
Indigo Olivier
LaborFeature
Like a Moth to a Flame, Workers Unite
The Triangle shirtwaist factory fire continues to inspire and motivate current labor movements 111 years later.
Daisy Pitkin
Sign up for our weekend newsletter
A weekly digest of our best coverage
Illustrated cover of Gaza issue. Illustration shows an illustrated representation of Gaza, sohwing crowded buildings surrounded by a wall on three sides. Above the buildings is the sun, with light shining down. Above the sun is a white bird. Text below the city says: All Eyes on Gaza
Get 10 issues for $19.95

Subscribe to the print magazine.