Understanding the “single payer option”

My friend Alain Lazard has sent me a great explanation of that so-maligned option. I'll try to summarize it today. The idea isn't new; it's used in the world's most developed nations, except the USA. Single payer insurance returns up to 97% of the premiums to be used for medical services instead of only 65% to 75% by private insurance companies, that's not counting the cost of processing insurance claims that adds another 10% or more to the cost of health care, something single payer insurance reduces dramatically, or can even eliminate altogether with proper computerization.

Furthermore, it doesn't have to be government-run; it can be an independent fund that operates within a legal framework. The so called “Public Option” fits that description perfectly. In it, medical doctors are the gatekeepers of the system and no middle man sits between them and the patient, as is the case currently with private insurance pre-authorization and denial of claims. In the private insurance model, monthly premiums are paid in advance. With a large deductible, months, years or even decades can pass before being reimbursed for “qualifying” medical expenses. If the insurance company has 100,000 subscribers none of the monthly premiums earn interest or accumulate and create a leftover capital.

Only 65% to 75% of all that money is available for medical services after deducting administrative expenses, advertising, lobbying, huge executive salaries, bonuses, perks, agent’s commissions and profits. This doesn't compare favorably to a bank or to a credit union in which the monthly management fee is very small and all of the money, possibly more with interest, is available to withdraw at any time. In fact, the only productive expense required, besides the reimbursement of medical expenses, is fraud control.

Bottom line, the more private health insurance companies compete, the lesser the value for their subscribers. Profit can only be generated by denying services from the funds left over after a plethora of unproductive overhead expenses. The approach of the current administration might be the only viable compromise: Creating a public insurance fund that competes with private insurance. If private insurance companies compete on the same basis with the public fund (no precondition clauses, same level of coverage, etc.) they it will cost them a lot and we can safely forecast that they might become a thing of the past before we know it.