Over at Jacobin, Enrique Diaz-Alvarez has an excellent piece explaining how our nation could have gotten to a single-payer health insurance system, as opposed to the bloated, Rube Goldberg-esque system we ended up with.
The decision to abandon the nationalization of perhaps the most unpopular companies in the US is correctly attributed to the fundamental conservatism of the Obama White House, and its unwillingness to take on the health insurers, pharmaceutical companies, or any interest group willing and able to spend millions lobbying, hiring former politicians, and donating to campaigns. Obama’s “wimpiness,” his need to always take the path of least resistance, became common tropes among the American left. Obamacare, liberals claim, is the best possible reform that could’ve been wrangled out of the health insurance industry.
But were the many backroom deals that make up Obamacare really an easier alternative to nationalization? A look at the financial details reveals the opposite conclusion. In strictly financial terms, nationalization would have been the easiest way forward, costing relatively little and delivering immediate savings while making access to health care truly universal. Politically, Obama could have counted on the support of a unlikely ally of progressive causes: health insurance shareholders, the theoretical owners of those very companies who would have been relieved of their then-dubious investments with a huge payout.
As of the end of 2008, the private insurance market covered 60 percent of the US population. For-profit insurers accounted for a large and growing share. The top five insurers accounted for 60 percent of the market — all but one of them for-profit companies. Absent a Bolshevik revolution, implementing a single-payer system would have required proper compensation for the owners of these institutions for their loss of future income — shareholders in the case of the for-profit insurers and, allegedly, the supposed policyholders in the case of most non-profits.
How much compensation? Well, in mid-2009, the total market capitalization of four out of the five top health insurers (the fifth is a nonprofit) amounted to about $60 billion. By then, the stock market had already rebounded nicely from the lows of the crisis, and the uncertainty over Obamacare had largely dissipated, so these were not particularly depressed valuations. Extrapolating this valuation to the rest of the health insurers would have a put a price tag of about $120 billion on the whole racket.
This means that buying out the entire health insurance industry at an enormously generous premium of, say, 100 percent, would have cost the Treasury $240 billion – about 2 percent of 2009 gross domestic product. And this figure is highly inflated —premiums for buying out well-established companies rarely exceed 50 percent and are usually closer to 20 percent. Also, I am valuing the dubious claims of non-profit policyholders on par with the more vigorously-enforced property rights of for-profit shareholders.
Other than the big smiles on the faces of health insurer shareholders across the country, what would have been the US Treasury’s payoff for writing a $240 billion check? Once again, the numbers are simple, and startling. US private insurance, whether for-profit or otherwise, may well be the most wasteful bureaucracy in human history, making the old Gosplan office look like a scrappy startup by comparison. Estimates of pure administrative waste range anywhere from 0.75 percent to 2.6 percent of total US economic output.
I’ve long been an advocate of a single-payer health insurance system as the easiest to implement and most cost-effective means of providing health insurance coverage to all Americans, and nothing I’ve seen from the implementation of Obamacare has convinced me otherwise.