The following is an explanation I gave for why it would be so hard for a US state to do single-payer even though comparably sized countries elsewhere can do it:

I am pulling these numbers out of air, just to give an idea of the flows I am talking about.

Let’s say we have a hypothetical state (“Bannack”) that gets back roughly what it sends to Washington. Bannack’s citizenry pays $7b a year in taxes, $2b to state and local governments, and $b to the federal government. The federal government turns around and spends $2.5b on health care in health care in Bannack, while Bannack is spending $.5b. Health care in the state in a given year costs $3b. They simply can’t do that with a $2b budget. They can’t raise taxes by $2.5b because the people just won’t pay it because that would be on top of all that money they’re sending to Washington. They’ll get some money by taxing businesses the money they’re no longer spending on health care, but anything more would be a tax hike and the same problems apply.

The best they can do is ask the federal government to say “We want that $2.5b in cash.” I think if they could get that, they could make it work. But the $2.5b is for one year and is going to fluctuate. And some states send in a lot more than they get out of Washington, and vice-versa. So it’s a real hornet’s nest of headaches. You can come up with a block grant formula, but that’s going to be difficult and going to be political. It’s much easier for DC to say “We’ll pay for this and we’ll pay for that. We’ll give you block grants for Medicaid but no way for Medicare and of course the VA system is different.”

Now, if Bannack were a country, it would be a lot simpler and they could do it even if they are not an especially large nation. They’re risk pool would still be a lot larger than many insurance companies’.

I didn’t put enough focus on how much other programs, like Medicare and the VA, complicate things. If you can’t fold them into your single-payer, you’re losing a lot of potential bargaining leverage.

Category: Espresso

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One Response to Why Single Payer Is Hard For States

  1. Brandon Berg says:

    This doesn’t seem quite right to me. For one, the SALT deduction means that relatively high state spending gets subsidized by other states. So there’s one advantage that the state has. For the rest, I don’t see a problem. The state continues to get all the federal spending it’s been getting, and any money that was being spent on private medical care can be appropriated by the state with no effect on disposable incomes (less than zero effect on disposable incomes, because SALT). It wouldn’t strictly be single-payer, since the federal government would still be paying for Medicare and Medicaid, but everyone would be getting health care funded by either the federal or state government. If we humor the claims of cost savings from single-payer health care, it’s a win all around.

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