Too much of a pinch for Vermont.

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If Single Payer Can't Work in Vermont...

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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While I was away last week, Vermont decided to scuttle its single-payer health-care plans. I predicted as much six months ago, for one simple reason: A single-payer system would cost too much. When faced with the choice of imposing double-digit payroll taxes or dropping his cherished single-payer plan, the governor of Vermont blinked.

"But Megan!" I hear you cry. "Single-payer systems are cheaper, not more expensive! Look at Europe!"

Alas, however, as I wrote at the time, there is nothing about single payer that will magically allow us to cut costs to European levels. People who believed otherwise were substituting a crude eyeballing of international statistics to substitute for reasoned analysis, in part because it told them what they wanted to be true: that they could have the universality and progressiveness of a single-payer system without having to ask the taxpayer for a giant heap of money to provide those benefits. They were, in the words of one of my favorite public-policy professors, "getting high on their own supply."

Now, I know what you are preparing to say: I am allowing my ideological priors to blind me to the plain evidence in front of my nose. So let me explain. I concede that single-payer systems may well allow you to control the rate of health-care cost growth, thanks to government price controls on supplies and services, along with rationing or denial of expensive treatments. What it doesn't allow you to do is easily cut the rate of health-care spending. None of the single-payer systems that are frequently held up as models for the U.S. have ever managed sustained cuts in health-care spending. All they've done is prevent it from growing so fast.

The problem, as I wrote previously, is that America doesn't have a health-care cost-growth problem; we had a health-care cost-growth problem. Right now, our health-care cost growth is right in the middle of the OECD pack:

Our spending is indeed high compared with the rest of the world, but that's because it started high. And while restraining government spending is easy, it is a walk in the proverbial (government-funded) park compared to actually cutting spending. Cutting spending means that a number of people are going to lose income and employment. They will have trouble paying their mortgages, car loans and little Johnny's bill for travel soccer. Then they are going to get organized and march on Washington and vote against the politicians who cut their jobs.

Path dependence is a running theme around here, and in no other area of public policy is it more troublesome. Health-care jobs are steady and well-remunerated compared to whatever else those workers could be doing. And that's not just true of the much-derided "specialists" who do too many procedures and charge too much; it's true of everyone in your hospital and doctor's office, from your beloved family physician to the woman who draws your blood. All those people have spent long years working to get where they are. If you suddenly change the rules and take that all away, their rage will burn with the righteous fire of a thousand suns.

So even if we could have had a much cheaper health-care system if we moved to single payer in 1970, that doesn't mean that we can get the same happy results by doing so now. Today we'd be building a single-payer system with the price schedule of our current health-care workers. Which means it would cost an absolutely breathtaking amount of taxpayer money, as Vermont just found out.

Oh, Vermont has some special problems -- a small state loses some of the ability to rationalize the system that the federal government would have because it has to deal with border issues, such as commuters and what to do about a Vermont citizen who has to get treatment in a New Hampshire hospital. But that doesn't seem to have been the biggest problem Vermont faced. Mostly, it faced the impossible choice between cutting provider incomes by a lot or raising taxes to nosebleed levels.

This holds a lesson for all the folks who hoped or feared that Obamacare was a stalking horse for single payer. It's not. First, because if you try to take away the current system from the vast majority of folks who had health insurance they liked before the Affordable Care Act was passed, your voter base will get hopping mad enough to enter low-earth orbit. And second of all, even if you're willing to brook their rage over the loss of their health insurance, combining that with a whopping great tax hike on the middle class is a recipe for political suicide.

The U.S. health-care system may be all kinds of screwed up. But at least at this late date, single payer is not the cure for what ails it.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net