Can the states pull off single payer healthcare? At least a few might be willing to try.

Health care policy in the U.S. is approaching a state of schizophrenic shambles. House Republicans have passed a massively unpopular bill that would strip care from 23 million Americans while calling it a blow for personal freedom. Senate Republicans have had to push back the vote on their own version of the bill due to increasing revolt among both voters and their own caucus. Insurers have begun raising their premiums explicitly to cover the uncertainty generated by Congress and the White House.

In response, fault lines on the left have begun to grow clear between those who want to support and repair Obamacare and those who think the time has come for Medicare for all.

In a recent interview with TheWall Street Journal, Senator Elizabeth Warren (D-Mass.) called Obamacare a conservative model from a conservative think tank and said that "[n]ow it's time for the next step. And the next step is single payer."

Some states agree. In recent weeks lawmakers from New York and California have drafted legislation to pass single-payer health care plans at the state level. (This is, it should be noted, different from the vetoed proposal in Nevada that would have made Medicaid available statewide.)

For liberals looking to prove that single payer health works, these states could make excellent test cases. California and New York have economies the size of France and Canada, respectively. They are large, with diverse populations spread across both rural and urban areas. In other words, they look a lot more like the United States overall than manyother states. Montana or Nebraska. 

The question is, can they pull it off?

Maybe.

Politics aside, when it comes to implementing single payer health care, money is the chief obstacle. Results both around the world and at home generally demonstrate that a single payer health care system can deliver a reasonable standard of care as long as someone pays for it. In fact, as found in the Commonwealth Fund study linked above, U.S. healthcare consumers on Medicare are consistently happier with their plans than people on private insurance are with theirs.

But if quality of care isn't a necessary sticking point, the money raises a lot of potential problems. Giving health care to all would simply cost an enormous amount of it. California's plan alone, which was recently put on hold until 2018, is estimated to cost anywhere between $330 billion to $400 billion per year.

The raw number is just the tip of the iceberg though. Here are a few more important factors when it comes to paying for single payer health care.

Overutilization

As insurance coverage expands, whether under a single payer system or a regulated market system like Obamacare, one of the chief cost drivers is increased consumption. As people get access to health care they tend to use it, and populations just getting insurance for the first time tend to be disproportionately sicker and therefore more expensive to cover.

"Local initiatives have proven this in other states," said Proteus Duxbury, a health care specialist with the PA Consulting Group. "When you give everyone in the state health care and it's cheap, there tends to be an overutilization. And if you don't reduce the costs, overutilization can kill it."

And while these programs do tend to see an up-front swell of costs, a lot of the new health care spending does not tend to fall off.

"Everyone went on and a lot of very sick people with chronic disease went on," Duxbury said of past experiments in health care expansion. "[And] chronic disease is not something that you spend money on for two years and then stop."

Now, health reform advocates often argue that increased health care consumption is a feature, not a bug, of expanded coverage. It means that sick people are getting care, and that's often true. However that still drives costs up, and the sicker someone is the more they cost to treat.

Patient Contribution

Advocates of single payer systems, such as legislators in California and New York, tend to gravitate towards the model of entirely state-sponsored health care. This has the benefit of simplicity and affordability for individuals, which is a particularly strong selling point in a nation exhausted by complex private insurance systems and a seemingly endless health care debate. However it also means the state bears a far greater burden of costs.

As a result, some experts believe that states may need to include patient contributions.

"There's definitely enough money in the system now to do some form of Medicare or Medicare advantage for all," said Richard Hirth, chairman of the University of Michigan's Department of Health Management and Policy. "There's not enough money to do the form that New York and California are proposing, which is no premiums, no copays, no cost share, no deductibles."

"If you're going to have no cost sharing, deductibles [or] premiums, there's obviously no demand side limitation on cost. People have no incentive to not consume care at any point," he said, echoing Duxbury's concerns about volume of utilization. "People are definitely going to want to consume a lot more care in that world, and it has to be paid for somehow."

Building a system that retains some form of patient contribution such as co-pays or deductibles, Hirth suggested, wouldn't just be about generating some revenue. It would act as a brake on overconsumption and help states exert some control over medical spending.

Employer plans

Advocates generally argue that single payer plans are affordable because they reduce health care spending overall. This was a centerpiece of the Bernie Sanders campaign, which argued that individuals would save more money on insurance premiums than they would pay in new taxes.

This may (or may not) be true for individuals who pay for their own health insurance premiums, but it leaves out the half of Americans who get their insurance through an employer. They would still bear any new tax burdens to pay for a single payer scheme, but they don't spend out of pocket on their insurance premiums. And while businesses would save money by eliminating health insurance as a cost, there's no guarantee that they would pass those savings along as increased compensation.

There is ample reason to believe that they would not.

What's more, large companies would end up paying double for their in-state employees.

As Duxbury pointed out, companies with multi-state footprints will have to keep their traditional benefits packages in place, because not everyone will live in a New York or California, while paying the in-state taxes to support the local health care scheme.

"It's complicated for large companies," he said. "You can't offer half of your employees one set of benefits and the other half of your employees another set of benefits."

Companies do want out of the health insurance business, Duxbury emphasized. Many that he speaks to, in fact, probably would like to just give everyone a stipend for the individual market, and others might like to have the government take this off their hands. But that won't make it any less complicated to have to deal with a national patchwork of different systems.

Prices

Finally, any single payer plan, whether at the state or national level, would have to anticipate the resulting impact on prices and reimbursement to doctors.

In a nutshell, payment schemes would go haywire.

"Just in the drug realm, there would be a dramatic increase in expenses, because the drug companies would have little incentive to compete on price," Hirth said. "If there's no cost sharing and there's no networking and there's no insurers to negotiate with, I don't have to worry about that, nor do the patients have to worry about it nor do the doctors have to worry about it. So the cost of prescriptions would go way up unless we directly control the prices."

Meanwhile, Duxbury cautioned, doctors could see their incomes fall dramatically for much the same reason. With all of the bargaining power, a single payer system could set physician reimbursement rates almost by fiat. Judging by Medicare, this has historically led to substantially reduced reimbursement rates compared to private insurance.

History is not destiny, and this does not necessarily mean that a single payer scheme could not solve these problems. Legislators who hope to get a plan off the ground cannot ignore them though.

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