Column: 50,000% markup for a shot makes the case for a single-payer healthcare system

A single-payer healthcare system once again is being talked about for California — the leading candidate for governor supports the idea — and once again the issue is being framed as a debate between starry-eyed dreamers and sober-minded realists.

It doesn’t have to be an either/or proposition.

The reality is that California could, and should, serve as a test case for nationwide universal coverage. It wouldn’t be easy because this is uncharted territory, requiring, among other things, congressional support for use of federal healthcare dollars.

But that doesn’t mean it can’t be done, nor does it mean we shouldn’t try just because no other state has had the courage or wherewithal to give it a go.

There are many reasons to take the plunge — making health insurance available to all, reduced costs through more efficient delivery of healthcare, a pioneering spirit upon which the Golden State was founded.

Or we could just focus on Sandra Stubban’s lidocaine injection.

Stanton resident Stubban, 84, recently visited a Fountain Valley pain-management clinic to receive an epidural for back pain. As part of the procedure, she was given a 10-milligram shot of the local anesthetic lidocaine to numb the injection site, the same stuff your dentist uses before giving you what-for.

Stubban shared her bill with me. It shows that the clinic, Pain Medicine Associates, billed her insurer $20 for the lidocaine.

The insurer, a Medicare Advantage plan called Scan Health Plan, said it would pay only 4 cents.

Without hesitation, the clinic knocked $19.96 off the charge, leaving the insurance company to pay 3 cents and sticking Stubban with a bill for a single penny.

I suppose there will be some who look at this and see a healthcare system that works. After all, no one can say Stubban was gouged with this 1-cent medical bill.

I look at the episode and see inexplicable, utterly opaque healthcare pricing that leaves patients largely in the dark.

I see a system under which reimbursement negotiations between medical providers and insurers typically start at insane levels just to push final amounts higher.

I see a system that will financially devastate anyone without insurance because the list prices are so ludicrously high — no small thing considering that more than 12% of the U.S. population is uninsured.

“It’s ridiculous,” Stubban said. “It’s like they can charge whatever they want.”

No one at Pain Medicine Associates got back to me. But Jill Selby, vice president of product development for Scan Health Plans, said it’s never surprising to see a wide gap between how much a medical provider charges and how much an insurer pays.

“Never pay anything right away,” she advised. “Always check with your health plan first.”

Americans pay more for healthcare than anyone else, roughly double what people in other developed countries pay.

And we get less bang for our healthcare bucks, judging from our relatively low life expectancy (78.7 years) and relatively high rate of infant mortality (the worst among 20 comparably rich nations, according to the Organization for Economic Cooperation and Development).

A big difference: Nearly every other developed country has a single-payer healthcare system, what in the U.S. might be considered Medicare-for-all. Under these systems, everyone is covered, and that huge risk pool allows the government to bargain effectively to keep costs at reasonable levels.

“Canada, the U.K. and almost all European countries have single-payer systems that are more cost-effective than the U.S. healthcare system,” said Resul Cesur, a healthcare economist at the University of Connecticut. “There is not a single solid example or anecdote that suggests otherwise.”

Single-payer systems aren’t perfect. There can be long waits for elective procedures, and some treatments or drugs may be unavailable.

But ask any resident of a country with such a system and they’ll tell you they’d gladly accepts these trade-offs rather than face the brutal uncertainty of the U.S. healthcare system.

With President Trump and Republican lawmakers determined to undo what little progress has been made in healthcare reform, the chances of a national Medicare-for-all system range from “what are you kidding?” to “fuggedaboutit.” So it’s up to state leaders.

The Democratic candidate for California governor, Gavin Newsom, has said he’ll get squarely behind legislation to establish a statewide single-payer system. “We will have universal healthcare in the state of California,” he’s said.

Newsom’s Republican rival, John Cox, is squarely against the idea, mockingly asking why California doesn’t also pursue “single-payer food and single-payer housing.”

Critics cite an estimate last year from the state Senate Appropriations Committee saying a single-payer insurance system would cost California as much as $400 billion a year. But this is a bogus figure.

It doesn’t take into account the savings that would be realized under a single-payer approach, such as lower administrative costs and cheaper prescription meds. A separate study backed by the California Nurses Assn. estimated the cost of single payer at closer to $330 billion annually by taking these factors into account.

Moreover, about 70% of California’s current healthcare spending is covered by public programs such as Medicare and Medi-Cal, which means state residents might be responsible for only about $106 billion in new revenue once the savings from single payer are included.

This could come in any number of ways — a sales tax, a payroll tax, some combination of funding sources. And before people start freaking out about higher taxes, remember: Under a single-payer system, you’re no longer paying premiums, co-pays and deductibles.

Many healthcare economists say total out-of-pocket costs for people would be lower under a single-payer system than they are under the current system.

“Critics who say single payer would be more expensive than the current system are either, one, referring to levels of taxes and not taking into consideration the fact that the current system also is funded by private premiums and cost sharing, or, two, lying,” said James Robinson, a health economist at UC Berkeley.

Perhaps the greatest concern about a switch to single payer would be a potential stifling of medical innovation without the promise of sky-high profits.

“Spending less on products of intense innovation would have important effects,” noted Anupam Jena, an associate professor of healthcare policy at Harvard Medical School. “We may be comfortable with those trade-offs, but we just need to be aware that they exist.”

Or not. Don’t forget that insulin was discovered in 1921 by a pair of academic researchers, who then sold the patent to their university for $1 each. The university in turn made it available to drug companies royalty-free.

Strange as it may seem, there was a time when medical innovation was guided primarily by the common good.

We can’t know how things would play out under a single-payer system until we play them out. That’s why Canada introduced its own nationwide single-payer system on a province-by-province basis, making adjustments as it went along.

All I know is that when a clinic charges $20 for a simple procedure worth 4 cents, that’s a nearly 50,000% markup.

Is there anyone who’s good with that?

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to [email protected].