Government Run Healthcare

Amid much discussion about healthcare and potential reform, the conversation often leads to the federal government’s role. It is worth considering the track record of federal health programs prior to deciding to hand over the entire healthcare system.  Our federal government currently commands four major realms of healthcare programs:  Medicare, Medicaid, Veterans Administration and Indian Health.

  • The VA health system is an abject disaster. Nine million veterans, those who served their country often at great cost, have been largely relegated to a scrap heap of substandard healthcare.   Centralized federal planning and bureaucratic fiefdoms have created a very illogical structure, low quality and a patient experience on par with Soviet-era food rationing.
  • Indian Health Services can best be described as sad – just ask any of the 3 million people “served” by it. Indian healthcare meets most third world health standards, and little more.  This is what happens when federal control triangulates with minimalistic funding and a recipient population with no voice.  Any “have nots” who think single-payer is the answer for them should take a look at Indian Health.
  • Medicaid functions well in many regards. Individual states work in compliance with federally directed parameters to provide health coverage to low income people.  The single biggest impact of Obamacare is that about 15 million people were added to Medicaid under its provisions, most of whom previously lacked coverage.  Interestingly, the majority of state governments opt to outsource the administration of Medicaid to large insurance companies like United Health Group.  The insurers (outsourcers), who are attuned to more sophisticated cost control than the government is, often ration healthcare through inconvenience in these outsourced Medicaid programs.  Said another way, they must follow government rules that generally purport to cover everything, but given funding limits, the outsourcers are left to pare back coverage by making it difficult to access.  So tricks like denying people who can’t walk access to a wheelchair via mountains of paperwork required or making a person place three calls and wait six weeks for an MRI, lead to peeling off 20% of the “demand” for healthcare.  It’s not a terrible system, it’s just not the type of coverage and treatment most of us are accustomed to with employer based health insurance.
  • Medicare is the immensely popular healthcare program for seniors. What’s not to love?  It is the Cadillac of health plans – very low out-of-pocket costs for participants, virtually no restrictions on coverage, broad networks of hospitals and physicians and little responsibility directed toward participants.  Medicare does place stringent cost controls on the fringes – homecare, non-physician healthcare, ER as examples – while placing virtually no controls over the huge costs of pharmaceuticals, procedure-based physicians and end of life healthcare expenditures.  Interestingly, the stakeholders with the most money get the least restrictive governance by Medicare – hmmmm.  For those who ask, “why can’t we all just be on Medicare or a Medicare like system?” the answer is that we can’t afford it.  It would significantly increase the cost of our healthcare system.  Medicare’s annual net cost to cover a beneficiary is three times that of private insurance.  Given the age discrepancies in the coverage pools, it is difficult to compare the two.  But, in the past ten years, when cost containment has become particularly important, Medicare has increased annual per beneficiary costs by $4,300 per person while private insurance has increased per person costs by only $2,000.  Additionally, single payer would likely take significant employer contributions and innovations out of the mix.  Further, it is worth noting that technology advances have driven costs out of most industries over the past two decades.  Healthcare, however, still utilizes many therapies, technologies and approaches which are twenty to sixty years old.  Medicare has done a very poor job in its role as an accelerant of innovation and technology in healthcare.

So while there are many aspects of single payer that are attractive, the government’s record of running healthcare programs is just not very good.  Buyer beware.


  1. One of the best thumbnail assessment of the US healthcare system I’ve read. Well done.
    Innovation is very difficult in the government, as you point out. The major stakeholders push to maintain status quo and regulation defends the status quo.
    The first constitutional requirement of the government is defense and our defense is one of our country’s greatest strengths; however, the innovation in defense is contracted to the private sector for execution. One could criticize the oversight and contracting process, but the outcomes are fulfilling the remit. The space program spawned so much innovation into healthcare and was executed similarly to the defense projects. The private sector responded to the challenges set in place by the vision of government, where the genius of the people was incentivized to find new solutions with a high degree of autonomy. The oversight was balanced by the need to meet the inherent dangers boldly head on, because to fail had large consequences. Healthcare in this country needs a bold vision and the government needs to articulate that vision. Our leaders need to have the courage to enlist the genius of the country to find solutions unimpeded by the historic size of the regulatory system. Just imagine if healthcare had the right incentives to move like the space program of the 60’s, or the information and communication business of the last decade. Can we make the courageous decisions now? I still believe we can.


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