A Minsky Moment

We are in a series exploring the idea of a single payer healthcare system.  Click here to find the prior posts.

Our first assertion in Monday’s syllogism was that costs are unsustainably high.  We think that is a fairly self-evident claim, what with our per capita costs at now over $10,000 a year and the $3.4 trillion of spending eating up almost 18% of GDP. My mom used to tell my hard-headed brother that he would argue with a fencepost, but I think even he would concede the point on this one.

But, there is a couple other points about cost that we should consider in light of a contemplated single payer solution.

First, there is a difference between price and cost.  Could the government, with monopolistic power, drive down the price of healthcare in a single payer system?  Of course.  The power to dictate by fiat is strong. But as people who get into a price war with Amazon or Southwest airlines know, pricing below costs is not a great long term strategy.

As we know from Medicare, the ability to simple pronounce the fee schedule will immediately lower cost. But as we know from Medicaid, pricing below costs, even if you can, has implications on access and innovation. 

The second point gets us to Mr. Minsky.

Hyman Minsky was an economist who studied the relationship between financial crises and debt.  To summarize, he thinks there is a connection.

OK, that was a little too high level.  Minsky differentiated between three types of debt. 

Hedging was debt taken to invest in an opportunity, but the principal and interest on that debt could be paid out of current cash flows.  Little risk.

Speculation means the debt holder can cover the interest out of cash flows, but will need to re-fi the principal in some way at some point in the future.  Little more risk.

You see where this is going, right?

Ponzi schemes were the third level because without more capital flowing in continuously, there is no way to pay even the interest, much less the principal.  When the music stops, lot of risk.

Actually, that is a pretty handy shorthand for evaluating debt in general.  You’re welcome. We’re just here to serve.

But as it relates to a single payer option,  this all sets up a more probably Minsky Moment, that time when this goes from a theoretical discussion to a financial crisis.

We know that the US government has no shot of balancing the budget, much less paying down the debt, until/unless we fix healthcare costs.  And that is with the government paying only half of the direct spend.  At least the other half that is paid by employers and individuals is mostly on a ‘pay as we go’ basis. 

Move another trillion and a half to the government and the likelihood of a Minksy Moment goes up.

On the cost argument alone, the single payer concept struggles to present a workable solution.


8 − five =


Tim Coan, ALN’s CEO, writes an insightful and witty blog three times a week about a variety of topics relevant to independent physician practices.

Yes, I'd like to get Tim's blog.