The insurance company’s prior authorization portal has a 15-minute inactivity timer. If you pause to examine the patient, or to look up the clinical criteria, or simply to think, it logs you out and you must begin again. 

Every time, you complete the form with the same information: patient DOB, member ID, medication code, all prior medications that did not work for this patient and why, all ICD codes for associated conditions and complications. All for a routine inhaler the patient has taken for years.

This is the actual prior authorization system for a major Medicaid insurer operating in California in 2026. The clunky, tedious process is not a glitch. The portal was designed this way. The friction is the function.

In 1963, a Stanford economist named Kenneth Arrow published a paper in the American Economic Review that explained, in the language of market theory, why this kind of bureaucratic inefficiency was predictable. The paper, “Uncertainty and the Welfare Economics of Medical Care,” demonstrated that healthcare markets depart, in systematic and predictable ways, from the conditions required for competitive markets to produce efficient outcomes. 

The moment you introduce insurance, you have already left the world in which market competition produces optimal outcomes.

Arrow’s argument turned on a single observation: You cannot predict when you will get sick, and when you do, the cost can be catastrophic. 

This combination of unpredictability and catastrophic cost means healthcare cannot be purchased like bread or televisions — it must be paid for through insurance. But insurance introduces a structural problem. Once a third party is paying, the patient is no longer a price-sensitive consumer, and the insurer’s financial interest runs directly against the patient’s medical interest.

 As Paul Krugman later summarized the argument: The moment you introduce insurance, you have already left the world in which market competition produces optimal outcomes. Arrow observed that “it is the general social consensus, clearly, that the laissez-faire solution for medicine is intolerable.” 

He was describing what society had already recognized, not prescribing a specific remedy.

The evidence that Arrow’s diagnosis was correct has accumulated steadily. The United States spends nearly $15,000 per capita on healthcare annually — more than double the average of peer nations. In return, the country achieves lower life expectancy, higher infant mortality, and higher rates of preventable death than nearly any other high-income country. 

In comparison, the countries that spend less and achieve more share a common structural feature: a single public insurer that cuts the administrative overhead of private intermediaries and negotiates provider and prescription rates at scale.

Low-income privately insured families now spend more than 26 percent of their postsubsistence income on premiums and out-of-pocket costs.

The consequences extend beyond the clinical. A 2022 analysis confirmed that employer-sponsored health insurance reduces job mobility by at least 25 percent — a phenomenon economists call job lock, in which workers remain in positions they would otherwise leave rather than risk losing coverage. 

A longitudinal study published in JAMA Internal Medicine in 2026, following 12,645 individuals over four years, found that 26.7 percent of American adults experienced either cost burdens or foregone care due to cost over that period; among those who died during the study, 53.2 percent had experienced cost burdens in the one to four years before their death. 

Low-income privately insured families now spend more than 26 percent of their postsubsistence income on premiums and out-of-pocket costs. Approximately 100 million Americans are currently in debt because of medical bills. 

These financial burdens are not the consequences of a system that is failing to achieve its goals. They are the consequences of a system accomplishing the goals of unfettered private markets.

The question, then, is not whether the current arrangement is not serving most Americans. The question is why, given the evidence, it has proven so difficult to change — and what a realistic path to single-payer public insurance coverage would actually require.

The answer requires a brief detour into history — not because the past is instructive in the usual sense, but because the pattern it reveals has repeated with enough regularity to suggest a common cause rather than a series of coincidences.

Why Transitioning to Single-Payer Is So Hard

On November 19, 1945, President Harry Truman sent a special message to Congress calling for a national health insurance program. The American Medical Association responded by hiring a public relations firm, Whitaker and Baxter, which launched a campaign describing Truman’s plan as “socialized medicine.” 

The AMA spent $1.5 million on lobbying in 1949 alone — at the time, the largest lobbying expenditure by any organization in U.S. history. Truman’s plan died in committee. 

Every serious attempt to establish universal coverage in the U.S. has foundered not on the theoretical design of the destination, but on the mechanics of getting there without the incumbent industry mobilizing against it.

In 1993, the Clinton administration introduced the Health Security Act. The Health Insurance Association of America spent an estimated $14 million on the “Harry and Louise” television advertisements, successfully framing the proposal as a threat to the middle class’s freedom to choose their own doctors. The bill never reached a floor vote. 

Between 2020 and 2024, America’s Health Insurance Plans (AHIP), the industry’s current lobbying arm, spent nearly $65 million lobbying Congress and the executive branch. The tactic has not changed because it has not needed to.

This pattern of incumbent industry mobilizing against structural reform is what policy architects call the transition problem. The transition problem is, at its core, a problem of imagination. A population that has never experienced universal coverage cannot easily be persuaded of its value — and the industry that profits from the current arrangement has every incentive to ensure the imagination gap remains open.

Every serious attempt to establish universal coverage in the U.S. has foundered not on the theoretical design of the destination, but on the mechanics of getting there without the incumbent industry mobilizing against it.

In 2011, Vermont Governor Peter Shumlin signed Act 48, legislation intended to make his state the first in the nation to establish a single-payer public insurance system. Three years later, he abandoned the plan. 

The difficulty was not epidemiological; it was mathematical. Financing the system would have required more than $2.5 billion in new taxes — an 11.5 percent payroll tax on businesses and up to a 9.5 percent income tax surcharge — on a state economy of roughly $6 billion. 

The common thread is not the specific payer type. It is the structural incentive created whenever a private administrative intermediary’s fiduciary duty runs to its shareholders rather than its enrollees. 

The Cost of Profit-Driven Health Care 

The dysfunction runs across payer types. When a Medicaid managed care organization denies a prescription, spending on subsequent emergency department visits and hospitalizations rises. The denial saves the insurer the cost of a generic medication; it transfers a larger cost onto the public via costs the hospital often must absorb, and passed onto other consumers. Our own research demonstrated this pattern across six medication classes, with net medical spending increases ranging from $624 to $3,016 per member per year for each denial.

When a Medicare Advantage plan denies a post-acute care placement, the patient deteriorates at home and returns to the emergency department at considerably greater cost. When a commercial insurer denies a prior authorization, the employer who purchased that coverage — and who paid an average of $26,993 in annual family premiums in 2025, up 6% from the year before — absorbs the downstream costs in lost productivity and disability. 

The common thread is not the specific payer type. It is the structural incentive created whenever a private administrative intermediary’s fiduciary duty runs to its shareholders rather than its enrollees. 

The transition to single-payer public insurance coverage is nonetheless achievable, provided we set aside the expectation of a single, overnight legislative act and consider instead a sequence of structural constraints

Meanwhile, the delivery side has consolidated in ways that compound the difficulty. Research by Zack Cooper and colleagues found that when hospitals within five miles of each other merge, prices increase by more than 6%. 

A 2023 study in JAMA found that private equity acquisition of hospitals is associated with a 25.4 percent increase in hospital-acquired adverse events among Medicare patients.

In many counties across the US, hospitals are all owned by just one or two firms, essentially eliminating the possibility of meaningful price competition in favor of a monopoly or oligopoly that can increase prices at will. 

Learning from Recent State Initiatives

The transition to single-payer public insurance coverage is nonetheless achievable, provided we set aside the expectation of a single, overnight legislative act and consider instead a sequence of structural constraints — each of which can be conquered on its own, and each of which makes the next step more politically viable.

The first step is constraining hospital costs at the state level. 

In 2014, Maryland expanded its all-payer rate-setting system into a Global Budget Revenue model. Instead of being paid for every procedure they perform, Maryland hospitals receive a fixed annual budget. The state capped annual per-capita hospital cost growth at 3.58 percent. 

By 2023, the model had reduced Medicare spending by more than $1 billion, a figure the Centers for Medicare and Medicaid Services confirmed in its own evaluation.

The second step is state-level primary care investment mandates. 

In 2010, Rhode Island’s Office of the Health Insurance Commissioner required commercial insurers to increase the share of spending dedicated to primary care by one percentage point per year, paired with price controls on commercial hospital contracts. 

My colleagues and I evaluated this policy in a peer-reviewed research study published in Health Affairs and found that it reduced quarterly fee-for-service spending by $76 per enrollee — an 8.1% reduction — while quality measures were maintained or improved. The model is already replicating across Colorado, Oregon, Delaware, and Massachusetts, where the Health Policy Commission recommended a 15% primary care spending target in December 2025.

The Taiwan model is the proof of concept; the first five steps are the political and administrative preparation that Taiwan had in place and Vermont did not.

The third step is administrative simplification through Section 1332 waivers — provisions of the Affordable Care Act that allow states to seek federal approval to restructure their insurance markets, provided they maintain equivalent coverage levels.

The law allows states to use this mechanism to create public options that pay Medicare rates and carry lower administrative overhead. Nevada, Colorado, and Washington state already have public options in operation. A 2020 RAND analysis found that public option premiums could be 10 to 27% lower than private insurance plans, primarily because public options pay providers at Medicare rates rather than the rates that commercial insurers negotiate in consolidated markets.

The fourth step is mobilizing the employer coalition. 

Employers are now spending an average of more than $17,000 per employee per year on healthcare, with costs projected to rise 9% in 2026 according to the Business Group on Health. Small businesses are abandoning coverage entirely. 

The employer-sponsored insurance system was a product of World War II wage controls, not a deliberate policy design. The political coalition for universal coverage has historically lacked a powerful economic constituency among employers. That may be changing.

The fifth step is Medicare buy-in expansion. 

Extending Medicare eligibility from 65 to 60, then 55, then 50 enlarges the risk pool and lowers per-capita administrative costs incrementally. The Congressional Budget Office has found that near-universal coverage is achievable through buy-in expansion combined with premium subsidies, building administrative capacity and public familiarity gradually — avoiding the transition shock that ended the Vermont experiment.

The sixth step is consolidation into a single-payer public insurance system — but only once the private market has been structurally constrained by the preceding steps. 

When Taiwan established its National Health Insurance in 1995, it absorbed 13 separate social insurance schemes into a single payer in one year. The 41% of the population that had been uninsured gained coverage within that fiscal year. Taiwan’s administrative costs now hover around 2% of total health spending. 

In the U.S., administrative costs consume 34.2% of national health expenditures — $2,497 per capita — according to a 2020 study in the New England Journal of Medicine by David Himmelstein and Steffie Woolhandler. 

The Veterans Health Administration negotiates drug prices that are 49% lower than Medicare Part D prices for brand-name drugs, according to the Government Accountability Office. The Taiwan model is the proof of concept; the first five steps are the political and administrative preparation that Taiwan had in place and Vermont did not.

Rhode Island demonstrated that state regulators can redirect spending toward primary care and reduce total costs without federal legislation. Maryland demonstrated that global budgets alter hospital behavior. Taiwan demonstrated that a government can absorb a fragmented system and extend universal coverage within a single fiscal year. 

The sequence exists. The evidence for each step is published.

Meanwhile, the prior authorization portal has timed out.