I am often asked if a single-payer system is the answer to healthcare’s ills. To even begin to examine the question, we need to think first about terminology and concepts.
When people propose a single-payer solution, they usually mean replacing the commercial insurance market of multiple payers (e.g., the insurance companies with which we are familiar) with a single government health plan, which also means replacing the multiple government health programs (e.g., Medicare, Medicaid, Tricare and the VA System) with the same national health plan.
People often point to the government-sponsored health programs of other industrialized nations with which the United States is compared, but even in most of those countries, the government is not the only payer. Private systems of healthcare have emerged in many of those countries for those who can afford to pay more for faster access to care or access to private physicians and hospitals. And in some of those countries, a market for purchasing private insurance has evolved.
Those enamored with the idea of a single-payer system most often support universal coverage, which is typical of those countries with a single-payer system, but “single-payer” and “universal coverage” are not equivalent terms.
Universal coverage means that all the people of that country have insurance coverage. A country, therefore, couldtheoretically offer universal coverage without the government being the only payer. In fact, the Affordable Care Act was an attempt at moving healthcare in that direction, even though it was built around using insurance exchanges and premised upon there being multiple competing insurance plans on the exchanges. The uninsured rate in the United States has plummeted since the ACA was enacted, according to a Gallup survey. Still, the uninsured rate for the second quarter of 2015 was 11.4 percent.
The United States is, to my knowledge, the only industrialized and economically developed country that does not provide universal coverage to its citizens. Some speculate that this is one of the reasons health outcomes for the United States are, on a whole, inferior to those achieved by the other countries with which we are compared.
However, it’s far from clear, given the many differences between world healthcare delivery systems and the fact that the United States generally performs poorly on social determinants of health relative to those same countries.
In Favor of Universal Healthcare
One of the biggest reasons for universal healthcare is the concept that healthcare is a right and therefore every American should be assured of the availability of healthcare services, regardless of their ability to pay.
I have previously looked at the many difficult questions that would have to be answered in order to implement universal healthcare, let alone determining how we would pay for it.
One of the biggest reasons for a single-payer system is to reduce the administrative costs associated with all of the myriad billing rules and forms of the many governmental bodies and private insurance companies that the typical healthcare provider must deal with.
Many point to the lower administrative costs of a program such as Medicare (about 3 percent of dollars spent) compared with those of private insurance companies (averaging about 17 percent of the premium dollar); however, it depends upon how those numbers are calculated. If they are calculated on a per-beneficiary basis, the private insurance companies would have the lowest administrative costs.
Further, it is argued that the private healthcare system is more efficient because those extra administrative costs go to programs designed to control utilization that reduces the total cost of care relative to the Medicare program.
Another argument for a single-payer system is that the multitude of payers and the movement of patients in and out of different programs (as employers change health plans; as low income people with inconsistent work move in and out of the Medicaid program; as employees move and change jobs, etc.) have actually contributed to the fragmentation of healthcare and a system that is best suited for treatment of episodes of acute care rather than management of chronic illness and disease management, which is where the most potential cost savings may be found.
The Arguments in Opposition
Universal coverage will obviously cost more. If the United States was to decide to cover the nearly 38 million currently uninsured people, it would have to raise significant tax revenue in order to do so. Some uninsured choose to be uninsured and might be able to afford insurance, but for many if not most, the financial burden to provide for the insurance coverage would fall to the federal and state governments.
Healthcare costs are expected to grow as we deal with the future consequences of the current epidemic of childhood obesity. And if costs are to be covered by increasing taxes and those taxes, like those that support the Medicare program, are predominantly derived from payroll taxes, we will also have to determine how sufficient tax revenue can be generated to account for the wave of baby boomers who are aging and incurring medical costs, but will no longer be contributing to that tax base, without negatively impacting the competitiveness of American companies and overburdening individuals. It seems an even more overwhelming challenge when one considers that the U.S. government cannot even afford the unfunded liabilities accruing now in the Medicare program.
Inevitably, single-payer systems resort to global budgets to try to control costs. This leads to a degree of rationing of services, or at least longer waits for certain procedures, which Americans are not used to and may not tolerate.
It is also for this reason that single-payer systems inevitably spawn a private insurance/provider network for those who can afford to pay and want quicker access to care, access to particular private facilities that offer more amenities and access to providers of their choice. So while “single-payer” may describe the predominant delivery system, in almost every case, these are really two-tiered systems.
While a single-payer system would reduce some administrative costs related to healthcare providers dealing with multiple payers with different coverage, billing and payment rules, a single-payer system would almost certainly be a government program, which means a significantly increased regulatory burden and a constantly shifting set of rules and regulations as Congress enacts new laws to address the cost and quality issues that arise, and the political lobbying of various stakeholders with many divergent interests, and as the federal agency charged with administering this huge program issues new rules to implement the laws passed by Congress.
What Have the States Done?
VERMONT
In 2011, Vermont enacted a law that would have created the first statewide, single-payer, universal health coverage. Under the law, all Vermont businesses would be subject to an 11.5 percent payroll tax and individuals would pay a sliding-scale income tax capped at 9.5 percent of their income. State residents would be automatically enrolled in the state’s health plan, with everyone receiving the same benefits.
In December 2014, Gov. Peter Shumlin announced that the plan was too expensive, and that moving ahead would damage the state economy, especially during this period of slow recovery.
Lessons learned: Universal healthcare is costly and requires a significant tax on businesses and individuals, and downturns in the economy put great pressure to cut back on subsidized healthcare programs.
MARYLAND
Maryland has the only all-payer hospital rate-setting system in the country. It does not have a single-payer system, nor is there universal health coverage for the people of Maryland. However, since all hospitals are paid the same regardless of the payer, governmental or private, it is still indicative of a single-payer system, though in the microcosm of hospitals only. This all-payer model goes back to 1971.
The cost of a hospital admission has declined from 26 percent above the national average in 1976 to 2 percent below the national average in 2007, according to a 2009 article in Health Affairs by Robert Murray. According to an article in the New England Journal of Medicine by Rajkumar et al., the result has been the elimination of cost-shifting (increasing the price to paying patients and businesses to help subsidize the care of non-paying patients) and a spreading of the costs associated with teaching programs and uncompensated care.
The initial program predictably led to overutilization through increased hospitalizations, and Maryland has realized the need to transition payments from fee-for-service to pay-for-value. The state is now tying payment to per capita total hospital cost growth and value-based measures of care management, rather than continuing to make payments per admission.
Has this all-payer approach to hospital rate setting resulted in low insurance premiums? According to the Kaiser Family Foundation website, Maryland ranked fourth (better than Idaho, in eighth place) for average monthly premium per person enrolled in the individual markets and came in at No. 28 (compared to third-ranking Idaho) for average family premium per enrolled employee for employer-based health insurance. Idaho has neither a single-payer model nor universal healthcare coverage, and has not expanded Medicaid coverage under the ACA.
Lessons learned: Healthcare providers will react to the incentives provided, and it is important not to just put cost controls in place without incentives for quality and efficiency. Taking a rate-setting approach to only one type of provider service (in this case, hospitals) has not resulted in Maryland having more competitive insurance premiums.
MASSACHUSETTS
In 2006, Massachusetts launched healthcare reform that would serve as much of the basis for the ACA in an effort to achieve near- universal health coverage, but not through a single-payer system. The result has been a significant reduction in the uninsured and improved access to healthcare services.
But because Massachusetts’ priority was coverage rather than cost containment, according to the Kaiser Family Foundation website, per capita spending exceeds the national average by 15 percent and affordability is an issue. Massachusetts has the highest individual market insurance premiums in the country.
Lessons learned: Universal health coverage is expensive and will not alone control healthcare costs.
Conclusion
A single-payer system may bring some cost savings with it relative to provider costs that are incurred today in negotiating with and administering multiple payer contracts under varying terms and conditions. However, it is not clear that a single-payer system is more efficient.
Further, it is likely that a substantial market in the United States would still exist for private insurance and for enhanced access and services, as is already evident in the concierge medicine models and direct primary care practices in existence.
Universal healthcare is a worthy aspiration but a costly reality, and would be dependent upon new taxes on businesses and individuals. Without the proper cost controls and incentives, universal healthcare will increase costs and result in even higher healthcare costs than we have today.
I remain convinced, as I said years ago in objecting to the ACA, that simply adding more people with coverage to an already broken healthcare delivery system will drive costs up, not down. The healthcare spending curve has slowed, but much of this may be attributed to the economic downturn the United States experienced and the slow recovery, as well as substantial health benefit design changes that now result in extremely high deductibles for individuals and families. We also have to factor in the cost of the subsidies, tax credits and increased federal share of Medicaid coverage to understand what is happening to total healthcare spending.
The answer still seems to be fundamental change in the care and business models for healthcare. We must redesign to ensure the outcomes we want, rather than to simply reward the volume of sick care provided. We must make healthcare more effective, safer and less costly, and then expand coverage.
I know many will disagree with me, and I look forward to the discussion. Please feel free to post your thoughts on my blog.
This article was first published in September 2015 on Dr. Pate’s “Prescription for Change,” a blog maintained by St. Luke’s Health System. The article has been repurposed with permission.
Share Email
