How Would Single-Payer Healthcare Work In The United States of America?
Physicians for a National Health Insurance Program define single-payer national health insurance, also known as “Medicare for all,” as a system in which a single public or quasi-public agency organizes health care financing, but the delivery of care remains largely in private hands. Under a single-payer system, all residents of the U.S. would be covered for all medically necessary services, including doctor, hospital, preventive, long-term care, mental health, reproductive health care, dental, vision, prescription drug and medical supply costs.
The program would be funded by the savings obtained from replacing today’s inefficient, profit-oriented, multiple insurance payers with a single streamlined, nonprofit, public payer, and by modest new taxes based on ability to pay. Premiums would disappear; 95 percent of all households would save money. Patients would no longer face financial barriers to care such as co-pays and deductibles, and would regain free choice of doctor and hospital. Doctors would regain autonomy over patient care.
Single-Payer Won’t Solve Our Problems
Ezra Klein highlights how insurers aren’t where the big profits in the health-care system go. In 2009, Forbes ranked health insurance as the 35th most profitable industry, with an anemic 2.2 percent return on revenue. To understand why the U.S. health-care system is so expensive, you need to travel higher up the Forbes list. The pharmaceutical industry was in third place, with a 19.9 percent return, and the medical products and equipment industry was right behind it, with a 16.3 percent return. Meanwhile, doctors are more likely than members of any other profession to have incomes in the top 1 percent.
In general, Americans don’t use more health care than citizens of other countries. But we pay a lot more for the health care we do get. Data gathered by the International Federation of Health Plans show that an MRI costs, on average, $1,121 in the United States and $363 in France. An appendectomy costs $13,851 in the United States and $4,782 in Switzerland. A birth by cesarean section costs $3,676 in the United States and $606 in Canada. A bottle of Nexium — a common acid-reflux drug — costs $202 in the United States and $32 in Britain.
There are few truly single-payer systems in the developed world. Canada has one, as does Taiwan. Most countries rely on many, many insurers. Germany, for instance, has more than 150 “sickness funds.” The Swiss and Dutch health systems look a lot like Obamacare’s health-insurance exchanges. In France, about 90 percent of citizens have supplementary health insurance. Sweden has moved from a single-payer system to one with private insurers. Yet all these countries pay vastly less for drugs, surgeries or doctor visits than Americans do.
Why? Because in every case the government sets prices for health-care services and products. Insurers in Switzerland don’t negotiate drug prizes with Pfizer. The Swiss government simply sets its drug prices and lets Pfizer decide whether to sell in Switzerland — or not.
In the United States, insurers negotiate with hospitals and drug companies on their own — and they pay more as a result. In fact, because of their weak negotiating position they frequently use whatever price Medicare is paying as a baseline and then, because they lack the power to strike a similar deal, add a percentage on top. Joshua Gottlieb, an economist at the University of British Columbia, found that when Medicare increases what it pays for a service by $1, private insurers increase their payments by $1.30.
That leaves the United States with the worst of both approaches: Prices aren’t set by the market, but they also aren’t set by the government. Consequently, Medicare’s negotiating power is weakened by the threat that drug companies or hospitals will opt to do business only with higher-paying private insurers. We simultaneously miss out on the efficiency of a purely private system and on the savings of a purely public one.
If insurers lose on negotiating with medical providers, however, they’re much better than the government at innovating on insurance design. Co-pays and deductibles aren’t popular, but they work. Many insurers are experimenting with ways to create incentives for better health, including using personal technology — everything from e-mails to smartphone cameras.
The limitations of single-payer systems became clear during the health-care debate, when the Congressional Budget Office projected that premiums for a public option would be higher than premiums for private insurance — unless a public option could avail itself of Medicare’s pricing power.
A health-care system that followed international best practices would direct the government to set rates. Or it would let insurers band together and negotiate rates collectively — a practice called “all-payer rate setting.” But it wouldn’t need to eliminate private insurers. It’s good for consumers to have a choice of insurers, who have real incentives to innovate and devise better ways to keep customers healthy and costs down.
It’s health-care providers — not insurers — who have too much power in the U.S. system. As a result, they have the most to lose if health-care prices fall. Single-payer, like Medicare, by and large just pays bills with little focus on delivery. It alone is not the answer for the country.