Single-Payer vs. Universal Coverage

The differences and how other major countries fund their healthcare.

As America continues our debate over Obamacare and how to best deliver affordable quality health care, single-payer continues to enter the conversation. As though the options were binary; a simple choice between our current system and single-payer, most Americans really don’t understand what it means or how it really works. Single-payer was a cornerstone of the Bernie Sanders presidential campaign although he seemed to always also describe it as Medicare-for-All. When AP surveyed more than 1,000 adults in 2016, 63% were very or somewhat positive about “Medicare for All” but felt less interested in single-payer (only 44%). While often described as the same, they are not the same. This is different from the general confusion with The ACA vs Obamacare, which is exactly the same thing.   

What is Single-Payer? To be technically accurate, “single payer” defines just one way of financing health care, in which one entity collects the money for health care and reimburses the providers (e.g. doctors and hospitals) for health care costs. In a true single-payer system, the government is that one entity or “single-payer”. The government collects monies from individuals and businesses, mainly in the form of taxes, and the government reimburses providers for health care services delivered to individuals enrolled in the public health insurance program. In other words, single-payer describes how health care is funded, it doesn’t describe healthcare delivery (whom doctors work for or how care is administered). Again, this is just one type of universal healthcare system solution. If a “single-payer country” also uses private coverage, it is a “hybrid system.” Almost every country with single payer has a hybrid system, which also allows for private supplemental coverage.

Universal health coverage is a broader term that describes a health care system where every individual has health coverage. There are many ways to achieve this and single-payer is just one model for universal coverage. Other universal health care models also utilize the private health insurance system or a combination of public and private solutions (multi or all-payer systems). If fully implemented, the ACA or "Obamacare" was on the path toward national universal coverage. The World Health Organization's constitution of 1948 declares health a fundamental human right and works with various countries in the development of their different health care models. The WHO definition of universal health care embodies three key objectives:

1. Equity in access to health services - everyone who needs services should get them, not only those who can pay for them;
2. The quality of health services should be good enough to improve the health of those receiving services; and
3. People should be protected against financial risk, ensuring that the cost of using services does not put people at risk of financial harm.

These seem like reasonable objectives but the method for financing a universal health care system is very expensive, complex and political. In the US, we have multiple payers, not a single-payer system… well, with an exception. The Medicare system is basically single-payer for seniors. In the US, the collection of money for health care is shared by the private insurance industry, from individuals and businesses, and the government, which collects taxes from individuals and businesses. Likewise, they both share the reimbursement to providers for health care services delivered to both privately insured individuals, and through government health programs (e.g. Medicare, Medicaid, and our veterans health system).

Most think of Canada and the UK when considering examples of single-payer systems but they are very different and neither is perfect. Health care is complex everywhere. Every other developed country has a universal health care system but not all are a single-payer model. Single-payer countries are often associated with longer wait times for receiving health care, a common perception largely based on Canada’s past experience. A survey by Commonwealth, 36% of Canadians said they wait six days or more to see a doctor when they’re sick versus 23% of Americans. The waits can vary by region and health condition. The Canadian government actually posts the current wait times for every province, by hospital, physician and condition type.

Here's a quick summary of how some countries finance their health care:

Canada - Canada’s Medicare Act was the legislation which initiated the country’s current single-payer public health system. It was passed in the House of Commons in 1966 after a massive struggle led by the labor movement. It works on a sliding scale based on income. Most Canadians in a region have the same plan, with the same benefits. Doctors in Canada earn a bit less than they do in the US. Theirs is really a hybrid model. Canada has a government-run national health insurance, funded by taxes. It ranks highly for quality of care, but waiting times, especially for elective surgeries such as hip and knee replacements, can be long. Studies show Canadians have one of the longest waits in the developed world. Private insurance for public services is illegal in several provinces, with only a small number of doctors able to accept private payments for speedier access to care. Anecdotes about Canadians traveling abroad for private treatment seem to be exaggerated (less than 0.2% of the population). Private insurance, held by about two-thirds of Canadians, covers services excluded from public reimbursements, such as vision and dental care, prescription drugs, rehabilitation services, home care, and private rooms in hospitals. In 2015, private health insurance accounted for only 12% of their total health spending.

The UK – While the UK is made up of different countries with slightly different systems, they are each single-payer models paid by and free at the point of getting care. They also have private and employer-based options in the UK, but they account for a very small part of their total system. The system is called the NHS (National Health System) and is funded through tax and required national insurance contributions. It’s free health care but it is struggling financially. Prime Minister Theresa May has promised to increase funding, but the opposition says they need much more. Care is free when you need it, but they have long waiting times and limited choice of hospitals or physicians in some regions. Doctor strikes are common because newer agreements required some overworked hospital doctors to work excessively long shifts. Private insurance offers faster and convenient access to care, especially for elective hospital procedures, but most policies exclude mental health, maternity services, emergency care, and general practice. Roughly 11% in the UK also have private insurance, often offered through their employers.

Germany – Germany has a multi-layered system that is really a series of mutual insurance funds. More than 150 “sickness funds.” Every employee must select one of these insurance funds and contribute according to their income. The cost is shared between the employee and employers. When they get care, patients only pay a small fee to see a doctor or other health services. If you can afford it, you are allowed to opt out and pay for private insurance instead. Only 10% of Germans opt out which suggests the public program works pretty well. Germans can choose their own doctor and data collected by OECD say Germans see their doctors more often, get more prescription drugs, have higher hospital admittance numbers, and longer hospital stays than people in other developed countries. A 2013 review of 2 million hospital stays found 40% overtreatment, including unnecessary admissions for services that could have been done on an outpatient basis. Their high utilization is also being strained by Germany's aging population. In 2014, 8.8 million people were covered by private health insurance.

Japan - Japan has universal coverage, which means everyone is covered by the public health insurance program. In Japan, everyone must join a public insurance program through their employer or municipal government and pay a monthly premium that varies by income. All citizens have access to government-approved medical procedures and prescription drugs. When receiving care, they pay 30% of the cost or less depending on income. Japanese health care is recognized as first-class, affordable and contributes to their high life expectancy rates. In 2016, Japan was ranked #1, with the average lifespan of 83.7 years.

Insurance coverage and health care prices have been set by Chuo Shakai Hoken Iryo Kyogi Kai (the Central Social Insurance Medical Council), better known as Chuikyo. The council is comprised of industry representatives, drug industry, and insurers. The council reviews the prices for all health care procedures and drugs every two years. While they work effectively at controlling prices, it doesn’t control the utilization of services being used. Japanese patients tend to seek more care than is needed because access is unlimited. Although premiums have risen over the years, medical services have been affordable for most people and stories of people going bankrupt due to medical bills are unheard. Private insurance plays only a minor supplementary or complementary role to their public program.

France - The French health system is very generous (and expensive) and ranked highly by the World Health Organization (WHO). Everyone is covered by mandatory health insurance, which is paid for by steep taxes. When getting care, patients pay for about 20% of the cost of their health care. More than 90% of French people also hold private insurance, usually through their employers, which covers the 20% coinsurance. There’s no underwriting in their private premiums based on income rather than health risks. The French system is chronically over budget, in part due to the global financial crisis and higher unemployment which funds part of the program with employee deductions. To help balance the budget, the French government is promoting generic drugs, cutting back on benefits requiring patients to pay more for services. Private health insurance is mostly offered by employers to help supplement the copayments, balance billing, vision, and dental.

Australia - President Trump said they have a better health care system than we do. Is it? Australia has had a Medicare for all system since 1984, in fact, it’s actually called Medicare. Funded through a 1.5% income tax levy, the basic national health system also allows for a private insurance option also at extra cost. People with lower incomes pay less and high earners pay an additional 1% tax for the national system. Australia’s system provides universal health coverage for citizens and permanent residents, as well as automatic coverage for people with temporary visas from countries with whom Australia has reciprocal arrangements (Belgium, Finland, Ireland, Italy, Malta, the Netherlands, New Zealand, Norway, Slovenia, Sweden, and the UK).

Private health insurance provides also offers more choice of providers, faster access for nonemergency services, and rebates for selected services. There are penalties for not having coverage. Their Lifetime Health Coverage program provides a lower premium for life if participants sign up before age 31 and a 2% increase in the base premium for every year after age 30 for people who do not sign up. Enrollment is highest for younger people with a higher opt-out rate at age 50 and up.

When using hospital services, Australians can select to be treated as a public patient (free health care) or as a private patient (75% coverage). For private patients, insurance covers the fee. If provider charges above the set fee, the consumer will bear the gap cost unless they have gap coverage.

India - The constitution of India considers the “right to life” to be fundamental and obliges the government to ensure the “right to health” for all, without any discrimination. India’s National Health Bill, introduced in 2009, views healthcare as a public good and health as a human right of every individual. The goal of India’s national health policy is universal access to good-quality health care services without financial hardship. Under their constitution, areas of public policy are divided between the central and state governments. States are responsible for organizing and delivering health services to their population. Private insurance premiums are tax-exempt but only upper-class urban populations are able to afford a substitute for the government health system. India’s growing middle class will likely grow the private insurance industry in coming years.

Israel - In 1995, Israel passed a national health insurance (NHI) law, which provides for universal coverage. Theirs is a hybrid model with public and private options. Reasons for purchasing voluntary health insurance include securing coverage of services not covered by the NHI (e.g. dental care, certain life-saving medications, institutional long-term care, and treatments abroad), care in private hospitals, or a premium level of service for services covered by NHI (e.g., choice of surgeon and reduction of waiting times). Voluntary health insurance is also purchased as a result of a general lack of confidence in the NHI system’s capacity to fully fund and deliver all services needed in cases of severe illnesses.

Singapore - While not one of the larger countries compared here, they have a very interesting and efficient model worth reviewing. Their government, using taxes, funds only about one-fourth of Singapore’s total health costs. Individuals and their employers pay for the rest. In fact, the latest figures show that Singapore’s government spends only $381 per capita on health, about one-seventh of what the U.S. government spends.

Singapore’s system also requires individuals to take responsibility for their own health, and for much of their own spending on medical care. Singapore is a unique model of universal health insurance system and only model in the world to require patients, not insurers, bear the costs of routine care. It's not perfect and not exactly the free- market system we are used to in the US. The government basically designs the insurance products. Singapore’s government controls and pays for much of the medical system. Hospitals are mostly public and most doctors work directly for the government.

Singapore might prove that both conservative and liberal solutions for health care could happen. The government acts to keep costs low and supports a market-driven insurance system. Some principles of their system could work in the US but could be very difficult as we also have significant cultural differences and some hardboiled beliefs about health care choice, access, and mandates.

Like other nations, Sweden believes all human beings have an equal entitlement to dignity and have the same rights regardless of their status in the community and when a choice has to be made, there should be a reasonable balance between the costs and the benefits of health care, measuring cost in relationship to improved health and quality of life (we would call them 'death panels'). The Swiss and Dutch health systems look a lot like the ACA health exchange marketplaces. While they are all different models, all of these countries pay much less for drugs, surgeries or doctor visits than Americans do.

Single-payer in the US:

Vermont tried to enact a state single payer model. The “freedom and unity” state was the first state to abolish slavery in 1777, pioneered same-sex civil unions in 2000, and hoped to be the first state to move to single-payer health care. It failed for the same reasons most US states or foreign countries have failed, how to pay for it.

Colorado’s Amendment 69 failed in 2016. Backed by progressives, but opposed by the business community, health insurers, Gov. John Hickenlooper and members of Congress from both parties, about 80% of voters rejected the measure. The proposed 10% payroll tax would have made Colorado the highest tax bracket in the country.

New York recently passed a single-payer health care bill in the Assembly for the fourth time by a vote of 87-38. The bill is headed for the State Senate where it has been rejected before. Currently, the bill is only two votes shy of passing and recently earned the support of the influential Independent Democratic Conference. In 2016 New York collected about $71 billion in tax revenue. If passed, the state would have to find at least another $91 billion in 2019 when the law would be enacted.

California twice passed single-payer legislation, which was later vetoed by then-governor Arnold Schwarzenegger. The single-payer proposal in 2007 was estimated to have cost of $209 billion, which would have meant huge wage tax hikes for employees and employers. Another bill will be considered in 2017 (CA SB 562) but faces a similar outcome. The actual cost or financial plan for the current bill remains to be seen. The last time a fully-defined single-payer bill was scored in California, it showed that even after the massive payroll tax increases proposed, the funding for the law was still $40 billion short, which effectively ended debate on that bill. CA Gov. Jerry Brown expressed skepticism in the state’s ability to fund the current plan. California’s single-payer bill (SB 562) is set for hearing today (May 22, 2017), by the California State Senate Appropriations Committee. 

“Mark was certainly not advocating for a single-payer system, but instead encouraging debate while pointing out that public-private partnerships have been the backbone of the more successful government health care programs (examples include administering Medicare Advantage or Medicaid managed care),” he said in an emailed statement. “In other words, partnering works when done the right way.”

Aetna CEO Mark Bertolini was recently asked if he supported single-payer. You can click on the link above to watch and hear his response. He does not and I agree. I personally support the broad concepts of universal health coverage but not single-payer. I also agree we should have an intelligent debate about all options for achieving universal coverage. I also believe implementing universal coverage should be done at a national level and not by individual states. I remain hopeful that we can work to repair both sets of our health care problems; those that happened under the ACA and those that predate it. We didn't get here overnight and we should be clear on the intended outcome. Are we truly aiming to cover everyone (universal coverage) or simply reigning in costs for those who can still afford coverage? If so, are we willing to accept the consequences of a growing uninsured population? It is complex and we could learn from other countries, the mature systems who have tweaked and adjusted over the decades. We first have to get past our political rhetoric and start the harder work to achieve better health outcomes at a lower cost - hopefully for everyone.

For my data sources and more details:

2015 Global Study from The Commonwealth Fund and WHO Rankings

Avik Roy - Transcending Obamacare - A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency

Warren Buffet, Charlie Munger, and Bill Gates on healthcare: