What is Single-Payer Health Insurance?

LinkedIn Icon

There’s been a lot of talk lately about whether or not the US should move to a single-payer health system and what that would mean. Ignoring the politics of that discussion, let us help you understand what it is.

LinkedIn Icon

There’s been a lot of talk lately about whether or not the US should move to a single-payer health system and what that would mean.  Ignoring the politics of that discussion, let us help you understand what it is.

Single-payer healthcare is a health system where one entity—either a government agency or a quasi-government agency—is responsible for providing (and paying for) health insurance for its citizens. The entity who pays for the health insurance then contracts with private doctors, hospitals and pharmaceutical companies who provide the actual healthcare to patients.

What Does Single-Payer Health Insurance Cover?

This really depends. Generally speaking, government-funded single-payer health insurance covers all out-of-pocket expenses (e.g. premiums, deductibles and co-pays) for necessary medical care for its citizens.  It covers prescriptions, preventative care, long-term care, mental health, hospital visits, necessary medical supplies, dental, vision, etc.  At least, that’s what is inclined in cultural and political discussions.

In practice, the single-payer health systems in countries like Canada and the UK have certain restrictions on what they cover. For instance, in Canada, the government health insurance doesn’t cover dental or vision, so residents must buy private insurance for those services.  In the UK, citizens must pay a co-pay for prescription drugs not prescribed in a hospital setting.

Other services that likely wouldn’t be covered under a single-payer system are cosmetic and elective procedures that are deemed medically unnecessary.

What are the Pros to Single-Payer Systems?

Advocates of single-payer health insurance say the two biggest pros are universal coverage and cost.

Under the current US health system, you can get health insurance from an employer which offers it, you can buy it on the private market or, if you qualify, you can get insured under a government program.  Even with all of these avenues for buying health insurance, about 30 million citizens are uninsured and 10s of millions are under-insured, which means their health plan doesn’t adequately cover their medical needs.

Under a single-payer system, every US citizen will receive health insurance at birth.  Advocates say that will lead to a healthier society as a whole.

In terms of cost, in a 2011 study published in the health journal Health Affairs, researchers estimated that American doctors spend four times as much money interacting with healthcare payers (i.e. health insurers, patients and the government) than healthcare providers in Canada.  Advocates claim this is because the American system has so many different payers that doctors and hospitals must spend much more time and administrative costs trying to figure out who owes them what amount.

In addition to administrative costs, advocates of single-payer systems say that because the government controls the health insurance market, it gives the government more bargaining power with doctors, hospitals and pharmaceutical companies and this results in lower overall medical costs.  It should be noted that countries like Germany who have multi-payer systems like the US, also achieve lower medical costs because the government sets prices for medical care.

What are the Drawbacks to Single-Payer Health Insurance?

Critics of single-payer health insurance say it could lead to long wait times and lower quality care.  The Commonwealth Fund compared patient wait times in different single-payer and multi-payer systems and found that if someone was sick and wanted to see a doctor the same day, their ability to do so didn’t seem to depend on the type of health system.

For instance, in Canada, a single-payer country, only 23% of patients were able to make a same-day appointment, but in the UK, also a single-payer country, 45% of patients could.  In the US, a multi-payer system, 30% of patients could make same-day appointments, while in Germany, also a multi-payer system, 55% of citizens saw their doctor right away.

In terms of quality of care, single-payer systems only govern who pays for the healthcare.  The administration of care is up to the private doctors and hospitals operating within the health system.

Single-payer health insurance is simply a system where the government or a quasi-government agency uses tax money to pay for health insurance for the citizens of said government.  Is it better for patients? Does it cost less? That’s up for debate!

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.