What Is Single-Payer Health Insurance?

Definition and Examples of Single-Payer Health Insurance

Mother and child at a doctor's appointment

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Single-payer health insurance is a model in which a single entity (like a government) pays for health care and extends coverage to all people. The way each system works varies by country and how it is designed. With that in mind, the most common factor of these systems is that people pay little or no premiums. Another is that basic health care treatment costs are gone. Instead, each person funds the single-payer health care system through the taxes they pay.

Read on for more details on single-payer health insurance and how it differs from universal health care. Also, you'll find some examples of countries that have single-payer systems.

What Is Single-Payer Health Insurance?

Single-payer health insurance is a health care system mostly or wholly funded by one entity (like a government agency, using tax dollars). The system takes the place of private health insurance companies and patient co-payments. The networks of doctors, hospitals, and payments in a single-payer system are managed by this single entity.

In the U.S., the idea of single-payer health care has been coined "Medicare for All." This name comes from the idea of expanding Medicare. Medicare is the tax-funded single-payer health care system designed for older people or those with disabilities. Medicare could expand to provide health care coverage for all people in place of private health insurance companies. This expansion would make it the nation's single-payer health insurance system.

How Does Single-Payer Health Insurance Work?

While many countries have single-payer systems, they don't all work in the same way. The systems all work to reduce co-payments and other forms of costs for patients. While reducing costs is the overall goal, the systems don't always cover the same services. In some countries, patients still pay some out-of-pocket costs. In others, they may need to find supplemental health insurance plans to cover what the system doesn't.

Single-payer systems try to provide low-cost access to:

Not all single-payer systems are national systems. Many large countries rely on the regional governments of states or provinces to administer the health care system and pay providers. These governments often get the funds they need from the national government. The regional program leaders decide how to use the funds to meet policy goals.

Examples of Single-Payer Systems Around the World

Countries that have single-payer health systems (or similar systems) include:

  • Canada uses regional control with national grant programs to fund the system.
  • The United Kingdom has regional flexibility with national funding in its health care system.
  • France has a mostly national administration and funding it the system it created.
  • Australia also allows for regional flexibility and uses national funding.
  • Norway gives regional leaders flexibility and uses national funding.
  • Denmark uses national grant programs to give funds to regional leaders for flexibility.
  • Sweden gives regions the flexibility to distribute the funds through mostly regional funding.

You may find that countries range from being very complex to simple when you compare their payment systems. For example, the Singapore federal government pays the health care providers. England has local clinical commissioning groups that take national funding and distribute the payments.

More complex systems in countries like Germany and the Netherlands are often thought to be single-payer. Many private health insurance companies exist in these countries, so they are really multi-payer systems. The funds are disbursed among competing health care insurance companies that pay doctors and hospitals. These companies may be nonprofit (like in Germany) or for-profit (like in the Netherlands).

Single-Payer Health Insurance vs. Universal Health Care

Single-Payer Health Insurance vs. Universal Health Care
Single-Payer Health Insurance Universal Health Care
Everyone has access to care. Everyone has access to care.
Funding tends to come from national taxes. Funding could come from taxes, out of the people's pockets, or both.
A single payer pays directly to health care provider. Health care providers could be paid by one or more entities.

Like single-payer health insurance, universal health care means that all people in a country have access to health care. But the term "universal health care" doesn't address how health care costs are paid.

If all Americans signed up with a private health care insurer today, the U.S. would have universal health care coverage. The same systems of insurance networks, co-payments, and premiums would remain intact.

The Affordable Care Act (ACA) was an example of a push toward universal health care, but not toward a single-payer system. The ACA set new laws that made it easier to obtain coverage. From 2010 (the year ACA became law) through 2016, roughly 20 million people signed up for health insurance for the first time.

The government-run marketplaces used private health insurance companies. People could find lower premiums due to subsidies from tax revenues that were built into the Act. Instead of paying health care providers, insurance companies received the tax dollars that subsidized the premiums.

Under a true single-payer system, the government would step in to replace the private health companies. As a result, patients wouldn't have to pay premiums to be covered. Instead, tax dollars would go straight to the health care providers.

Pros and Cons of Single-Payer Health Insurance

  • Access to preventative care improves the health of society.

  • All medical costs are covered, which reduces medical bill bankruptcies.

  • Total health care spending could decrease.

  • It's politically divisive.

  • Private health insurance workers might lose their jobs

  • Wait times for health care could increase.

Pros Explained

  • Access to preventative care improves the health of society: Preventative care can find health issues when they begin instead of when they are a problem. For example, vaccines can prevent the spread of disease. Annual check-ups can catch issues such as high cholesterol at an early stage. Doctors can then prescribe lifestyle changes rather than perform costly surgeries or pass out costly drugs.
  • People won't go bankrupt because of medical needs: Single-payer systems remove the choice patients may have to make between their health and medical debt.
  • Total health care spending could decrease: It's hard to guess the effects a change in a system would have on total costs. Given the range of options for how a single-payer system could take shape, many argue that billions of dollars could be saved.

Cons Explained

  • It's politically charged: In the U.S., health care is a politically charged topic. Polling in 2020 found that nearly half of Americans support a shift to a single-payer system. Among Republicans, support drops to 39%. Nearly two-thirds of Democrats (64%) support a change. Note that the numbers extend to all health care proposals covered in the poll, not just the issue of single-payer systems.
  • Job loss among private health insurance companies: If the U.S. were to get rid of the private health care system, many people might lose their jobs. Health care providers would see the least amount of job loss. Those who work in private network billing would see major changes, if not outright job loss.
  • Wait times could increase: When American and Canadian health care systems are compared, wait time is one of the main topics of concern. It's unclear whether longer wait times are a unique feature of Canada's system or if they are common in all single-payer systems (Australia and the UK reported shorter wait times than Canada). Whatever the case, it's an issue that needs to be dealt with.

Key Takeaways

  • Single-payer health insurance is a system in which a single entity pays health care providers on behalf of all people in the country.
  • Many countries have some form of a single-payer system, though there are differences between their systems.
  • In the U.S., which does not have a single-payer system, this concept is also known as "Medicare for All."