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 (usually the government) pays for health care and extends coverage to all citizens. The details of the system vary by the country implementing it, but in general, citizens in a single-payer system pay little or no out-of-pocket costs for coverage and basic health care treatment. Instead, citizens fund single-payer health care systems through taxes.

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

What Is Single-Payer Health Insurance?

Single-payer health insurance is a health care system financed largely or entirely by one entity (usually a government agency with tax revenue). In place of health insurance companies, patient co-payments, and networks of doctors and hospitals, payments in a single-payer system are managed by this single entity. This is where you get the "single" in "single-payer health insurance."

In the U.S., the idea of single-payer health insurance is also known as "Medicare for all." This name comes from the idea of expanding Medicare, which is an existing tax-funded single-payer health insurance system designed for elderly and disabled Americans. If Medicare were expanded to provide health care coverage for all American citizens in place of private health insurance companies, this would effectively become a national single-payer health insurance system.

How Does Single-Payer Health Insurance Work?

While many countries have adopted single-payer systems, they don't all work in the same way. They all reduce co-payments and other forms of out-of-pocket costs for patients, but they don't all cover the same services. In some countries, patients still pay some out-of-pocket costs, or they may seek supplemental health insurance plans to cover what the single-payer system doesn't.

In general, single-payer systems seek to provide affordable access to:

Not all single-payer systems are national systems. Many large countries rely on regional governments, such as states or provinces, to administer the health care system and pay providers. These regional governments often get funding and policy guidelines from the national government, and then it's up to regional leaders to determine how to use those funds to meet policy goals.

Examples of Single-Payer Systems Around the World

Countries that have single-payer health insurance, or something similar to a single-payer system, include:

  • Canada (regional control with national grants)
  • United Kingdom (regional flexibility with national funding)
  • France (largely national administration and funding)
  • Australia (regional flexibility with national funding)
  • Norway (regional flexibility with national funding)
  • Denmark (regional flexibility with national grants)
  • Sweden (regional flexibility with largely regional funding)

There are extra complications when you break down the differences between the payment systems. In some single-payer systems, such as Singapore's, payments flow directly from the federal government to health care providers. England has local clinical commissioning groups that take national government funding and distribute payments within the municipality.

The systems in countries like Germany and the Netherlands are often considered single-payer, but multiple health insurance companies still exist, so these are actually multi-payer systems. The funding ultimately comes from tax revenue, just like other single-payer systems, but the funds are disbursed among competing health care insurance companies that directly pay doctors and hospitals. These insurance 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 is covered. Everyone is covered.
Funding usually comes from national tax revenue. Funding could come from tax revenue, out of the pocket of consumers, or both.
A single payer pays directly to health care provider. Health care providers could be paid by a single entity or by many entities.

Like single-payer health insurance, universal health care means that all citizens in a country have access to health care coverage. However, 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, even though the same systems of insurance networks, co-payments, and premiums would remain intact.

The Affordable Care Act was an example of a push toward universal health care, but not toward a single-payer system. The ACA introduced new regulations that made it easier for Americans to obtain coverage. From 2010 (the year ACA became law) through 2016, roughly 20 million Americans got health insurance who hadn't had it before. However, many of these Americans signed up with private health care companies through a government-run marketplace. Tax dollars may have subsidized premiums paid to private health care companies, but it wasn't paid directly to health care providers.

Under a true single-payer system, as opposed to a universal health care system, the government would step in to replace private health insurance companies. Patients wouldn't pay premiums to a company to receive coverage, and tax dollars would go directly to health care providers instead of to insurance companies.

Pros and Cons of Single-Payer Health Insurance

  • Access to preventative care improves the health of society.

  • Individuals don't go bankrupt because of medical needs.

  • Total health care spending could decrease.

  • It's politically divisive.

  • Potential for job loss exists among private health insurance companies.

  • Wait times could increase.

Pros Explained

  • Access to preventative care improves the health of society: More preventative care stops many serious health issues before they become both more disruptive to a person's quality of life and more expensive to treat. For example, vaccines can prevent the spread of disease. Annual check-ups can catch afflictions such high cholesterol at an early stage—when they can be addressed with lifestyle changes rather than invasive surgery or expensive drugs.
  • Individuals don't go bankrupt because of medical needs: Single-payer systems remove the choice patients may otherwise have to make between their health and medical debt. In 2017, a Bankrate survey found that 31% of Millennial Americans had skipped medical treatment due to the cost. Gen X and Baby Boomers weren't far behind in the survey, with 25% and 23% of them skipping health care because of costs, respectively.
  • Total health care spending could decrease: It's difficult to speculate about costs, given the range of options for how a single-payer system could take shape, but many experts agree that there is the potential for savings. According to Physicians for a National Health Program, 95% of American households would save on personal health care spending under a single-payer system. The group also estimates that total health care spending would fall by more than $500 billion as a result of eliminating profits and administrative costs from all companies that operate in the health insurance industry.

Cons Explained

  • It's politically divisive: In the U.S., health care is a politically divisive topic, which could hamper the effectiveness of rolling out a single-payer system. Polling in 2020 found that nearly half of Americans support a shift to a single-payer system, but that percentage falls to 39% among Republicans, and it rises to 64% among Democrats. That divisiveness extends to all health care proposals that the poll covered, not just the issue of single-payer systems.
  • Potential for job loss among private health insurance companies: If the U.S. were to abolish private health care systems, it would add a huge element of uncertainty to any career that's currently in health care. Health care providers would see the least disruption, but those who specialize in billing for private networks of health care insurance companies would likely see major changes—if not outright job loss.
  • Wait times could increase: Comparisons between American and Canadian systems of health care often mention wait times. One survey from 2013 found that 36% of Canadians wait six days or longer to see a doctor when they're sick, as compared to 23% of Americans. It's unclear whether longer wait times are a unique feature of Canada's system or inherent to single-payer systems (Australia and the UK reported shorter wait times than Canada), but it's certainly a potential issue.

Key Takeaways

  • Single-payer health insurance is a system in which a single entity pays health care providers on behalf of all citizens.
  • Many countries have implemented 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."