What Is Universal Health Care?

Image shows three buildings representing different types of health care payment. Text reads: How Universal Health Care Works. Single payer: free government-provided health care paid for by income tax revenue. Every citizen has the same access to government-owned services (example: the United Kingdom) Mandatory Insurance: Government-run health insurance fund financed by payroll tax on employers and/or employees. Private doctors and hospitals provide services (example Germany) National Health Insurance: Every citizen pays into a national plan provided by a single insurance company. Publicly funded and private delivered (example Canada).

The Balance / Nusha Ashjaee

DEFINITION
Universal health care is a system that provides quality medical services to all citizens. The federal government offers it to everyone regardless of their ability to pay.

Universal health care (UHC) is a system that provides quality medical services to all citizens. The federal government offers it to everyone regardless of their ability to pay.

This model is in contrast to other health care systems that require individuals to pay at least a portion of their medical costs directly. There are several models of universal health care, and the system has many advantages and disadvantages compared to what most Americans are used to.

Definition and Examples of Universal Health Care

Universal health care comes in several different forms, but the basic idea is the same across the board: The government steps in with taxpayer money to ensure that every citizen has access to the medical care they need. With universal health care, no citizen is denied coverage based on their ability to pay.

The sheer cost of providing quality health care makes universal health care a large expense for governments. Medical coverage must be paid for by taxpayer-funded programs.

A substantial portion of countries around the world have UHC, including Canada, much of Europe, Asian countries such as Hong Kong and Japan, along with Australia, and New Zealand. The U.S. has the distinction of being the only wealthy, industrialized nation without universal health care.

  • Acronymn: UHC

Although the U.S. does not have a UHC system, its health delivery system does have specific components, such as Medicare, Medicaid, and the Department of Veterans Affairs, that provide universal health care to specific populations (the elderly, low-income, and veterans, repsectively).

How Universal Health Care Works

Universal health care can work in several different ways, depending on the exact system. There are three universal health care models: single payer, mandatory insurance, and national health insurance. 

Single-Payer Model

In a single-payer system, the government provides free health care paid for with revenue from income taxes. Services are government-owned and service providers are government employees. Every citizen has the same access to care. This is called the Beveridge Model.  

When governments provide health care, they work to ensure doctors and hospitals provide quality care at a reasonable cost. To do this, government agencies must collect and analyze data and use their purchasing power to influence health care providers.

The United Kingdom helped advance the single-payer health care system with its National Health Service, in which the government not only pays for health services, but runs hospitals and employs doctors.  Other single-payer-based countries include Spain, New Zealand, and Cuba. The United States offers it to veterans and military personnel with the Department of Veterans Affairs and the armed forces.

Countries often combine universal health coverage with other systems to introduce competition. These options can lower costs, expand choice, or improve care. In some cases, citizens can opt for better services with supplemental private insurance

Social Health Insurance Model

Countries that use a social health insurance model require everyone to buy insurance, usually through their employers. Employers deduct taxes from employee payroll to cover the costs, and the taxes go into a government-run health insurance fund that covers everyone. Private doctors and hospitals provide services. The government controls health insurance prices. It also has a lot of clout to control the private providers' prices.

Germany developed this system, which is also known as the Bismarck model. France, Belgium, the Netherlands, Japan, and Switzerland also use it. In the U.S., meanwhile, the Affordable Care Act, also known as "Obamacare," also requires insurance, but there are many exemptions, and this rule is no longer enforced by penalties. It is also similar in that it provides subsidies to health insurance companies for low-income enrollees.

National Health Insurance

The national health insurance model uses public insurance to pay for private-practice care. Every citizen pays into the national insurance plan. Administrative costs are lower because there is one insurance company. The government also has a lot of leverage to force medical costs down. 

Canada, Taiwan, and South Korea, for instance, all use this model. The U.S. Medicare, Medicaid, and TRICARE systems are based on a national health insurance approach.

Advantages and Disadvantages of Universal Health Care

Advantages
  • Lowers overall health care costs

  • Lowers administrative costs

  • Standardizes service

  • Creates a healthier workforce

  • Prevents future social costs

  • Guides people to make healthier choices

Disadvantages
  • Healthy pay for the sickest

  • Less financial incentive to stay healthy

  • Long wait times for elective procedures

  • Doctors incentivized to cut care to lower costs

  • Health care costs may overwhelm government budgets

  • Government may limit services with low probability of success

Advantages Explained

  • Lowers overall health care costs: The government controls the prices through negotiation and regulation.
  • Lowers administrative costs: Doctors only deal with one government agency. For example, U.S. doctors spend four times as much as Canadians dealing with insurance companies.
  • Standardizes service: In a competitive environment like the U.S., health care providers must also focus on profit. They do this by offering the newest technology. They also offer expensive services and pay doctors more, competing to target the wealthy. A universal system takes away the profit motive and focuses on providing equal care for all. 
  • Creates a healthier workforce: Studies show that preventive care reduces the need for expensive emergency room usage. Without access to preventive care, emergency room patients went there because they had no other place to go and needed to use the emergency room as their primary care physician. This health care inequality is a big reason for the rising cost of medical care.
  • Prevents future social and health costs: Preventive care can prevent future health issues and improve outcomes in the most vulnerable communities.
  • Guides the population toward healthier choices: Better investment in health care, health infrastructure, and public education can help push the population toward healthier choices and lifestyles. 

Disadvantages Explained

  • Healthy people pay for the care of the sickest: Chronic diseases make up 90% of health care costs. According to Brookings research, the half of the population using the least health care accounts for only 3% of total (including out-of-pocket) expenditures (excluding long-term care and some other components of spending), while the top 1% accounts for 22%. However, this is true even outside of universal health care systems, as spending on chronic diseases will raise the cost of private health insurance plans as well.
  • Less financial incentive to stay healthy: Without a copay, people might overuse emergency rooms and doctors.
  • Long wait times: The government focuses on providing basic and emergency health care, so wait times for elective procedures can be much longer.
  • Doctors incentivized to cut care to lower costs: Government cost-cutting can lead to reduced availability of care. For example, doctors report Medicare payment cuts will force them to close many in-house blood testing labs.
  • Costs may overwhelm government budgets: Health care costs make up a significant portion of government budgets. For example, on average, Canadian provinces spend almost 40% of their budgets on health care.
  • Government may limit those services with a low probability of success. This includes drugs for rare conditions and expensive end-of-life care. In the United States, care for patients in the last year of life makes up between 13% and 25% of the Medicare budget.

Examples of 6 Developed Countries With UHC

Here is a look at the UHC systems in some of the world's developed nations.

Australia

Australia has a mixed health plan. The government provides public health insurance, called Medicare, and runs public hospitals. Everyone receives coverage, and people must pay deductibles before government payments kick in. Many residents are willing to pay for additional private health insurance to receive a higher quality of care. Government regulations protect seniors, the economically disadvantaged, children, and rural residents.

As of 2020, health care cost 9.4% of Australia's gross domestic product (GDP). The per capita cost was US$4,919, slightly above average for developed countries. Wait times for elective surgeries ranged from 17 days for a coronary bypass to 209 for knee replacement. Australia also has one of the best infant mortality rates of the compared countries at 3.1%

Canada

Canada has a national health insurance system. The government pays for services provided by a private delivery system. Private supplemental insurance pays for vision, dental care, and prescription drugs. Hospitals are publicly funded. They provide free care to all residents regardless of their ability to pay. The government keeps hospitals on a fixed budget to control costs, but it reimburses doctors at a fee-for-service rate. 

In 2019, health care cost 10.8% of Canada’s GDP. The cost per person was US$5,370. Wait times for elective surgeries ranged from six days for a coronary bypass to 122 for knee replacement. The infant mortality rate was 4.4% in 2019.

France

France has a social health insurance system that provides care to all legal residents. That includes hospitals, doctors, drugs, and some dental and vision care. It also pays for homeopathy, spa treatments, and nursing home care. Of that, payroll taxes fund 64%, income taxes pay for 16%, and 12% is from tobacco and alcohol taxes.

As of 2020, health care cost 12.4% of GDP. That was US$5,564 per person. The infant mortality rate was 3.4%. These statistics are all in the middle of the pack for developed nations. 

Germany

Germany has a social health insurance program. Everyone must have public health insurance, but those above a certain income can choose private insurance instead. The state-sponsored insurance covers hospitalization, except for meals and accommodation. It also covers rehab for hospital stays, mental health, addiction, and even covers long-term care. Funding comes from payroll taxes.

As of 2020, health care cost 12.5% of GDP. It averaged US$6,731 per person. Both figures are about average. In addition, most Germans can get next-day or same-day appointments with general practitioners. The infant mortality rate was 3.1%. 

Switzerland

The country has a social health insurance system for all residents. Coverage is provided by competing private insurance companies. Residents pay premiums based on their income, and the government reimburses them for any higher costs. People can buy supplemental insurance to access better hospitals, doctors, and amenities.

As of 2019, health care spending was 11.3% of GDP. It was USD $7,138 per person. In 2020, the infant mortality rate was 3.5%. 

United Kingdom

The United Kingdom has single-payer health care that covers all residents. Visitors receive care for emergencies and infectious diseases. The National Health Service runs hospitals and pays doctors as employees. The government pays 80% of costs through income and payroll taxes. The rest is paid from copayments and people paying out-of-pocket for NHS services. It pays for all medical care, including some dental and eye care, hospice care, and some long-term care. There are some copays for drugs.

As of 2020, health care costs accounted for 12.8% of GDP. The cost was US$5,268 per person. Wait times for elective surgeries ranged from 35 days for a prostatectomy to 98 days for knee replacement. The infant mortality rate was 3.6%. 

Comparing Universal Health Care to the U.S. System

The United States has a mixture of government-run and private insurance.  

As a result, in 2020, 66.5% of Americans had private health insurance, mostly from their employers. The government subsidizes private health insurance through Obamacare. Another 34.8% of Americans had public government coverage. This includes Medicaid, Medicare, Children's Health Insurance Program, and military coverage including the Veterans Administration. Only 8.6% had no coverage at all.

All health care service providers, except for the VA, are private. Some democratic candidates have promoted universal health care under the title "Medicare for All."

In 2019, health care cost 16.8% of GDP. That was a staggering US$10,948 per person. The infant mortality rate was 5.4%, significantly higher than that of countries such as Australia and Germany.

Key Takeaways

  • Universal health care is a system that provides quality medical services to all citizens.
  • Services are either provided directly by the government or funded through government programs.
  • There are various models for UHC throughout the world, from countries including Canada, the United Kingdom, France, and Japan.
  • The U.S. system is fundamentally a private health care system, not universal.

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