A single-payer system is a government is the only payer of health services. It does not mean that the government owns the health care provider, as the U.S. government owns Veterans Administration hospitals. An example is Canada, where the government is the only payer for all the basic medical services provided to its citizens.
Canada, Cuba, and North Korea are the only countries that have a true single-payer system. In these countries, an individual cannot buy health care services privately if that same service covered and paid for by the government. Most single-payer systems find it necessary to incorporate a “buyout” provision. Great Britain, which started as a single payer system, found it could not serve everybody so the government allowed an outlet for people to buy private insurance or private care. This is a “buyout.” That is not a true single-payer system as considered by advocates.
One benefit is that everybody would have health insurance. Proponents of a single-payer system point to the millions of people in the United States without health insurance and they believe a single-payer system would quickly provide universal coverage. However, most proponents want to go further than that and want to achieve equity – everybody has the same coverage. They expect that a single- payer system will assure that everybody is treated alike regardless of income or socio-demographic characteristics. Proponents also assert that a single-payer system would be less expensive and note that Canada spends a smaller percent of its gross national product on health care than the U.S. They also believe that the U.S. system has vast administrative costs that a single- payer system would eliminate.
The single-payer system in Canada, or for that matter the Medicare and Medicaid systems in the United States, do not have enough funds to pay for all the care and demands. When the government lowers the price of health care and/or extends health insurance coverage for everyone, more people will want to use more health care services and the government has to find a way to ration care. Rather than ration by charging beneficiaries the full price of health care, they limit the budget of hospitals and physicians. Facing strict budgets that limit the amount of services they can provide, providers do not want anybody to take any of their budgeted dollars. Providers also will resist innovations if they perceive that dollars meant for them could go to somebody else. For instance, if a provider developed new services in outpatient care at a much lower cost, as this innovation would not be funded. Thus, one of the main problems of a single-payer system is its reliance on rigid budgets that results in the demand for health care exceeding supply that, in turn, leads to rationing available care by forcing people to wait for long periods. That is a big cost and many of examples in which people in Canada have died while waiting on lists for 6 months to a year. Wealthy people often go to the U.S. for care, as several prominent government leaders recently did. A single-payer system does not live up to its billing as providing “an equal system for all” as the wealthy still have more access outside the government system.
Single-payer systems also result in less preventive care because there is such a demand for what care is available that most resources allocated for acute or urgent care. You see this with the lower mammogram rates in Canada versus the United States. According to the Concord study of cancer rates around the world published in the medical journal The Lancet Oncology, the U.S. had among the best cancer survival rates as well as better cancer detection, whereas Canada and Great Britain had lower rates and much less preventive care than the U.S. In sum, single-payer systems result in government rationing, wait lists and other access problems, more inequality because higher income people can go outside the country, decreased incentives for efficiency and innovation, delayed access to technology, less preventive care, and lower quality of care.
I would also recommend improving incentives on health care providers and insurers to foster greater competition. One of the proposals is for insurance companies to compete across state lines that would help reduce premiums, particularly in the states that require costly state-mandated benefits. Opponents are afraid insurance companies have high market shares and there will not be enough competition. This would increase competition. I would also do away with a number of regulatory clauses like any willing provider. I also favor an individual mandate for the purchase of health insurance as long as there is a strong penalty for not purchasing insurance. A weak penalty is likely to bankrupt some insurers because young people and others who are not sick will be unlikely to buy insurance. They might as well pay a weak penalty and buy insurance later when they get sick. This will increase adverse selection and place insurers in economic jeopardy.
I am concerned that there is not enough hospital competition in a number of markets and hospitals are gaining market power. As you get consolidation of hospitals, they are able to increase the rates charged to insurers and it is going to become even more difficult for insurers to negotiate lower prices. The insurers will have little choice but raise premiums, but that will lead to trouble with the insurance regulators as we talked about a moment ago. The only way around this is to bundle services into one payment or pay on an episode-basis; say one payment for a hip replacement to split among the hospital, physician, and community provider. By moving toward a more capitates payment system, the Medicare program would encourage higher-priced physicians to work together with hospitals and then maybe these types of organizations would be more competitive with one another.
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