What Is “Single-Payer” Health Care?

Report Health Care Reform

What Is “Single-Payer” Health Care?

November 29, 2018 12 min read Download Report
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Research Assistant in Domestic Policy Studies
Meridian is a research assistant in domestic policy studies in Heritage's Institute for Family, Community, and Opportunity.

Summary

American policymakers should reject “single-payer” proposals such as Medicare for All. Although the promise of “free” care may be attractive, in reality such a system would impose an unprecedented payroll tax on all working Americans. It would take control from patients and their doctors and put it in the hands of government politicians and bureaucrats. The international track record on single-payer plans confirms that this consistently leads to poor access to care—and even to denial of care. In short, single payer would have the effect of higher costs and reduced access to care for many patients. Instead, Congress should seek to reduce costs and increase access to care for Americans through proposals that empower patients and doctors.

Key Takeaways

Leading Democrats have voiced support for replacing existing forms of insurance with government-run health care.

A payroll tax increase on all working Americans would fund government-run health care.

In the U.K. and Canada, government-run systems ration care—resulting in delays and denials of service.

Leading Democrats in the U.S. Senate and more than half of Democrats in the U.S. House of Representatives have voiced support for “single-payer” health care—a full government take-over of American health care.REF Its promise of simplicity strikes a chord with Americans who are frustrated with high costs and complex payment arrangements. This sentiment is amplified by the fact that some Americans face additional trouble accessing care if they are sick or low-income. Single-payer advocates claim that full government control of health care is the answer, and they argue that such a system would deliver superior quality care for everyone at lower costs than current public and private arrangements.

Upon closer examination, however, these claims are greatly exaggerated. Government-controlled health care would substantially raise taxes for all Americans. Moreover, it would slash payments to medical providers, resulting in less access to quality care for millions of Americans. The experiences of the United Kingdom and Canada offer a cautionary lesson of government-run health care. Under these systems, the government rations care—resulting in delays and denials for its citizens.

Leading Single-Payer Proposals: Medicare for All

The term “single-payer” is an umbrella term for a variety of approaches to government-funded health care.REF In its purest form, it refers to a universal system in which the government itself becomes the national health insurer. With few exceptions, it typically supplants or abolishes previously existing public and private health coverage.

The most prominent proposal for government-controlled health care is S. 1804, the Medicare for All Act of 2017, introduced by Senator Bernie Sanders (I–VT).REF This proposal would create a national health insurance program covering all U.S. residents.REF Coverage would include 10 benefit categories and eliminate nearly all cost sharing, making care “free” at the point of service. It would prohibit employer-sponsored coverage and all other private insurance, except for non-covered benefits or services.REF The proposal would also eliminate nearly all existing public coverage arrangements, most notably Medicare, Medicaid, and the State Children’s Health Insurance Program (CHIP).REF

Following a four-year transition period, the federal government would enroll all residents covered under current private and public arrangements (as well as those currently uninsured) into the new, federal insurance program.REF Under this scenario, 164 million Americans would lose their employer-sponsored insurance; 17 million Americans would lose their individual-market insurance; and 75 million Americans would lose Medicaid or CHIP. Ironically, even though the title of the bill is “Medicare for All,” over 57 million elderly and disabled Americans would lose their existing Medicare coverage and instead be enrolled in the new program.REF In short, almost all Americans would lose the health care coverage they have today.

The Sanders plan suggests financing the cost of the program in part through a combination of new payroll and income taxes.REF The plan would impose a set of specialized taxes—including taxes on investments and dividends—and target tax-rate increases on Americans making over $250,000. The proposal also assumes significant savings from reductions in administrative costs and substantial cuts in payment for doctors, hospitals, and other medical professionals. Under the Sanders proposal, doctors and other medical professionals would receive Medicare-level reimbursements, and the proposal would severely restrict any private contracting between doctors and patients outside the government program.REF Health spending in the new government program would be subject to a global health care budget and governed by an elaborate regulatory system of centralized decision making in the U.S. Department of Health and Human Services.REF

There is a similar Medicare for All proposal in the U.S. House of Representatives, H.R. 676, the Expanded and Improved Medicare for All Act of 2017. The bill was originally introduced by Representative John Conyers (D–MI) and is currently sponsored by Representative Keith Ellison (D–MN).REF While broadly similar, this proposal varies on some points from Senator Sanders’ bill.

  • The House bill does not provide a transition period between systems, while Sanders’ offers a four-year transition period.REF
  • The House bill permits anyone arriving at a medical facility to receive care: They are presumed covered under the plan, though they must submit an application for coverage.REF Sanders’ bill does not include this provision.
  • The House bill also includes long-term care in the list of covered Medicare-for-All services, while Sanders keeps long-term care in the Medicaid program.REF
  • The House bill does not include any cost sharing, while Sanders’ bill includes small copays for prescription drugs.REF
  • The House bill bans for-profit, investor-owned medical facilities, while the Sanders plan does not.REF
  • While the House bill is silent on private contracting, the Sanders proposal specifies that providers may opt-out of Medicare for All (though private insurance is banned).REF
  • Under the House bill, individual facilities and providers would receive global (fixed) budgets, while the Sanders plan sets the budget only at the national level.REF
  • Finally, the House bill proposes a combination of revenue sources, including a payroll tax, while the Sanders bill does not specify his revenue sources in the bill itself (other than current spending).REF Sanders does, however, provide revenue suggestions in a separate document from the bill and proposes a variety of funding sources—but primarily relies upon a combined payroll tax and income-related premium equal to 11.5 percent of income.REF

The High Cost of Government-Run Health Care

Health policy analysts from across the ideological spectrum have examined the potential cost of the Sanders’ proposal. While the estimates vary methodologically, they all consistently show the proposal would require substantial federal tax increases and could impose major deficits, depending on actual incurred revenue. The Urban Institute, a widely respected liberal-leaning think tank, estimates that Senator Sanders’ plan would cost $32 trillion in new federal spending over 10 years. Yet Urban finds that the proposed combined payroll and income tax of 11.5 percent would bring in only $15.3 trillion of the needed $32 trillion—leaving a 10-year deficit of more than $16.7 trillion.REF

Economist Ken Thorpe of Emory University, a former adviser to President Bill Clinton, estimates the 10-year cost of Sanders’ plan at $24.7 trillion.REF Like the Urban Institute, Professor Thorpe finds that Senator Sanders’ tax proposal would be insufficient to cover the full cost of the proposal. He estimates a shortfall of nearly $1.1 trillion per year. Professor Thorpe estimates that the tax level required to cover the true cost would need to be about 20 percent in combined new payroll and income taxes.

Analysts at the Center for Health and Economy estimate a 10-year cost of up to $44 trillion. This estimate assumes the Sanders proposal offered coverage equivalent to current “platinum”-level plans offered in the individual and small-group health insurance markets. The Center’s analysts also find that Senator Sanders’ revenue proposal would be insufficient and would result in a deficit of up to $2.11 trillion in the program’s first year.REF

More recently, Dr. Charles Blahous, Senior Fellow at the Mercatus Center at George Mason University and former public trustee of Social Security and Medicare, estimates a 10-year cost of $32.6 trillion. In his estimate of the Sanders bill, he notes that “doubling all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan.”REF

Reduced Access to Care in Single-Payer Systems

With insufficient revenue, single-payer systems usually depend on government officials holding firm to the global health care budgets that restrict national spending or imposing payment regulations, reductions, or price controls on medical goods and services. The Sanders bill includes both approaches to control national health spending.

U.S. policymakers can look to international experience on how such systems work in practice. The British National Health Service (NHS) and Canadian health systems, both single-payer systems, explicitly ration health care—creating access problems for patients.

Wait Lists. Wait lists are a significant problem in the Canadian system. In 2017, Canadians were on waiting lists for an estimated 1,040,791 procedures.REF Physicians reported that only about 11.5 percent of patients “were on a waiting list because they requested a delay or postponement,” meaning much of the remainder was systemic failure.REF Often, wait times are lengthy. For example, the median wait time in Canada for arthroplastic surgery (hip, knee, ankle, shoulder) ranges from 20 weeks to 52 weeks.REF

Cancellations. In the British NHS, cancellations are common. In 2017, the NHS canceled 84,881 elective operations in England for non-clinical reasons on the day the patient was due to arrive.REF The same year, the NHS canceled 3,845 urgent operations in England.REF Episodes of frequent illness tend to aggravate this problem. During the 2018 flu season, for example, the NHS canceled 50,000 “non-urgent” surgeries.REF

Poor Performance. In the United States, the Veterans Administration (VA) health program and the Indian Health Services (IHS), both government-run health care programs, have a history of poor performance.REF A 2015 report revealed that in the VA, as many as 238,000 veterans may have died while they were waiting for care. Curiously, in spite of these shocking revelations, the Sanders’ bill would preserve the VA program, along with the troubled IHS.REF

Professional Problems. Not only patients, but also doctors would face a more difficult practice environment under a single-payer program. Earlier this year, the British Medical Journal published a study of general practitioners who have left practice or are planning to leave.REF The most commonly cited reasons were the lack of professional autonomy, administrative challenges, and increasingly unmanageable workloads.

Conclusion

American policymakers should reject “single-payer” proposals such as Medicare for All. Although the promise of “free” care may be attractive, in reality such a system would cost most taxpayers more than they pay today. It would take control from patients and their doctors and put it in the hands of government politicians and bureaucrats.

The international track-record on single-payer plans confirms that this consistently leads to poor access to care—and even to denial of care. In short, single-payer would have the effect of higher costs and reduced access to care for many patients. Instead, Congress should seek to reduce costs and increase access to care for Americans through proposals that empower patients and doctors.REF

—Meridian M. Paulton is a Research Assistant for Domestic Policy Studies, of the Institute for Family, Community, and Opportunity, at The Heritage Foundation.

Authors

paultonm.png
Meridian Paulton

Research Assistant in Domestic Policy Studies