As Republican efforts to repeal and replace the Affordable Care Act continue in the background, some Democrats are starting to eye a new health policy goal: implementing a single-payer system. Sen. Bernie Sanders, I-Vt., introduced a single-payer bill in mid-September with 16 Democratic co-sponsors — 16 more than he got when he introduced the bill two years earlier. But how is the health-care system funded now, and how would “single-payer” change that?
How health-care systems are funded
There are three major components to every health-care system, single-payer or not: a patient, a payer (typically an insurance company or the government) and a provider. Here’s how money moves between them:
How multi-payer systems work
Virtually all health-care systems follow this general pattern, but who the payers are can vary widely. In the U.S. private insurance market, patients typically purchase coverage from one insurance company among many competing insurers. Because different people end up with different insurers, there are multiple payers throughout the U.S. health-care system.
How single-payer systems work
In a purely single-payer system, there is, as the name would indicate, just one payer — typically the government. This is analogous to how the United States administers some portions of Medicaid: The government provides coverage, and no private insurers are involved.
Sanders’ bill takes universal coverage close to this extreme: The government insurance would cover so many services with such small co-pays that private insurance would be almost universally unnecessary. Accordingly, it would also be quite expensive — $32 trillion over 10 years, according to an Urban Institute report. That’s more than a 50 percent increase in federal spending — all federal spending — according to spending projections by the Congressional Budget Office. That would be partially offset by people no longer needing to pay premiums to private insurers, however, and the government’s monopoly could allow it to implement cost-saving measures.
How the American health insurance system currently works. (The Washington Post)
But most universal-coverage systems don’t look quite like this. It’s expensive for a government to fund a comprehensive health-care system, especially somewhere like the United States, where costs are so high.
So many governments instead pay for most but not all of their residents’ medical treatment. In those countries, people have the option to buy “supplementary” private insurance, which pays for services such as dental care that the government health-care program excludes. People often also have the choice to buy “complementary” private insurance, which pays for the co-pays and deductibles in the government’s insurance plan.
This is analogous to how traditional Medicare (as opposed to Medicare Advantage) operates in the United States. The government pays for a large portion of medical services, but it’s common for people to buy complementary Medigap plans from the private insurance market. And it’s common for people to buy supplementary Medicare Part D plans from private insurers to cover prescription drugs, which are not covered by traditional Medicare.
Countries with universal coverage sit on a spectrum from the least pure to the most pure single payer — that is, governments that offer the least comprehensive care, where complementary or supplementary insurance is more necessary, to those that offer the most comprehensive health-care coverage, with little need for private insurance. (Where one draws the line for “single-payer” vs. merely “universal coverage” is debatable, and largely a semantic problem.)
Some countries, such as Norway, are closer to the “pure” end. They offer such comprehensive coverage that complementary or supplementary private insurance makes up just a small piece of the system. In Canada, by contrast, 29 percent of health-care spending comes from the private sector, and about two-thirds of Canadians hold some sort of private supplementary insurance according to a report from the Commonwealth Fund.
It’s yet to be seen whether Democrats will coalesce around a single-payer plan, and if so, where it will fall on this spectrum.
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