Why single-payer health systems spark endless debate
Authors: Uwe E Reinhardt
Journal: BMJ (2007)

Whenever Americans lapse into their periodic “conversations” on health reform, a single-payer health system is proposed by some as the panacea and condemned by others as “socialised medicine.” Rarely are the pros and cons of single-payer systems fairly debated.

In single-payer health systems, the entire population shares one health insurance carrier, usually the central or provincial government. Such systems should not be confused with “socialised medicine,” in which the government also owns and operates the healthcare delivery system. Single-payer health systems typically are just social insurance grafted onto pluralistic delivery systems, which may include investor owned, for-profit enterprises. Canada's and Taiwan's health systems are classic examples of this genre, as is the government run Medicare system for elderly people in the United States for the services it covers.

To their proponents, single-payer health systems offer several distinct advantages over pluralistic health insurance systems, such the American system.

Firstly, single-payer systems are the ideal vehicle for implementing an egalitarian social ethic, if that is what the citizenry desires. Such systems can apply the same terms of healthcare delivery to all of its citizens, regardless of the patient's socioeconomic status, including styles of rationing and the fees paid for given treatments. It is not so in the United States. The Medicaid programme for the poor run by state governments, for example, pays physicians and hospitals significantly lower fees—sometimes less than half—than those paid for commercially insured patients. These differential prices signal to providers that the social value of health care depends, in the eyes of legislators, on the recipient's wealth or insurance status. Many American physicians predictably and rationally respond to that signal by refusing to treat Medicaid patients altogether.

Secondly, single-payer systems are administratively simple. They typically spend only a fraction of what pluralistic health insurance systems spend on administrative overheads, leaving more of national healthcare spending for health care proper. One reason these systems spend less on administration is that they are the ideal platform for a coherent electronic information infrastructure, with a commonly shared nomenclature.

In Taiwan's single-payer system, for example, utilisation trends and healthcare spending can be tracked electronically almost in real time. By contrast, in the United States, paper based claims processing is still common among the myriad of private health insurers, and total national health spending can be roughly estimated only with a lag of a year or more. Furthermore, claims processing in the US engages armies of costly intermediaries who translate nomenclature used by providers into the differing nomenclatures used by third party payers, who help patients claim reimbursements from insurance carriers, who help physicians bill private insurers, and who help insurers defend themselves against over-billing by providers. In a recent article entitled “Billing Battle: Fights Over Health Claims Spawn a New Arms Race,” the Wall Street Journal (14 February 2007) reported that American insurers and physicians were spending billions of dollars fighting over insurance claims, and that some consulting firms now earned handsome profits by helping both sides in this arms race with customised software.

The built-in pitfalls of single-payer systems, however, must be acknowledged as well.

Firstly, single-payer systems allocate disproportionate market power to the buy side of health care, which allows government to keep prices at the minimum necessary to keep providers in the system. Providers understandably may question the fairness of so asymmetric a distribution of market power in a health system. To be sure, the low prices it forces on the system allow society to provide more real health care for a given budget than could be delivered in a more expensive pluralistic system, and it also makes universal health insurance coverage more affordable. On the other hand, the extremely low profit margins it yields the provider of health care makes single-payer systems less hospitable to innovation in healthcare products and services and in the organisation of healthcare delivery, areas in which the United States excels, sometimes to the point of excess.

Secondly, in single-payer systems spending on health care is pitted against other government priorities and easily falls victim to the politician's perennial desire to campaign on tax cuts. The barebones technology, physical amenities, and queues that unduly low global budgets in single-payer systems tend to beget inevitably trigger political forces for turning the system over to allegedly “more efficient” private market forces, which is code for letting the quality of the healthcare experience vary with the patient's economic circumstance. Canada is now in the midst of a debate on this issue; Taiwan, whose single-payer health system also shows the strains of chronic underfunding, may soon follow.

Single-payer systems have poor political prospects in countries that hold sacred the right of individuals to jump queues with their money, all the more so if the distribution of family income is highly unequal. That is certainly so in the United States where, it seems, it is considered ever more acceptable for moneyed elites to purchase for themselves superior access to prestigious private schools and universities, a higher quality healthcare experience, superior access to the political process, and even superior justice.

Single-payer systems have poor political prospects in countries that hold sacred the right of individuals to jump queues with their money