Explainer: What is a single payer healthcare system?

Despite having more access to health insurance, the highest proportion of people in the United States postponed doctor visits last year due to their inability to afford care. According to a Gallup survey, 38 percent of respondents reported that they or their family members had to skip medical treatments due to high costs. Since 2001, when Gallup began conducting the survey, this figure has increased by nearly twenty percent.

Although efforts have been made to expand access to healthcare through the Affordable Care Act, with prices skyrocketing, being insured no longer means that one is protected if one gets sick.

Since 2000, the average consumer, according to Consumer Price Index data from the Bureau of Labor Statistics, is paying 28 percent more for health insurance and 108 percent more for medical care. Since 2011, the cost of prescription drugs has also jumped 26 percent. Meanwhile, over the last 23 years, real wages have only increased seven percent of the average worker, highlighting that increases in medical costs are severely outpacing gains in income.

What is a single-payer healthcare system?

In the US, a single-payer healthcare system, often referred to under the banner of Medicare for All, would be a public and universal system that would replace the private system that the country currently operates under. Instead of premiums, copays, and deductibles, a single-payer healthcare system would be funded through taxes. Private insurance would still exist but serve as a supplement to the public system, an option for those seeking additional coverage. A Yale study on the topic, published in the Lancet, found that Medicare for All could reduce healthcare spending by thirteen percent or $450 billion a year. Public Citizen reported that for the average family making under $60,000, a single-payer system could decrease their healthcare costs by 14 percent a year.

How would a single-payer system impact healthcare costs?

Opponents of Medicare For All often argue that healthcare costs would increase beyond what many pay today. However, compared to other OECD countries, the US pays the highest prices for healthcare, and most of the other countries have single-payer systems. On a per capita basis, the US healthcare system costs $12,555 per person a year. Switzerland has the second most expensive healthcare system, which comes out to around $8,049 per citizen. Many countries on the list with single-payer systems, like Spain, Italy, Greece, and Ireland, pay a fraction of what the US does to provide healthcare to its citizens. Despite this, they have higher life expectancy than that of the US.

Why does healthcare cost so much in the US?

The argument is often made that healthcare costs so much in the United States because the quality is very high. While, for those who can take advantage of the latest advancements in medical science and technology, that may be true, there are barriers to accessing that care for the vast majority of residents.

A 2018 study found discrepancies in cancer survival rates between poor and rich countries in the US. A single-payer system cannot eliminate all of the impacts income inequality has on health, but it attempts to raise all boats by creating a more cost-effective system that increases accessibility for patients across the income spectrum. One way this goal is achieved is by ensuring that rural communities have access to healthcare. National Nurses United, a union that advocates for Medicare for all, has argued that those “vulnerable communities in rural and underserved areas would benefit from reliable and equitable funding which will improve health care in these communities and prevent hospital closures.” Private companies often refuse to serve rural areas because there are insufficient patients to make their operations profitable. With a single-payer system, profit-motivated companies are no longer able to hold so much power to determine where hospitals and other facilities are built.

The benefits of economies of scale within a single-payer system

The Affordable Care Act made more people eligible for insurance, which increased the number of individuals between whom the costs could be shared. In a public healthcare system, the government can leverage its bargaining power to force private suppliers to provide high-quality products at the lowest possible prices. For example, let’s consider a company that manufactures prosthetic hips. The government could release a tender for 80 percent of all prosthetic implants, and companies, realizing the potential size of the contract, would be motivated to offer the best possible product at the lowest unit price. When you scale this one example to all medical devices, materials, medications, and other equipment, we begin to see how economies of scale at the national level can bring down prices.

In 2022, the Inflation Reduction Act was passed, which allows the federal government to negotiate with pharmaceutical companies for the first time. However, the law only permits the price of ten drugs to be negotiated, and only those receiving Medicare will benefit from the price decreases.

Advocates for single-payer argue that all people in the US should be able to benefit from lower drug prices.