Single-Payer Healthcare, Explained

If you’ve heard the term “single-payer healthcare” floating around lately, you might be wondering what it is—and what this system could mean for your health costs.

A single-payer system would ensure that everyone has access to affordable healthcare. A proposal for a U.S. single-payer system called Medicare for All has been introduced in Congress, but it is unlikely to become law any time soon.

Read on for more about a single-payer healthcare system and how you may be affected if the U.S. instituted one.

“Single-payer means that one public agency pays for universal health coverage,” explains Dr. James Kahn, a professor of health policy, epidemiology and global health at the UCSF School of Medicine. “Everyone has the same comprehensive benefits package, covering all usual medical services like medications, hospital, emergency and long-term care.”

For those who live in the U.S. such a system would represent a significant shift in how healthcare costs are financed – and who bears the brunt of those costs.

The American healthcare system isn’t a monolith. Instead, healthcare is financed by a mix of private companies, federal and state governments and patients themselves.

The most common way to get the health insurance that pays for much of your care is through your job. Roughly half of Americans are covered by private employer sponsored insurance. Companies typically subsidize the cost of insurance, with workers chipping in via monthly premiums, copayments and coinsurance, and deductibles.[1, 2]

The next most common sources of health insurance are Medicaid and Medicare, the government programs for low-income Americans, the disabled and those 65 and older. Some Americans buy individual health insurance policies through the Marketplace, though for many of them the government subsidizes the monthly premiums. And nearly 10% of Americans have no health insurance, leaving them on their own to pay for healthcare.[2]

With a typical employer-sponsored or Marketplace health plan, preventive care is free.[3] Beyond that, even with health insurance you usually must meet a deductible before your policy covers the cost of your care, and then you’ll pay at least a portion of your healthcare expenses until you reach your plan’s out-of-pocket maximum. With Marketplace plans in 2022, the out-of-pocket maximum can’t exceed $8,700 for an individual plan, $17,400 for a family plan.[4]

Single-payer healthcare vs. the U.S. system

This current U.S. healthcare system is a hodgepodge of health insurance programs financed by private companies, individuals and the government. Under a single-payer system in its purest form, there would be one government-run insurance plan, financed through taxes, that covers everyone. Your health insurance would no longer be tied to your job or where you live. And everyone in the U.S. would enjoy the same coverage. [5, 6]

As a patient, you would deal with a single healthcare administrator and contend with less paperwork. Today your insurance plan may limit you to a narrow network of healthcare providers. Under single-payer, you would have more choice of doctors and hospitals. Unlike with some other universal healthcare systems, doctors, hospitals and other medical providers would remain privately run.

According to Kahn, a single-payer system could cut total U.S. healthcare spending by an estimated 3% to 15%, depending on the specifics of the system that’s implemented. That’s in line with a 2020 study he contributed to that was published in PLOS Medicine. It found that 19 of the 22 proposed models would save an average of 3.5% in total healthcare costs, though some models did lead to an increase in overall healthcare spending.[7] A single-payer system would be expected to lower administrative costs as well as the price of drugs.

Some estimates, however, predict higher healthcare spending, in part because of greater demand for care. Regardless of the overall change, a single-payer system would shift healthcare spending from states, private businesses and households to the federal government.[8]

With true single-payer, most healthcare consumers stand to benefit. “Individuals would pay no insurance premiums and have minimal or no cost-sharing,” Kahn says. Financing a single-payer system, however, would mean higher taxes, especially for high earners. Or it could lead to cuts in other federal programs or larger budget deficits.[6]

“The vast majority of families would pay less overall because premium and out-of-pocket savings exceed new taxes,” Kahn says, “but richer people would pay more on average.”

Medical bankruptcy, he notes, would also disappear under a single-payer system. Some 19% of Americans carry medical debt, and it’s more common among Black households (28%) and Hispanic households (22%).[9]

“Single-payer is used in many other wealthy countries, and yields better access to care, longer lives and lower costs,” says Kahn. Some of them include:

Canada

Under this publicly funded system, all citizens receive free healthcare. They also have the option to purchase private insurance to help pay for excluded services like outpatient prescription drugs.[10]

Taiwan

Their system provides mandatory coverage funded via payroll-based premiums. There are subsidies for low-income folks. There are some out-of-pocket costs, like copayments for prescription drugs and coinsurance for hospital stays.[11]

South Korea

This healthcare system is funded by payroll taxes, government subsidies, outside contributions and tobacco surcharges. Low-income families are exempt from monthly payments.[5, 12]

Keep in mind that single-payer is not the same as socialized medicine, which can be found in places like the U.K. Under that system, the government employs medical practitioners and owns the health facilities. That’s not necessarily the case a single-payer system.[13]

You may think of Medicare as an example of a single-payer-like system in the U.S. since it’s run by the federal government and ensures that everyone age 65 and older (and certain other individuals) has access to healthcare.[14] But in fact Medicare is multi-payer, with a government-run plan, private insurance and premiums and cost-sharing for enrollees.[6]

There have been attempts in Washington D.C. to move all Americans to a true single-payer system. In March 2021, the Medicare for All Act was introduced to Congress. If passed, it would establish a national single-payer system in the U.S. that would cover a wide range of services, including primary care, vision, dental, prescription drugs, mental health and substance abuse treatment, long-term care services and reproductive healthcare.

However, the act has gone nowhere since its introduction.[15, 16] So while there’s some interest in a move to a single-payer system, it likely wouldn’t be realized any time soon.