What is Single-Payer Healthcare?

Published April 8th, 2020 by Chris Riley
Fact Checked by
Chris Riley

Our healthcare system determines the type of medical care we receive. Every country has its own healthcare system in place that determines what kind of access to medical facilities and prescription drugs its residents get. Healthcare reform has been a major undertaking in the United States over the past 20 years. The Affordable Care Act, which was put into place under the Obama administration, aimed at providing healthcare coverage for the millions of Americans without health insurance so that more people could have affordable access to medical care. Yet, currently millions of Americans still remain without health insurance or are underinsured. This a big problem because the costs of medical care in the U.S. are on average higher compared to the rest of the world. For most Americans, health insurance is provided by their employers through private health insurance companies. We have all heard of different types of healthcare systems like Universal Healthcare or a Single-Payer Healthcare system. Are these healthcare systems any better than what we currently operate on?

Universal Healthcare

Universal coverage means that every individual in that country has healthcare coverage. For example, Canada operates on a Universal healthcare system in which the government provides health insurance to every single Canadian citizen. This means that there are no uninsured Canadian citizens. Coverage under Universal Healthcare is typically offered by different providers, and people can choose from different insurance companies for their health insurance. Although this type of healthcare plan sounds great, it is not actually free. The costs of Universal Healthcare have to be covered somehow and this is usually through a special tax that taxpayers pay, or it can also be by requiring individuals to buy their insurance policies. Assistance is usually given to individuals or families with limited income who may not be able to afford this. 

Single-Payer Healthcare System

Single-Payer Healthcare is not the same as Universal coverage. In a Single-Payer healthcare system, the government covers the costs of healthcare coverage for all its citizens. Under this type of system, everyone receives coverage irrespective of his or her ability to pay for an insurance plan. The government takes responsibility for the healthcare claims of all individuals. Simply put, the government is the ‘Single Payer’ that provides healthcare coverage and covers the costs all healthcare claims. The government gets the funds to do this from special taxes that it allocates to its healthcare system. Single-Payer healthcare systems cover all the basic medical care options like office visits, hospital stays, preventative care, long-term care, emergency medical attention, reproductive and mental health care, dental and vision coverage. 

Currently, 17 countries operate on a Single-Payer healthcare system. Some of these countries include the United Kingdom, Norway, Sweden, Finland, Iceland, Portugal, Spain, Slovenia, Kuwait, Bahrain, and the United Arab Emirates. Exactly how a Single-Payer Healthcare system is structured in these countries varies. There is no single set way to run a Single-Payer healthcare system. 

In the United States, Medicare is an example of a government-run single healthcare plan. Extending this coverage to all its citizens under a Single-Payer healthcare system has been referred to as “Medicare for All”. Since both the federal government and state government run Medicaid jointly, it is not truly a ‘single’ payer system but the principle of coverage would be the same. Currently, only senior citizens above the age of 65 and younger individuals with certain disabilities are eligible to enroll in Medicare. The vast majority of remaining people in the U.S. are covered by health insurance offered by private companies. Therefore, while a Single-Payer healthcare system does exist in the U.S., the amount of people who can use it are extremely limited. This creates a huge disparity in the ability of people to access the same kind of medical care. 

Some other countries have a two-tier type of Single-Payer coverage system in which the government is the ‘single-payer’ that offers a set basic coverage plan, and people can opt add on to this plan by buying more expensive coverage. Countries that use this type of healthcare system include Australia, Denmark, France, Ireland, Hong Kong, and Singapore. This type of plan also ensures that people of that country will have access to at least basic healthcare even if they cannot afford to buy more expensive options in their plan. 

Single-Payer Healthcare and Prescription Drug Coverage

How will a Single-Payer Healthcare system affect prescription drug coverage and your access to the medications that you need? Some of the major questions about implementing a system like this are:

  • Will this system affect the cost of prescription drugs? 
  • Will the process of purchasing your drugs be the same? 
  • Will co-pays and premiums still apply? 

In general, the cost of prescription drugs in countries that use Single-Payer Healthcare systems is much lower than in the United States. The rising price of prescriptions drugs in the U.S. is a major concern, especially for people who have to take medication regularly for a chronic illness or disease. Some reports estimate that the current average price of a drug in the U.S. is three times that of the same drug in countries like Switzerland. 

According to SingleCare, the average American spends approximately $1,200 on prescription drugs in a year. According to another report by the Congressional Budget Office, the costs of prescription drugs accounts for only 10% of personal healthcare spending annually and most people spend much more out-of-pocket on hospital services and physician office visits than they do on buying their prescription drugs. Therefore, if the government funds healthcare by being the single payer, drug coverage would not be expected to be a major financial component of the overall costs that they have to take on. Since the funds for a Single- Payer system conventionally come from its taxpayers, this means well for the people. 

Assuming that a Single-Payer healthcare system can bring prescription drug prices down overall, while consumers of the medications will widely benefit, pharmaceutical companies could take a hit. Companies that make a bulk of the popular medications that are currently available, like Pfizer or Roche, could lose up to 25% of their total revenue with lower drug costs. For some companies, this will tremendously impact their research and development of new drugs, meaning that developing new drugs for health conditions could be halted. Patients who are in desperate need for the discovery of new drugs to treat their conditions could be negatively impacted. Additionally, government-imposed taxes could increase to cover the cost of subsidized drug prices for customers. Mostly, however, patients who routinely purchase prescription drugs will only notice that the prices of their drugs have gone down similar to the prices offered by other Single-Payer healthcare nations like the United Kingdom. Implementation of this system in the U.S. could bring prescription drug prices back to being comparable with the rest of the world.  

Prescription Drug Cost Determination under Single-Payer Healthcare

A Single-Payer healthcare system can use different methods to cover the costs of prescription drugs. To establish reduced costs of drugs, the government would need a way to evaluate drugs across groups to decide how much each drug should cost. 

Certain countries that use Single-Payer healthcare systems use ‘negotiated pricing’ in which the government (as the single payer) negotiates reduced prices of drugs directly with the manufacturer of the drug. This is similar to how private insurance companies get reduced costs on drugs from drug manufacturers. 
Some countries like Sweden use ‘value-based pricing’. In this method, the cost-effectiveness of the drug determines its value or how much it should cost. Either the government can investigate how cost effective a drug is, or the drug manufacturer can provide this information. In Sweden, drug manufacturers provide this information to the government for a new drug and if the government decides that it is not cost-effective and rejects the drug, the manufacturer must resubmit an application with a lower drug price. This generally keeps the drug prices down.

Drugs can also be priced according based on prices of other drugs within a reference group. Countries like Canada use this method to determine the price of prescription drugs. The reference can be other drugs within the same therapeutic classification of the drug in question, or it can be an external reference, like how much the drug costs in other countries. Most European countries utilize reference pricing in their Single-Payer healthcare systems. Countries that use external references to price their drugs could face slower release of new drugs if they wait to see how much a drug will cost in the countries that they use as a reference. 

Overall, a Single-Payer Healthcare system could benefit patients by bringing down the general cost of prescription drugs. In general, this could benefit a large percentage of the population that buys standard and popular prescription drugs. These drugs are likely to be included with Single-Payer coverage. For patients that need specialized prescription drugs, that are relatively uncommon or expensive, how the prescription drug is priced under this system would depend on what type of cost determination method is used. Co-pays could certainly still exist with a Single-Payer system too. Additionally, not all aspects of medical coverage could be included depending on how the system is structured. Of course, another big issue is whether the government will need to raise taxes to afford implementing Single- Payer Healthcare. As discussions about this system continue, it remains to be seen whether ‘Medicare for All’ will come into effect at some point in the future.  

Published April 8th, 2020 by Chris Riley
Fact Checked by
Chris Riley

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