Part II: Government-Funded Health Care

Stephen B. Kemble, MD

Part I summarized the problems inherent in use of competing private health insurance plans for health care financing. Part II looks at the implications of single-payer public funding of health care.


Consider H.R.676, the House single-payer bill kept “off the table” during health reform negotiations. It proposes public financing of universal health care, but leaves care delivery (doctors and hospitals) private and independent. This is not the same as “socialized medicine,” in which government owns the hospitals and employs the physicians. It uses a “social insurance” model in which everyone is included in a single risk-pool, with no exclusions from coverage based on health status, and it eliminates competing private health insurance plans. Effective government-sponsored programs may use private plans provided they are made to function as a single risk-pool, as in many European countries.  In these systems government requires universal and open enrollment, standardized benefits and fees, and risk-adjusted funding of plans. However, in general countries using multiple plans have somewhat higher health care costs.1 Single-payer financing is most cost-efficient.


  • Benefits are comprehensive, with minimal or no co-pays.
  • Patients have free choice of providers.
  • Health care is independent of employment status.
  • Universal health care is less expensive because it has much lower administrative costs and allows effective cost controls. Countries with universal health care spend about half of U.S. per-capita total health care spending, and they cover everyone. 1,2
  • Lower total health care costs means less pressure to restrict and control physicians’ professional decisions.
  • Streamlined administration is much easier and less expensive for providers.
  • Quality improvement programs work much better in a unified market.
  • Public programs (Medicaid and Medicare) would no longer be dumping grounds for the sickest, most expensive populations. A universal risk pool would relieve their fiscal problems.
  • Universal health care can remove health care expenses from medical malpractice, worker’s compensation, and automobile insurance, drastically reducing their costs.
  • Accountability in government is theoretically to the people, although this can often be sabotaged by special interests.


  • Government can be inefficient, irrational, and inflexible (“administration by acts of Congress,” as with U.S. Medicare).
  • Special interest pressures often lead to bad policies in government programs.
  • A government-funded plan means government control of physician fees. Even if these are negotiated with organized Medicine, as in Canada, pressure to reduce taxes may lead to under-funding over time. This could possibly lead to pressures to ration care, reduce fees, and control doctors, as is already happening with private insurance. However, this would happen at a much lower total spending level than with competing private plans, because a single-payer system carries much lower administrative overhead.
  • No competition means we need another means to ensure accountability. (Of course, competition in U.S.-style health insurance does not provide accountability to quality health care anyhow.)

Establishing Accountability in Government-Funded Health Care

The legislative branch must define the broad structure of government-funded health care and how it is to be financed. To prevent corruption by special interests, a public plan needs a carefully designed administrative structure, accountable to quality health care, but insulated from special interest pressures. This could be accomplished with a system of national, state, and regional boards, with representation from the essential stakeholders in health care: physicians and other professional providers, hospitals, and the public who are or will be recipients of care. These boards would be charged with assuring quality, cost-effectiveness, and fair reimbursement for hospitals and physician services.


This administrative structure must have the autonomy to implement continuous quality improvement. It must be able to modify policies based on feedback from providers and patients at the front lines, without having to go back to the legislature for every administrative adjustment. Quality improvement programs are most cost-effective when led by physicians, not by insurance plans or government.3,4


Other functions of these boards should include allocation of government funding for health care education and training, incentives to meet manpower needs in provider shortage areas, medical research, public health programs, and scope-of-practice issues. They should also have substantial influence over the public financing of the health care system, including health care tax rates (premiums), to ensure that the funding of the system continues to reflect the realistic costs of providing quality health care, to ensure public health care funds are spent cost-effectively, and to ensure sustainability.


A single-payer government plan would require a top-to-bottom redesign of health care financing, so there is at least an opportunity for physician leadership to keep reform accountable to improving health care. With competing private health insurance plans, misaligned financial incentives make this nearly impossible.


Increasing competition among health insurance plans must mean escalating pressures to limit coverage, deny care, reduce physician and hospital reimbursement, and add administrative burdens to providers. Adding a competing “public option” would not help. It would leave the high administrative costs of private insurance in place, and the overriding incentive for private plans would not be to offer a better product; it would be to avoid covering the sick, dumping them onto the public plan. Only a universal health care financing system with a single risk pool could simultaneously align incentives to encourage quality health care while reducing cost.


With physician involvement in redesigning a government-funded program, we have a shot at a more rational system that would protect delivery of health care from the abuses we are currently experiencing. Many other countries are doing this successfully, and a few communities in the U.S. (Community Care of North Carolina, Rocky Mountain Health Plans in Colorado) have successful, cost-effective, physician-led Medicaid programs without insurance company intermediaries, showing us that it is possible.3,4 If we want cost-effective health care building on proven examples of “what works,” we need a universal health care system with a single risk pool at the state or national level, with public funding and private care delivery, accountable to the public good, and with a physician led continuous quality improvement program. We do not need more competition among insurance plans.


Stephen B. Kemble, MD

Honolulu, HI

November 28, 2010


  1. American College of Physicians. Achieving a High-Performance Health Care System with Universal Access: What the United States Can Learn from Other Countries. Ann Intern Med 2008;148:55-75.
  2. Chernichovsky D. Not “Socialized Medicine” — An Israeli View of Health Care Reform. NEJM 2009;361:e46.
  3. Community Care of North Carolina: Putting Health Reform Ideas into Practice in Medicaid. The Kaiser Family Foundation Publication #7899, May 2009. (
  4. Bodenheimer T and West D. Low-Cost Lessons from Grand Junction, Colorado. N Eng J Med 2010; DOI: 10.1056