There are three general types of universal health care systems. Each system, which other industrialized democracies rely upon, has its quirks.
It is critical to understand what makes each system unique when organizing for universal health care in the United States. For decades, politicians from the Republican and Democratic parties have cited often heard claims about the downfalls of single-payer health care to protect health insurance companies.
Unraveling for-profit health care will continue to be difficult if citizens remain uninformed on how different universal systems truly function.
Examples: United Kingdom, Norway, and Denmark
Closest American analogy: Veterans Health Administration
In simple terms, this is a system where a significant portion of the health care system is directly owned by the government and many specialist doctors are government employees. Money to fund it is collected via taxes. In most places, citizens are enrolled automatically and anyone who is part of the system can enter a government hospital and get treatment.
Even under these systems, not everything is directly owned by the government, nor are health insurance companies completely eliminated. Primary care providers are normally private entities paid by the government based on the amount of service they provide.
For example, in places like Norway and Denmark, some people have private insurance/supplemental insurance often through their employers, which lets them use private facilities for faster treatment or non-covered items.
The closest thing the United States has to such a system is the Veterans Health Administration, which is socialized medicine for veterans. It theoretically could be expanded to everyone, but replicating it population-wide would be a significant lift. Only about 15 percent of hospitals are public in the United States. It would require building a new public hospital system parallel to the current system or nationalizing a large number of facilities.
Closest American analogy: Medicare
The government collects taxes and uses the money to run an insurance company, in which everyone is automatically enrolled. People visit medical facilities and providers are reimbursed by the government, which directly decides what it will pay and what is covered. Hospitals can be a mixture of public, non-profit, or for-profit facilities.
Single-payer systems do not fully eliminate the concept of private insurance. In Canada, roughly two-thirds of the population has supplemental private insurance coverage for things the government doesn’t cover, like vision, dental, and private hospital rooms.
Some systems let people buy-in to a parallel private insurance system. It is very similar to how Medicare is run in the United States; many people on Medicare buy supplemental private insurance (i.e. Medigap) or select alternative private insurance (i.e. Medicare Advantage).
This would be a significantly easier transition, easier being a relative term. Just over one third of the country is already covered by Medicare, Medicaid, or Tricare. Medicare or Medicaid could be expanded to cover more and more people.
Examples: Belgium, Japan, Germany, Switzerland
Closest American analogy: Federal Employer Health Benefits, ACA exchanges
In general terms, all-payer systems have a number of highly regulated private insurance companies that people can choose from or be assigned. Insurers are normally required to be non-profit, and there is some mechanism to compel people to sign up. The system is funded by general taxes, payroll fees/taxes, and/or premiums.
The government does most of the critical work that it would under a single-payer system but indirectly through regulation. It decides what needs to be covered, how plans are designed (to extreme detail), how the risk is spread between insurers, what can be charged, what is covered, how bills are processed, and how providers are reimbursed.
That is how they achieve the efficiency and low administrative costs similar to single-payer systems.
All-payers pay the same, using the same billing process. Additionally, the government uses significant risk adjustment to redistribute up to half of all premium dollars among the insurers based on who they sign-up.
This is a critical task that needs to be done right so insurers compete on quality instead of competing on how best to avoid covering sick people. The latter is a lot easier and what allows American insurers to excel.
In these systems, the insurers range from very tightly regulated utilities to entities that are basically nothing more than large cooperative bank accounts under de facto government control.
There is no real analogy for all-payer in America. Supporters of the Affordable Care Act have repeatedly claimed the exchanges were similar, but they are starting to admit they were similar in the way that a goldfish is similar to a great white shark because they both are fish.
The ACA gave the insurers large subsidies and the individual mandate, forcing people to be their customers without extracting the same major concessions as Switzerland when they adopted their system.
Our private insurance system lacks the heavy standardization, strict regulations, requirement for basic insurance to be not-for-profit, strong risk adjusters, and most importantly the all-payer rules that make other systems work.
All-payer requires significant regulation
Without the government creating a global reimbursement rate for all insurers, we have hundreds of insurers individually negotiating with thousands of providers for possibly millions of different payment rates. It creates a massive administrative burden, reduces competition, and empowers providers.
Moving our private insurance sector towards a functional all-payer system would rely on the government adopting laws massively expanding regulations over the health care industry—complex regulations that are essential but almost unknown to the public and not well understood by many so-called health care wonks.
It also requires federal and state administrations with the funding and desire to strenuously enforce them. The current Republican Party’s general opposition to regulation, attacks on risk adjustment mechanisms, and total unwillingness to take part in the ACA’s tiny steps in this direction create real concerns about the viability of this path. Regulations are easier to undo than public programs.
Senator Marco Rubio’s successful fight against the risk corridor provision in the ACA, which he dubbed a “bailout for insurance companies,” is illuminating. This provision was very important because it made the market nature of the exchanges work, but the GOP still opposed it.
In the end, the GOP effectively killed the risk corridor provision and President Barack Obama’s administration let them. The Obama team either did not understand its importance or realized it was too politically difficult to defend. Neither option should make anyone confident about going a regulation-focused route.
One less obvious thing worth highlighting is that even in the most left-leaning countries, private health insurance is not entirely eliminated. It is just relegated to a very modest role as small supplemental coverage or a needless luxury.
The simple fact is that throughout human history people with significant money have found ways (legally or illegally) to get faster and more luxurious services, such as private hospital rooms. Health care is no different, and smart systems find a way to allow this without preventing everyone else from having their basic needs met.
These three systems are not entirely mutually exclusive. Some systems combine elements of two or all three. What is important for success is that every health care action, big or small, has to be judged on whether it moves our system towards one of these or away from them.
A look at what these proven systems would require leads one to the conclusion that some form of single-payer is the most viable and practical path forward for the United States. The transition cost to socialized medicine would be massive, and an all-payer system would almost definitely fail.