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Should the United States Adopt a Single-Payor or a Multi-Payor Universal Healthcare Model?

By Selvoy M. Fillerup, MD, MSPH, FACS

Many Americans, with understandable impatience, advocate a single-payor healthcare system in the U.S.
The healthcare system in this country appears to be on the verge of implosion, but the problem for the U.S. is not the absence of a single-payor system; it is the absence of a unifying healthcare policy to provide direction to its multi-payor system.

There are decided differenced between single-payor and multi-payor universal enrollment healthcare systems. Notably, multi-payor universal healthcare systems retain competitive market advantages and do not have waiting times for elective procedures.

Multi-payor Universal Healthcare Systems 

Germany, the Netherlands, Japan, France, and Switzerland all rely on private health insurance to keep their multi-payor systems of dynamic, innovative, equipped with new technologies, and solvent. In Germany 10% of the population has private health insurance; in the Netherlands, 31%; in Japan, over 50%; in France 86% have complementary private health insurance; and in Switzerland, by mandate 100% have private primary health insurance. And in Switzerland, per capita healthcare costs are 295 less than in the U.S.

Several countries with multi-payor healthcare sytems frequently enlist the peculiar features of private health insurance when implementing healthcare policy. There are several studies relevant to the advantages and disadvantages of government health insurance and private health insurance in these different healthcare systems.

It has been an important lesson for policy makers that heathcare spending channeled through private health insurance provides immediate feedback regarding the critical healthcare services paitnes need and use. This channeling of resources also reveals preferences regarding elective services.

Even though the above mentioned countries developed their universal healthcare policies independent of one another, they have all implemented a common set of policy instruments, with some variation, in the development of successful universal healthcare programs. 

Multi-payor Healthcare Policy Instruments 

These critical policy instruments of multi-payor universal healthcare demonstrate the following:

•  Private health insurance plays a pivotal role in the success of multi-payor universal healthcare systems when government and private health insurance are assigned complementary roles.

• Market efficiencies and innovations are preserved in the private sector.

• The combined utilization of government and private insurance has this particular advantage; private health insurance collects and redistributes funds that eventually fund medical infrastructure, then once that infrastructure is in place, government clients use that infrastructure at or near variable cost. (Medicaid being a case in point.)

Four policy measures reinforce the essential characteristics of competitive markets relative to health insurance. 

The policies are:
• Universal enrollment
• Guaranteed Issue
• Community Ratings
• A Uniform Benefits Package

When the essential characteristics of competitive markets are defined as:
• Uniformity of Product
• Universal Availability
• Perfect Knowledge of Product and Price
• Easy Entry to the Marketplace
• Price-based competition

The following table shows how appropriate instruments of policy affect the health insurance markets in those countries:



When implemented under the above conditions, a universal enrollment policy tends to lower the per capita cost of healthcare.

 Q1 = Current number of insured.
 P1-P1' = current negotiable price range.
 Q2 = Number of insured under mandatory enrollment
 P2-P1' = competitive price range under mandatory enrollment.

 Under current market conditions insurers employ price differentiation. The lowest negotiable price is   
 P1. The highest price is P1'.   P1-P1' becomes the negotiable price range, and insurers enjoy revenues
 equal to the entire area under the revenue curve left of Q1. The average price of insurance falls
 between P1 an P1'.

 Under conditions of universal enrollment additional populations are enrolled and quantity reaches Q2.
 A monopoly could ostensibly charge P1' of every enrollee, but if there are multiple insurers, one would
 expect price related competition and prices for insurance could fall through the entire competitive price
 range - potentially to P2.

 The revenue curve is related to marginal cost. In the short term P = MC. Marginal costs for
 insurers fall for two reasons:

 1.Quantity shifts from Q1 to Q2 (a greater number of insured).
 2. Universal enrollment mitigates the effects of adverse selection.

 Under conditions of mandatory enrollment, guaranteed issue, community ratings and uniformity of 
 product, the effect of competitive pricing is felt in the entire healthcare market - as evidenced by the
 lower costs of medical care in countries where these policies are enacted.

 Conclusion 

 The commonly studied single-payor systems - Canada and the UK in particular - have long queues for
 elective procedures due to lack of infrastructure and manpower and in this context may be considered
 "failed" systems.

 The U.S. has a decidedly "failed" system. Fifteen percent of the population has infinite waiting times for
 elective procedures because they lack access to existing infrastructure and manpower - not because
 the U.S. lacks a single-payor system, but because the U.S. lacks a universal enrollment policy.

 On the other hand, multi-payor universal healthcare systems such as the Netherlands, Germany,
 France, Switzerland, and Japan all have universal enrollment policies. They enjoy high-tech healthcare,
 no waiting times, excellent health outcomes indicators, and per capita healthcare costs much lower
 than in the U.S. This happens because their policies, even though they were developed independently,
 share common strategies relative to basic market dynamics.

 Again, it appears that these successful multi-payor healthcare systems have all discovered and
 implemented a common set of policy instruments that capitalize upon the peculiar advantages of a
 policy-defined relationship between government and the private health insurance industry.
 
 The U.S. will benefit from a universal healthcare policy, and should give serious study to the
 advantages of multi-payor universal healthcare systems.

 Reference List:
 1. Health Systems Must Seek Better Value for Money, OECD Condludes in Report to health Ministers. 5 December 2004; Available
     at: http://www.oecd.org/document26/0,2340,en_2649_33929_31724041_1_1_1_1,00.html.
     Found at http://www.oecd.org/>search by topic>health>working papers

 2. Colombo FTN. Private Health Insurance in OECD Countries: The Benefits and Costs for Individuals and Health Systems. Paris,
     France: Head of Publications Service, OECD, 2004. OECD Health Working Papers No. 15. (Found at http://www.oecd.org/>search
     by topic>health>working papers>No.15

 3. Sbarbaro JA. Trade Liberalization in Health Insurance: Opportunities and Challenges: The Potential Impact of Introducing or
     Expanding the Availability of Private Health Insurance within Low and Middle Income Countries. WHO: WHO Commission on
     Macroeconomics and Health, 200; CMH Working Paper Series* Paper No. WG 4:6.

 4. Tuohy CH, Flood CM., Stabile M. How does Private Finance Affect Public Health Care Systems? Marshaling the Evidence from
     OECD Nations. Journal of Health Politics, Policy and Law, 2004,; 29(3): 359-96.

 5. Colombo, F. Towards More choice in Social Protection? Individual choice of insurer in basic mandatory health insurance on
     Switzerland. OLabour Market and Social Policy - Occasional Papers No. 53, OECD, 18-Sep-2001. Available at:        http://www.olis.oecd.org/OLIS/2001DOC.NSF/43bb6130e5e86e5fc12569fa005d004c/c1256985004c66e3c1256acb00548723/$FILE/JT00112830.PDF 
    (Table 4 of this paper which describes the use of Mandatory enrollment
     in Article 3, Community rating in Article 64, Guaranteed issue in Article 4, and Uniform benefits in Articles 25-32).