By Chris W. Durkin, RHU, REBC, President and CEO of FBC Insurance, Benefits & Consulting

In this era of disruption, with the Affordable Care Act staggering along, Medicare changing payment models, and health care premium costs continuing to outpace inflation, interest in a single payer system has risen—again. So, what exactly is a single payer system?


The term “single-payer system” sounds either scary or comforting, depending on who you ask. But, we’ve been down this road before. Both the Nixon and Clinton administration looked at the idea pretty seriously.

Two entities which suffer in the public eye are insurance companies and the government. Lots of folks hate insurance companies for various reasons, most of which are not entirely valid. Yet, most folks aren’t that keen on the DMV or the post office. So, how would a single-payer system work? A single-payer system is an insurance arrangement whereby one party is responsible for paying for the costs of healthcare and the structure of how much money is collected to pay for the costs incurred.

In the United States, the only entity capable of handling that arrangement is a government entity: either a state or federal government. Funding comes through raising taxes, which is always a fun topic. As I said, people either find this scary or comforting.


Yes. Both Medicare and Medicaid are single-payer systems. So, let’s take a look at how they work to understand how a single-payer system might work for the rest of the U.S. population who are not covered by Medicare or Medicaid. While we are at it, let’s compare how they work differently than the commercial or free enterprise system most of us currently use.

Medicare and Medicaid, which are managed by the Center for Medicare Services (CMS) are directed today by Dr. Patrick Conway, MD, the Principal Deputy Administrator and Chief Medical Officer. Dr. Conway is responsible for setting strategy for how and how much CMS will pay anyone in the U.S. healthcare system. Since CMS is responsible for paying roughly 60% of all costs of healthcare in the United States, Dr. Conway wields a very big hammer.

In a federally run single-payer system, the U.S. government would be in a position to dictate how and how much doctors and hospitals are paid (When I say how, I mean on a discounted fee-for-service basis, on a per-patient basis, or some other method of reimbursement). This is where it gets tricky. Presently, doctors and hospitals gets most of their money from CMS, but would be quick to point out that since commercially insured plans pay a higher reimbursement, they would be shutting their practices if they had to exist solely on CMS reimbursement schedules.


This begs important questions. Could we actually exist in a single-payer system? Would the doctors continue to practice like they do now, or would they fundamentally alter their practices to limit the amount of care they provide? Would this reduce the number of young people drawn to becoming doctors? A single-payer system requires some entity, such as a governmental panel or board of trustees, to decide on what is covered.

Neither 2016 presidential candidate is advocating for a single-payer healthcare system, but we could see the issue in future presidential races.

In Colorado, for instance, there will be a board of trustees who get this job if Amendment 69 passes establishing Colorado Care. Colorado Care would be one large insurance group for the state governed by an elected board of 21 trustees. It would be funded by collecting a payroll tax of 3.33% from employees and 6.7% from employers on wages. Exactly what it would cover is still being developed. Presently, there are about 20 states in some form of consideration of a single-payer system.

Vermont instituted a state-run plan and then abandoned it when it failed to be fiscally viable. In other words, it could not handle the cost of the care and had undercharged those who were supposed to pay for it. Vermont demonstrated a key difference in a single-payer system and a commercial system: in the single-payer system, through their representatives, people vote on important things like how much tax a business or employee should be required to pay to support the system and any increase in this number is again subject to a voting process.

There is also a board or panel of folks who determine what is covered and what is not. This panel or board has the power to ration care on a de facto basis. These decisions are made by the government, not consumers.


In the commercial sector, the cost of coverage is determined by the costs of healthcare, and those costs go up based on utilization. When rates go up, consumers can choose another company’s plan if they wish and the competition plays a big role in keeping prices in line. Largely, plans are built to cover all the things consumers want to use—even if the inclusion of those coverages lags the creation of the service. In the commercial sector, consumers make buying decisions.

For instance, there is presently a very strong interest in telemedicine. The free market economy presently has a number of competitive products offering this service. Consumers can buy this if they want it. Medicare and Medicaid beneficiaries are years away from having this option, if they ever do, because of the process required to get it included.

I’ve said this before, but our unique national paradigm on healthcare is this: “I should have all the best healthcare, all the best choices, and those included in my insurance plan immediately whether or not they existed yesterday.” Sadly, many of us also add “and it shouldn’t cost me so much money!” Wow!

Just to quantify this a bit:


2015 U.S. Gross Domestic Product


Percentage of GDP spent on healthcare (2015)

320 Million

U.S. Population (2015)


Average healthcare spend per person (2015)


Average healthcare spend, family of four (2015)


Understand that regardless of who pays for it, this is our cost of healthcare in this country. I recognize some folks trust the government more than insurance companies, and I also recognize tax dollars are best used to create common infrastructure we all benefit from.

However, I just don’t see the United States moving to a single-payer system in the foreseeable future because of our preference for how we make decisions on our healthcare. I do believe we will slowly evolve in that direction, but always with a commercial option which allows us to exercise our preferences as consumers. Stay tuned!

As always, we welcome your comments and insights!

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