How Single Payer Healthcare Works and What’s Been Going on in Britain

by Benjamin Studebaker

Today I’d like to get at some of the deeper intricacies of single payer healthcare systems by telling you a story about what’s going on with Britain’s National Health Service (NHS). If you’re American, this post will shed some light on how Bernie Sanders’ system potentially works. If you’re British, this is where you’ll get my view on the junior doctors’ strike and what the conservatives are trying to do with the NHS.

Most people who pay attention know that single payer healthcare systems are generally cheaper than private systems, and that the American healthcare system costs more than twice as much per capita as Britain’s:

The American healthcare system works by having individuals or their employers buy health insurance for them through private companies or state or federally run exchanges. Poor people’s plans are subsidized or handled through Medicaid. Old people are on Medicare. Both Medicaid and Medicare are government programs, though the latter provides much higher quality coverage than the former. Individuals and employers are at a disadvantage when negotiating with insurance companies, and insurance companies are at a disadvantage when negotiating with doctors and hospitals, because the large number of payers inhibits collective bargaining. Because in many cases people cannot do without healthcare, doctors and hospitals have a big negotiating advantage, and the American healthcare sector continues to grow as a share of US GDP as a result:

Single payer systems like Britain’s avoid this by eliminating the distinctions among the payers. Instead of multiple groups of patients, you have one–the state. The state exercises monopoly power over the cost of healthcare, and it can determine how much it wants to spend as a result. For most of the NHS’ history, the British government has permitted slow, steady increases in spending. At its peak in 2010, NHS spending was just under 8% of GDP–this is equivalent to where the United States was in the mid 70’s. Nevertheless, the British government decided that 8% was too high, and it has now committed itself to using its monopoly power to not merely stop the growth of healthcare spending, but to reverse it, with the aim of cutting healthcare spending to 7% of GDP by 2020:

This is precisely what Prime Minister David Cameron promised not to do during the 2010 campaign:

As a share of GDP, these cuts will effectively put UK healthcare spending roughly where American spending was in 1970. There is very little that can stop a determined British government from slashing NHS spending–British doctors are unionized, but the government retains the legal right to impose contracts on them if it deems the negotiations a failure. The only card British doctors have to play against the British state is the threat of striking or leaving the profession, which is what the junior doctors are doing now. The British right likes to claim that NHS costs are spiraling out of control, but compared to American healthcare costs they are exceedingly manageable–the government can dictate how much it wants to pay. If the NHS were privatized, British healthcare costs would rapidly increase without limit indefinitely. In America, the right argues against single payer on the grounds that it would ruin the quality of care–it claims there would be rationing, or that wait times would be long, or that the amount and quality of medical research would decline. What the American right is not acknowledging is that these things are not a product of whether you have a public or private system–they are a product of how much money your system spends on those things.

The American system wastes some money on marketing, superfluous layers of management, and unnecessary tests and treatments. Indeed, most drug companies spend more on marketing than they do on research:

Nevertheless, if the US reduced its healthcare spending from 16% of GDP to 8%,  this would likely lead to some reduction in the amount of medical research conducted. But switching to single payer doesn’t necessarily mean reducing healthcare spending to 8% of GDP–it means giving the government the power to determine the level of spending and where the money goes. This means that if the United States wanted to give a higher priority to medical research than other countries do, it could do that by choosing to spend more in that area. Similarly, if a country wants to avoid rationing certain treatments or to avoid long wait times, that’s a policy choice it can make if it’s willing to spend the money. The US could have a single payer system that spends just as much as the current system, but diverts all the money currently squandered on marketing to medical research. Or the US could have a single payer system that significantly cuts total spending. By putting the decision into the hands of the government, the choice of how much to spend on research or marketing or patient care is made by the people’s representatives on the basis of the public interest rather than through perverse market incentives that are indifferent to people’s healthcare needs.

So when someone like Bernie Sanders talks about going to single payer, he may be talking about making significant spending cuts to put money back into patients’ pockets, or he may be talking about distributing money away from marketing to research, or he may be talking about doing some combination of both. Single payer is about giving the state the power to decide what to prioritize, it does not entail any given set of priorities.

In single payer countries like Britain, the biggest danger to public health are politicians and parties that want to abuse the government’s monopoly power to reduce spending on healthcare to a point at which it becomes impossible for the system to perform adequately. Sometimes this is because the right is just skinflint, but sometimes these right wingers blame the system’s failures on the fact that it is single payer rather than on their policy of refusing to adequately fund it. This is then used to justify privatization, which can only make the system more expensive and less efficient. They are the ones choosing to make the system fail by refusing to fund it adequately.

This is the irony about the healthcare debate. In America, the right criticizes single payer systems for producing inferior standards of care. In Britain, the right reduces standards of care by refusing to spend. So on one side of the pond, the right criticizes single payer systems for being too cheap, while on the other side they are criticized for being too expensive. On both sides, the right’s aim in criticizing single payer is the perpetuation or restoration of a private system that wastes large amounts of money and funnels it to marketing firms, insurers, hospitals, and drug companies. Private healthcare systems deny the public the ability to choose what to prioritize, and that lack of transparency allows private companies to exploit perverse incentives and systematically rob the public blind.