Single-payer healthcare coverage (also known as universal coverage) is a health insurance system in which the national government pays for healthcare costs incurred by citizens. “Single-payer” refers to the single public body which finances these healthcare costs. Benefits of such a healthcare delivery system often include publically financed healthcare for all national citizens. This means that regardless of a person’s employment status, he or she is able to access even advanced healthcare services at little to no personal cost. Healthcare providers in countries with single-payer healthcare systems are often private, though they still receive their reimbursement from a publically-managed fund. This funding mechanism differs from nation to nation, but generally a large portion of its makeup derives from taxes levied on working citizens. These taxes then directly finance healthcare services for citizens.
On an individual patient level, universal coverage solves the problem of inelastic demand. That is, a person’s healthcare needs are inelastic—we cannot negotiate effectively for our own healthcare costs because we may need healthcare services (whether they be pharmaceutical drugs or advanced surgery) to sustain a high quality of life, or even simply to survive. Private healthcare providers and health insurance companies may choose to exploit inelastic demand by raising the costs for healthcare services rendered. Patients are unable to resolve the issue themselves, given that they need the services to survive and will pay a disproportionate amount out-of-pocket to ensure they receive care. These inflated costs for healthcare services are a large part of why the United States healthcare delivery system is disproportionately expensive and fails to provide millions of citizens with adequate care.
In a single-payer or universal coverage healthcare system, however, the national government has leverage in negotiating with healthcare providers and health insurance companies, given that the government determines how the public healthcare finances are distributed. This means that in a universal coverage system, the government can award large contracts (e.g. for artificial knees) to healthcare providers and manufacturers of hospital equipment. These (typically private) manufacturers then have a very good incentive to ensure that their equipment is safe, effective, and affordable. As a direct result, the end cost to the consumer is vastly reduced.
In the United States, presently (as of October 2013) the only advanced industrialized nation without some form of single-payer healthcare system, this knowledge may come as a bit of a shock to taxpayers who may have believed their tax revenue was being utilized more effectively. The Affordable Care Act of 2010 was a direct response to skyrocketing healthcare costs and tens of millions of US citizens without means to obtaining healthcare services. The Affordable Care Act is but a small step toward universal coverage, however, and does not yet allow the government to negotiate as effectively as it can under single-payer systems.