Eligibility, Cost Sharing Key Factors for Single-Payer Health Insurance

May 08, 2019 - Eligibility, cost sharing, and the role of private health insurance will be among the primary concerns for policymakers if they choose to design a single-payer health insurance system in the US, according to a report from the Congressional Budget Office (CBO).

Some members of Congress have proposed establishing a single-payer healthcare system to provide universal coverage, an idea that has become a polarizing political issue. While such a system may have the potential to decrease the number of uninsured individuals, policymakers would have to carefully design a new system in order to see widespread benefits.

“About 29 million people under age 65 were uninsured in an average month in 2018,” the report stated.

“Although a single-payer system could substantially reduce the number of people who lack insurance, the change in the number of people who are uninsured would depend on the system’s design.”

Policymakers would have to determine whether the entire US population could participate in the new system, as well as whether the new system would allow for any opt-outs among the eligible population.

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“A single-payer plan could restrict eligibility to US citizens and lawfully present noncitizens, a group that CBO estimates accounted for about 97 percent of the US population in 2018,” the report said.

“Other people, such as noncitizens who are not lawfully present, might be ineligible for coverage, eligible for full coverage, eligible for a limited set of benefits, or able to buy into the system without any government subsidies. A waiting period for noncitizens who have newly entered the country to become eligible could also be implemented.”

CBO stated that the new system could allow eligible individuals to opt out for moral or religious reasons, or to opt out and purchase private insurance that mirrors the benefits of the single-payer plan. Policymakers would also need to decide if those who opt out are still required to contribute financially to the single-payer system, and if so, how much they must contribute.

“Those people could still be required to contribute fully to support the single-payer system, or they could receive a tax credit or tax deduction to offset some or all of their premium payments for private insurance,” CBO stated.  

“If contributions were mandatory, the single-payer system could enforce compliance through existing automatic payroll withholdings and taxes.”

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In addition to determining eligibility, policymakers would have to consider the amount of cost sharing the single-payer system would require.

Cost sharing could vary across services, CBO said, such as in a value-based insurance design. This design could eliminate cost sharing for effective or high-value care but require cost sharing for low-value services. However, CBO also noted that because some judgment would be required to determine the value of services, the use of a value-based insurance design may increase the administrative complexity and costs of a single-payer system.

Cost sharing could also depend on beneficiaries’ level of income, the report stated.

“People with low incomes could be eligible for cost-sharing reductions, and people with certain catastrophic conditions, such as cancer or HIV, could receive cost-sharing exemptions,” CBO said.

“Although an income-based cost-sharing structure would be more difficult to administer because of the need to collect and verify income, that process could be simplified by building on existing systems, such as the current income tax system.”

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Cost sharing in a single-payer system could include deductibles, co-payments, coinsurance, and out-of-pocket maximums.

Lawmakers would also have to consider the role of private health insurance in a single-payer system. According to CBO, private insurance in this kind of system would likely need to be limited to three main categories: supplemental insurance, which could cover additional services such as dental or vision; substitution insurance, which would duplicate the benefits of the single-payer plan; and other types of private insurance, which would provide benefit enhancements.

“If such private insurance was allowed, policymakers would need to decide whether it would be required to cover people with preexisting conditions and whether premiums could vary by health status, age, sex, or other factors,” CBO wrote.

“Another consideration is whether the government would encourage the use of private insurance through tax credits, tax deductions, or penalties. If employers sponsored the private insurance, policymakers would need to determine whether to exclude employers’ premium contributions from taxation.”

The single-payer health insurance system would need to develop guidelines for billing of private-pay patients as well. Policymakers would have to decide whether providers are able to balance bill patients, which they may be inclined to do if payment rates decrease under the new system.

“A prohibition on balance billing in a single-payer system would help ensure affordability for patients,” CBO said.  

“If provider payment rates under such a system were much lower than average rates under current law, however, prohibiting balance billing could discourage some providers from participating—particularly if they could treat private-pay patients for higher amounts.”

Policymakers would also have to determine whether participating providers could offer services covered by the single-payer plan to private-pay patients.

“If participating providers could treat private-pay patients, policymakers might consider whether to impose any restrictions on that activity—for example, by specifying the number of private-pay patients they could treat or the amount they could charge,” the report said.

“If a single-payer system did not allow providers to treat private-pay patients, some providers might opt out, especially if substitutive insurance plans were allowed or the system’s payment rates were low and enough private patients were willing to pay for their services.”

Ultimately, designing a single-payer system that offers cost-effective benefits and appropriate coverage would be a significant challenge for lawmakers and existing commercial insurance entities.  

“Establishing a single-payer system would be a major undertaking that would involve substantial changes in the sources and extent of coverage, provider payment rates, and financing methods of healthcare in the United States,” CBO concluded.

“For both the economy and participants in the single-payer system, the consequences would depend on how all stakeholders responded to the system’s various design features and how those responses interacted within the health care system and with the rest of the economy.”