All Payer Healthcare

By Pierce K. Kozlowski

The Breakdown

The National Institute of Health defines the All-Payer System, or the Bismarck /Social Health Insurance Model, as a statutory health insurance program that is bought into and paid for by multiple non-profit entities which finance the healthcare program via annual insurance premiums. This insurance supplies government defined benefits to both middle and low income enrollee beneficiaries, with the healthcare institutions facilitating their medical services through both public and private means.

In other words, the nation’s legislators craft a healthcare coverage plan that becomes statutory law. The healthcare coverage is a health insurance program, and it operates as a “sickness fund.” The legislator’s then determine what medical benefits are covered by this insurance sickness-fund. An example of medical-benefits are hospitalization (e.g., rehabilitation for addiction) or necessary medications (e.g., insulin for diabetes).

The sickness-fund is capitalized by the wage contributions and subsidies of 3 specific non-profit entities:

• 1. Citizens: They pay an insurance premium via payroll taxes.

• 2. Employers: They also pay an annual premium via payroll taxes.

• 3. Government: They provide annual subsidies.

Employed citizens who are insured by the sickness-fund are billed an insurance premium. So employed citizens only pay 50% of their personal premium, while their employers cover the other 50%. On the other hand, unemployed citizens [and children] are also insured and billed an insurance premium. But instead of having the unemployed citizens cover the premiums, the government foots the bill of the premiums with annual subsidies.

Two Benefits, One Drawback

The benefit of this program is the capacity for price control. Because the government will have a wider ambit of purview over the medical industry, they can utilize tighter regulations and low price controls for cost-effectivity. Furthermore, maintaining labor and employment laws and initiatives that promote high-employment will prevent over-reliance on healthcare social safety nets, and will counter the effects of financial strain on the national economy and administrative costs. This means an All-Payer system could potentially be an affordable model to both the government’s budget and the citizen’s wallet. And since this is a statutory insurance law, every citizen must buy or be placed under this healthcare plan, making the Bismarck model universal as well.

The drawback of this program is that a citizen can not choose their approach to care. Medical treatment can be done through either publicly or privately financed medical facilities, but the recipient of the healthcare does not choose. Even if there are minimum coverage standards that hospitals must adhere to when supplying their services, the quality of treatment goes down when compared to a model like the single-payer system. Essentially, the All-Payer System gives provisions for universality and affordability at the expense of quality.

Who Uses It?

A nation that utilizes this model of health insurance is Germany. Germany famously uses the Bismarck system, and the concept of an All-Payer healthcare system started with Otto von Bismarck, who signed his Health Insurance Bill into German Law on June 23rd, 1883. Bismarck’s insurance policy was a net positive for Germany as well, as it successfully reduced the national mortality. Furthermore, Germany does address the issue of reduced options in the approach to healthcare. According to the Common Fund, “Germans earning more than $68,000 can opt out of SHI and choose private health insurance instead.”

References:

1. Donnelly, Peter D et al. “Single-Payer, Multiple-Payer, and State-Based Financing of Health Care: Introduction to the Special Section.” American journal of public health vol. 109,11 (2019): 1482-1483. doi:10.2105/AJPH.2019.305353

2. Tikkanen, Roosa, et al. “International Health Care System Profiles: Germany.” Home, Commonwealth Fund, 5 June 2020.

3. “Health Care in Germany: The German Health Care System.” InformedHealth.org [Internet]., U.S. National Library of Medicine, 8 Feb. 2018.

4. Khazan, Olga. “What American Healthcare Can Learn from Germany.” The Atlantic, Atlantic Media Company, 8 Apr. 2014.

5. Langwell, K. “Price controls: on the one hand ... and on the other.” Health care financing review vol. 14,3 (1993): 5-10.

6. Burton, David R. “A Guide to Labor and Employment Law Reforms.” The Heritage Foundation, 9 Oct. 2020.

7. Saver, Barry G et al. “Care that Matters: Quality Measurement and Health Care.” PLoS medicine vol. 12,11 e1001902. 17 Nov. 2015, doi:10.1371/journal.pmed.1001902

8. Tulchinsky, Theodore H.. “Bismarck and the Long Road to Universal Health Coverage.” Case Studies in Public Health (2018): 131–179. doi:10.1016/B978-0-12-804571-8.00031-7

9. Bauernschuster, Stefan, et al. “Bismarck's Health Insurance and Its Impact on Mortality.” VOX, CEPR Policy Portal, VoxEU & CEPR, 7 Oct. 2017.