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Can the federal government really ban private health insurance companies from operating? It seems strange that the federal government would be able to outlaw contracts between two private parties whereby where one party promises to make regular payments and the other side promises to cover the other party’s medical expenses if they arise. Is it really as simple as Congress passing a law just explicitly saying that you can’t do that anymore?

Also why would M4A need to do this in order to operate? It seems like if some people wanted to opt into private insurance that would just lessen the burden on M4A without affecting the amount of money it’s allocated by Congress.

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    There are quite a few different proposals for Medicare for All.. can you pick one out there that specifically details "banning" private insurance so that we can deal with specifics, rather than just generalizing them all as the same? Here is a good listing, though I am not knowledgable enough to know how comprehensive it is. – Jeff Lambert Jan 28 at 18:37
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    My plain reading of Bernie's plan (more formally known as Medicare for all Act of 2019 by Sen. Sanders, S.1129) does not ban, outlaw, or otherwise do away completely with private insurance. It bans duplicate coverage (Sec. 107), which makes sense because those benefits are provided and guaranteed by the Federal Government under that plan, no co-insurance would be necessary for those for tax payers to receive them. – Jeff Lambert Jan 28 at 19:00
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    @Jeff but that sort of just begs the question. Why would that need to be explicitly banned? It seems like a law against burning your own valuables. Also Can someone opt out and if not why not, since that would Do nothing but decreasethe expense of the program. And allowing people to opt out or duplicate their coverage (weird as that is) would Eliminate the political liability of being accused of abolishing private health insurance. – Tim kinsella Jan 28 at 19:18
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    Note that the UK NHS does not ban private insurance. There's no reason they can't coexist. I assume it's just hostile misreading by the media. – pjc50 Jan 28 at 20:53
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    @pjc50 and alephzero: The fact that private provision exists in the UK doesn't mean that it's a good thing. As some of the answers on this page point out, the existence of a private market forces the NHS to compete to retain practitioners and suppliers. Private providers, meanwhile, can be choosy about who they treat, giving them an unfair advantage over an organisation tasked with universal provision. This leads to a cycle where NHS treatment gets worse, private treatment becomes more attractive, and the NHS is left with just those loss-generating services which private providers don't want. – IMSoP Jan 30 at 17:31
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Jeff Lambert has found the Sanders proposal.

SEC. 107. PROHIBITION AGAINST DUPLICATING COVERAGE. (a) IN GENERAL.—Beginning on the effective date described in section 106(a), it shall be unlawful for— (1) a private health insurer to sell health insurance coverage that duplicates the benefits provided under this Act; or (2) an employer to provide benefits for an em10 ployee, former employee, or the dependents of an employee or former employee that duplicate the benefits provided under this Act. (b) CONSTRUCTION.—Nothing in this Act shall be construed as prohibiting the sale of health insurance coverage for any additional benefits not covered by this Act, including additional benefits that an employer may provide to employees or their dependents, or to former employees or their dependents.

Interesting enough, it's basically identical to the Canadian system as far as what it aims to impose. These are not Sander's own arguments, but probably close enough:

While many Canadians have supplemental private insurance, it’s illegal to charge insurance customers for “duplicate” coverage of what’s already covered by the public plan. As I’ve argued elsewhere, such a public monopoly on at least basic insurance is a positive good both in terms of cost control and avoiding an unjust two-tier system.

And in more detail on that argument

Take the debate between proponents of single payer — i.e. of the idea that the government should have a monopoly on at least basic insurance — and various “public option” schemes. Single-payer advocates correctly point out that the cost-control benefits of a public monopoly are canceled out when private companies are free to compete by offering to compensate providers at a higher rate — a dynamic that currently causes many providers to refuse to take Medicaid.

“If Bernie’s plan to abolish private plans (at least for basic insurance) were implemented, on the other hand, doctors and hospitals would have to either close their doors or make do with the rate that Medicare was willing to pay. The last several decades of Canadian history strongly suggest that most of them would learn to make do.”

As for legality, presumably it could be argued so under the Commerce Clause, but of course, it's hard to say what the Supreme Court might decide.

As John K commented below, in Canada the prohibition to buy duplicate insurance was indeed struck down in Quebec, as this 2005 paper notes:

A surprise ruling of the Supreme Court of Canada that struck down a Quebec prohibition on private health insurance in that province has raised fears that a two tier health care system will arise to replace the whole country's universal publicly funded system. Until now, Canadians have not been allowed to buy health insurance to cover services provided by the publicly funded system, even though there are long waits for some of these services. The decision of the court is likely to result in residents of other provinces also challenging the ban.

The court judgment was given in a case brought by Jacques Chaouilli, a Quebec doctor whose patient, George Zeliotis, had waited nearly a year for hip replacement surgery. Dr Chaouilli and Mr Zeliotis argued that Quebec's ban on buying private insurance for services already covered by the public system yet not readily accessible violated both Quebec's Charter of Rights and Freedoms and Canada's Charter of Rights and Freedoms.

The court agreed: "In sum, the prohibition on obtaining private health insurance, while it might be constitutional in circumstances where health care services are reasonable as to both quality and timeliness, is not constitutional where the public system fails to deliver reasonable services."

Note the interesting legal argumentation: not illegal per se to have such a ban, but illegal if it causes shortages.

Also of note, three of the four (majority) judges also wrote a separate (minority) opinion that the

governmental policy was “arbitrary,” given in their view the lack of evidence supporting the contention that to allow parallel private insurance would undermine the operation of publicly funded medicare.

There's also a Wikipedia page for the case. There's currently an ongoing similar case in British Columbia. And the reason for this delay is pretty interesting:

For the last 20 years, the [BC] Government did not enforce the impugned provisions and turned a blind eye to the operation in BC of private clinics such as Cambie Surgeries Corporation. It cited the long wait times and the excess surgical capacity physicians had available as justification for non-enforcement. Consequently, British Columbians with the ability to pay have had access to private surgeries over the last two decades.

However, in 2018, the Government reversed course and began fining physicians who operated in dual public-private practice. It targeted physicians who provided publicly-available health care services privately at a cost.

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    In Canada there was a Supreme Court decision about 15-20 years ago that struck down a provincial law in Quebec that banned private care. So Canada now has small private medical sector and doctors can work inside medicare or work outside for cash if they want. There aren't any private hospitals but there are private specialty clinics. Ironically, beyond that, Canada's most important safety valve for care shortages is... the US. – user30014 Jan 28 at 21:37
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    @JohnK do you have any details for that assertion. I've seen information previously about wait times for treatment in Canada, but nothing about shipping patients to the US to reduce those waits. – Jontia Jan 29 at 9:15
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    This cbc.ca/news/canada/toronto/… happens all the time. – user30014 Jan 29 at 12:22
  • @Vality As mentioned in comments under the question, the rich are not benefiting the public system, but damaging it (by putting it in unfair competition with for-profit services, which are free to grab the lucrative services while avoiding the loss-generating services). So it makes sense to let them do that damage in another country, doesn't it? It's not like America is gonna say no to some quick bucks. – R. Schmitz Jan 31 at 14:15
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To explain the hypothetical "why": mixed public-private healthcare systems are almost always worse than ones which are closer to purely public. Countries which have switched to allow private treatment as another tier to a public system usually see increases in wait times for the public sector, because doctors choose to service wealthy individuals whose health problems aren't actually that bad and are relatively easy to treat, but can be charged a high premium. Of course, if you follow market logic, why wouldn't they? The profit motive encourages healthcare practitioners to maximise their income, and generally individual feelings cause them to want to maximise outcomes for their specific patients, not to maximise the health outcomes of populations as a whole. The whole point of public systems is to remove the profit motive so that you can focus on the latter. From this link, which has further citations:

The mountain of evidence against parallel private healthcare underscores some logical flaws in arguments for it. First, since healthcare practitioners can't be in more than one place at the same time, creating a parallel private system simply takes badly needed doctors and nurses out of our public hospitals. Given that most people believe we already have a shortage of both, it's hard to see how removing them from the public system will help alleviate public waits. Second, since doctors earn more in the private sector, they have what economists call a "perverse incentive" to keep public waiting lists long, to encourage patients to pay for private care.

A parallel private system can provide faster care - to those with deeper pockets. However, it seriously compromises access for those waiting for care in the public system, and contradicts one of the features of public healthcare of which Canadians are most proud: that citizens should receive care based on their need, not on their ability to pay.

Another side of it is more explicitly political: if the wealthier fraction of the population can opt out of the public system, they have less motivation to support increases in healthcare funding, because they don't see any personal benefit from it. In places like Canada and the UK which are relatively close to pure public systems, even the conservative parties are hesitant to attack the healthcare systems (other than in quiet ways like reducing funding) because almost everyone relies on it.

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  • This doesn't quite address Bernie's proposal, does it? Or perhaps it goes further. Bernie's proposal only proposes banning duplicate insurance, as I understand it. Physicians would still be completely free to accept out-of-pocket payments from patients. So it seems to me that it's a different comparison. – Obie 2.0 Jan 30 at 4:43
  • @Obie2.0 the question wasn't specifically about Sanders' proposal when I answered, I'm just addressing the common misconception from the last paragraph of it – llama Jan 30 at 16:39
  • Your reference focuses on when private providers are added to an existing system that is primarily public. This is the opposite of what would happen in the United States under a "public option" type proposal that the questioner is asking about, where the existing system is private with some public payments and an additional, new public system is created next to it in parallel. The results would not be the same because the starting conditions are different. – Joe Jan 31 at 12:55
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    @Joe indeed, it would be worse: the healthcare practitioners would be used to only providing care to those who pay more – Caleth Jan 31 at 16:54
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The generic description of universal single payer national health care is as follows:

  • Define what the national health care plan covers
  • Enroll everyone in that national health care plan

There are a lot more details that vary among countries, most of them related to how and who pays. From looking at Bernie's campaign I have no idea which specific solution he prefers, that's why I can't be more specific.

Once you're in the national health care plan, there's no need to pay a private insurance for something that's already covered. You can't opt out of the single payer insurance, that's the entire point. You'll still be able to get private "extra" insurance on top of that, which will cover additional procedures that are not covered by the universal health care. The extras might include not just different treatments, but also more follow up appointments, different hospital meals, better rooms, faster wait times, etc.

This is a generic answer, but I haven't seen anything about Bernie's plan that deviates from the "single payer for baselines, private insurance for extras" approach.

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Other answers are getting into the nitty-gritty of policy law, but it sounds like you're looking for the basic principles that govern this decision.

Separate-but-equal doesn't work.

From around 1890 to the 1960's, American life was segregated: Black schools and White schools, Black restaurants and White restaurants, Black banks and White banks. The Courts ruled that this didn't violate the 14th Amendment (every citizen should be equally protected under the law) via the 'Separate-but-equal' concept. Sure, everything was separate, but as far as the law went, it treated them completely equally.

The law looked innocuous on its surface, but was awful in practice. Whites had the vast majority of the money and power, which ended up reflected in the end result. White schools just 'happened' to be better, White restaurateurs knew the zoning board and just 'happened' to get the prime real estate for their new restaurant, White banks just 'happened' to have more money to lend with fewer restrictions. When we're regulating what's in the hearts of humans, people can argue that any potential discrimination is just a coincidence.

Likewise, if we allow for parallel systems, one will naturally be better and will naturally consume more resources. Now, if I was a world-class cardiologist, which system would I prefer? The one that pays me a fixed rate to care for everybody, or the one that pays me twice as much to care for only rich people? Soon, all the best healthcare resources will switch over to the better system, and it will essentially be like it is now: an underclass system staffed solely with failed doctors, students, and those weirdos who get into medicine to 'help people', and an overclass system who gets all the best and the brightest. Innovation will make this divide even more stark over time.

Now, for stuff like face lifts, medical spas, unapproved medicines, and other stuff Universal Healthcare wouldn't cover? Supplemental insurance would be fine. There are still perks for being rich. But for medically-necessary health care? Everybody would get the same care.

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    This is a garbage answer for implcitly comparing apartheid to public and private sectors, in part because it is an inappropriate metaphor, and also in part because it says "This was great in theory," when everyone knew the point of the theory was to explictly screw black people over for not being white. Nothing was ever great about it in theory. – Joe Jan 30 at 20:20
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    I was referencing America, not South Africa. South Africa is a whole other ball of wax with elements that most certainly don't fit with the narrative I'm crafting. And yes, I'm contrasting the actual wording of the law (seems innocuous!) and the reality (and likely intention) of the law. – Carduus Jan 30 at 20:23
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    @Carduus It's still garbage for being a reference to the American apartheid system that is commonly referred to as Segregation and/or Jim Crow instead of the South African system of apartheid commonly referred to as Apartheid. – Joe Jan 30 at 20:54
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    @Joe Why? Is the comparison unjust? Or are you just not comfortable thinking about it in that way? Have you ever been to the only Medicaid-accepting urgent care in a big city? It is a very different experience than that of work-insurance facilities. – Carduus Jan 30 at 21:00
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    @Carduus 1. The it's a "It's a good idea in theory" construction implies that racial segregation is a good idea in theory, because that was the explicit goal of the separate-but-equal system that you're alluding to. 2. It's an unjust comparison because the intended purpose of having a separate private and public system would not be to the public system worse. Nobody who wants private healthcare says "let's do this to screw everyone on Medicaid." Everyone who said they wanted "separate-but-equal" wanted it specifically and intentionally to screw black people. – Joe Jan 30 at 22:02
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You have to take over the full insurance market (for particular types of coverage) because the entire point is the make the entire population the actuarial risk pool if you want to run it with any kind of efficiency.

When medicare was implemented here in Canada there was a national law, the Canada Health Act, that set out standards and coverages for the provinces to follow and each province effectively "nationalized" its health insurance industry for those coverages specified by the CHA (in the late 60s). Hospitals are operated as non-profit independent corporations.

Private insurance continued for secondary coverages like dental, eye, prescriptions etc and when you have a job in Canada your company health benefits is still important part of your compensation, just not as important as a full array US employer plan.

Anyway, it works reasonably well most of the time, but you live with the inevitable problems. Care is rationed, (obviously - you have finite budget resources and if demand exceeds budgeted resources, you limit access; there's no other option) and you more or less hope you don't catch something with a long waiting list. So you take your choice and live with the consequences.

I wouldn't blow it all up to switch back to a full private system, but if I lived in the US I'd be really wary of a federal nationalization of the health care industry (with 50 states, there's no way it could be implemented the way Canada did it). It would turn into the Mother Of All Bureaucracies and would become a bloated mess in short order. Things like this don't scale up well. For a country the size of the US, I have no idea what the solution is.

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  • Let us continue this discussion in chat. – Obie 2.0 Jan 30 at 4:58
  • The "risk pool" argument is only valid if you're actually running a system that is supposed to function like the financial product called insurance, where everybody at risk pays a little, there are infrequent claims, and the insurance company pays big when there is a claim that they accept. Most public health systems are not operated in this fashion; typically everybody in the entire country pays through taxes or public debt, the government always foots the bill for everybody no matter what. – Joe Jan 31 at 13:03
  • But the "efficiency" argument for the government footing the bill for everybody only works if the government draws funds to run the system from across the entire population so that the high use segment's impact is diluted as much as possible. "Risk pool" is an imperfect expression but was the best I could come up with. In any case, the Canadian system was run for the first several decades as an insurance product, with dedicated premiums in the form of payroll taxes that were labelled premiums. Over time it slowly became integrated into the basic bureaucracy and is now closer to the NHS. – user30014 Jan 31 at 13:30
  • @Joe How is that not the same as insurance? – user253751 Jan 31 at 13:35
  • @user253751 The short answer is because it doesn't work as insurance in practice, but as pre-payment for services you're certain to consume. My answer to this other question about the US health insurance system goes in more detail than I could fit in a comment: politics.stackexchange.com/questions/40084/… – Joe Jan 31 at 15:56
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You don't really need to ban private coverage in a single-payer plan, but you do need to enroll everyone for best results, so what you can't do is to allow opt-outs.

The differentiating point regarding to the US is really the need to consolidate the risk pool across the population for economic efficiency. That, and using the state's purchasing power to negotiate better pricing, as is in common in other fields of endeavor in free markets. The rest are details.

The reasons you need to enroll everyone are:

  • to avoid ending up with a pool of unhealthy people while everyone else with better prospects are covered by private plans or opt out, trusting for example that they are young and healthy. This pooling of risk is what makes universal coverage in places like Europe and Canada come in at about half the GDP slice of the US's private + public (Medicare, Medicaid) outlays.

  • to avoid the excessive paperwork and verification that seem so characteristic of the US system. If everyone is covered by the same plan, then there is no need to check that they are not free-riding by hiding, gosh, being ill.

At that point, you can choose to allow or ban private coverage, including for fully duplicate care.

Canada bans it, by principle that people's access to health care should be equal regardless of their wealth. In practice, lots of union, government and military folk have tailored health plans that don't put them in the waiting lists of the larger public. And a lot of richer folk do health tourism, often in the US.

France is more relaxed. Sure, you can totally pay out of pocket for privately-funded care, but why would you want to?

In both cases, the base national plan is really pretty good, though someone with a really large amount of money could purchase better service in a top US health facility. There are long waiting lists in Canada, but mostly not for life-threatening issues, although there may be waiting lists for diagnosis, including of dangerous problems.

Canada's wait lists are not structural to its approach - given more funding, they could be reduced. But, at some point, you run the risk of health care funding crowding out all other government spending, including education. That is not a desirable outcome. Perhaps money could be redirected from end-of-life spending, where supportive care is more realistic than curing someone, but that is a thorny ethical issue. France's plan is more generously funded and usually figures heavily in national budget deficits.

Note that in either case there is no strong incentives for insurers to sell coverage that duplicates what the single payer system is already offering. Canada's position is more a matter of principle than practicality.

Both countries totally allow for private providers - doctors and hospitals need not be government employees and funding is also different - provincial level/general tax revenue (+ individual topup) in Canada, national, with complicated funding plans based on employee status in France.

Private insurers do exist, and make substantial money, offering top up coverage in areas like dentistry.

On the other hand, the US health sector sucks up nearly 18% of GDP vs 10-12% in European systems (rough numbers). That much pork employs a lot of people, pays a lot of stockholders and greases a lot of politicians via lobbyists. Plus, people in generous existing plans, and that includes US retirees who magically turn pro-single-payer at 65, don't want to mix their lot in with the hoi polloi.

This is the flaw with Obamacare, though well-intentioned, it doesn't go far enough because it couldn't get the votes to do it.

Don't expect US single payer, with or without allowance for private coverage, to pass anytime soon. Too much money to fight against it and too common for Americans to paint it with the term socialism even when their government's share ends up spending as much of its GDP as everyone else (Medicate, Medicaid), before the private sector pays its pound of flesh.

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Can the federal government really ban private health insurance companies from operating?

Yes.

Congress has the power to regulate interstate commerce. Due to a Supreme Court ruling in 1942, the power to regulate interstate commerce was expanded to include the power to regulate commerce that takes place entirely within one state, or the decision of private persons to not engage in commerce at all, because these decisions could still affect interstate commerce indirectly. The end result is that, as long as that decision stands, Congress' power to regulate any form of commerce, anywhere in the United States, is virtually unlimited.

It seems strange that the federal government would be able to outlaw contracts between two private parties whereby where one party promises to make regular payments and the other side promises to cover the other party’s medical expenses if they arise. Is it really as simple as Congress passing a law just explicitly saying that you can’t do that anymore?

Yes. Why wouldn't it be?

The federal government outlaws all sorts of contracts between two private parties, for all sorts of reasons. The federal government outlaws contracts between two private parties where one party makes any form of payment and the other side provides a machine gun manufactured after May 19, 1986. The federal government outlaws contracts between two private parties where one party makes any form of payment and the other party provides any drug product that contains Gamma Hydroxybutyric Acid. The federal government outlaws contracts between two private parties where one party agrees to provide their labor on an hourly basis and the other party agrees to pay an amount less than $7.25 per hour.

Why would health insurance be special?

Also why would M4A need to do this in order to operate? It seems like if some people wanted to opt into private insurance that would just lessen the burden on M4A without affecting the amount of money it’s allocated by Congress.

The whole theory behind having Medicare for All is that the "for All" part is the desirable feature. The reasons for that basically boil down to a moral belief that people should not be denied health care because they cannot afford it. One theoretical way to reduce the cost of health care that the patient pays is to have the government pay for it, which has the added possibility of implementing additional forms of cost control that don't exist in a purely private system and may not be as effective in a public-private hybrid system.

Does this necessarily require that private insurance be made illegal? No. But... some people who want single payer systems are motivated by the separate moral belief that any inequalities in health care are themselves are a problem that must be solved. If you're someone who thinks this, then you're not going to be interested in a system that keeps private insurance in any form.

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"Medicare for all" doesn't have to make private insurance illegal at all. It can achieve its aims simply by leveraging the power of the Federal Government to drive out private insurance. Something some other candidates have floated is the so-called public option. The public option is where you buy your health insurance from the Federal government itself.

Theoretically, the public option should be more affordable for consumers because the government could use its heft to negotiate lower rates with doctors and hospitals and to reduce costs. How effective it would be depends on how it's set up, and most candidates haven't delved into the nitty gritty details.

The way this drives private insurance out is by undercutting it by discretely subsidizing recipients. Let's say Private and Public are competing in a given market. Private offers a lot of value for $500/mo. Public offers similar options for $300/mo. and subsidizes that coverage for low-income families. Ostensibly the government touts that it is "saving money" and "driving down costs", when, in fact, Public is actually subsidizing most of that, and doing so with deficit spending (i.e. the government is borrowing money). Given that most Americans like their subsidies (see current Medicare, Social Security, etc), these would be politically unpopular to cut, as it would decrease the number of people insured. Some individual politicians might pay a price when private insurers close, but overall the parties and these plans will survive the political tumult.

That's why Sanders MFA plan (which most Democrats now heartily endorse) still gets Single Payer across the finish line, even if it's a roundabout way

In other words, while Sanders' plan doesn’t ban supplementary coverage from private insurers, it does offer such generous coverage by the government that there's not much room left for private coverage to fill any gaps. This is the logic upon which both conservative critics — and supposedly nonpartisan mainstream reporters and pundits — hang the logic that Sanders' plan would "ban" private coverage. It's a dramatic "gotcha" question, and last week wasn't the first time presidential candidates like Harris have been tripped up by it.

We see this in play in the UK, which has the National Health Service (which, I should note, is not Single Payer). While Conservative Tories want to reform the system, none of them ever talk about cutting it, let alone ending it

David Cameron always claimed the NHS was “ring-fenced” from cuts, but the balance sheet says something different:

And

Johnson has repeatedly denied that the NHS is “on the table” in any US trade deal.

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    Can you elaborate on your claim that "the NHS is not Single Payer"? I thought it was... – Dai Jan 29 at 15:27
  • I note that Government/state subsidies for anything do not necessarily require deficit spending or borrowing money (e.g. there could be sufficient headroom in the non-subsidized plans, and/or plans could be means-tested to ensure that overall the system pays for itself). – Dai Jan 29 at 15:29
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    The theory behind single payer is the government is the only entity that can pay for health care. Since the government has a monopoly, it can then enact price controls. Canada is a true single payer (or was for a while). The UK has never been AFAIK – Machavity Jan 29 at 15:56
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    The pricing power of the NHS in the UK is indistinguishable from a monopsonist for most healthcare. For example, every five years an NHS team sits down with a team from the UK pharmaceutical industry and they negotiate standard prices for NHS drug purchases (e.g. see p.35 of this PDF for 2014-19 rates). The UK's Office of Fair Trading estimates that these prices are used as the benchmark for ~25% of the world pharma market. – Matthew Jan 29 at 17:52
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    The idea that the public option will drive out private practices requires it to provide a perfect service; as long as there is any alternative treatment you could pay for, or any waiting list you could skip, there will be a market for the rich to buy that option. As other answers have pointed out, this creates a second market, where the practitioners choose to spend their time providing these options. The public option, meanwhile, has additional obligations that private providers can ignore, reducing its ability to compete. The system won't lead to a public monopoly unless forced to do so. – IMSoP Jan 30 at 17:17

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