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Single-payer failure leaves room for all-payer system success

All-payer brings insurers and providers together to negotiate prices

Single-payer healthcare has yet to gain significant traction in America. In December, Vermont Gov. Peter Shumlin (D) pulled the plug on implementing a single-payer system by 2017.

But a similar system could follow in single-payer's footsteps and potentially succeed, according to Vox. The plan, known as all-payer rate setting, establishes one uniform price that every health insurer pays for any given procedure.

Currently, healthcare costs for certain procedures vary greatly at different hospitals and doctor offices. For example, the costs for knee and hip replacements--the two fastest growing medical treatments in the country--vary by more than $20,000 from one place to another.

Bigger plans have more pricing negotiating power, as noted in the article. Private plans pay the most, while Medcaire pays slightly less and Medcaid pays the least.

Under an all-payer system, insurers and providers negotiate set prices for each procedure. This would means insurers wouldn't pay more than Medcaid. Everyone would be on an even playing field.

The idea of an all-payer system is not entirely new. During the 1970s and 1980s, 10 states set up rate-setting systems to help control healthcare costs. Research has found that these early programs reduced the costs of each hospital visit between 12 and 26 percent, according to the article.

It wasn't clear if these systems actually reduced overall healthcare spending. One by one, states began pulling out of the all-payer system. To this day, only Maryland uses an all-payer system, bringing together insurers to negotiate set hospital prices. However, hospital spending grew 5.1 percent per person in the state between 1990 and 2009; for the rest of the country, this growth was 4.7 percent. This spike in growth forced Maryland to re-invent its all-payer system last year by implementing a budget cap for how much it spends on healthcare.

Critics argue that, should all hospitals earn the same amount for each procedure, they may have less initiative to innovate. "This has always been a challenge of these types of systems," Ken Thorpe, a health economist at Emory University, told Vox. "How can you structure them to promote innovation, while also controlling costs?"

For more:
- here's the article

Related Articles:
Single-payer option dead in Vermont, still alive in other states
Vermont pulls single-payer plan
BCBS: Huge variation in medical costs shows need for price transparency

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