Universal Healthcare: Effects on Businesses and the Economy

The United States' healthcare system, heavily reliant on employer-sponsored insurance, faces significant challenges in efficiency and equity. This article explores the potential impacts of transitioning to a universal healthcare system on businesses, considering both benefits and potential drawbacks.

The Current State of Healthcare in the US

The United States stands out among high-income countries with its unique approach to healthcare. Unlike many developed nations, the US relies heavily on a private insurance system, primarily through employer-sponsored plans. While programs like Medicare, Medicaid, and TRICARE offer universal healthcare to specific populations (seniors, low-income individuals, and military personnel), a significant portion of the population remains uninsured or underinsured.

In 2023, approximately 25.3 million non-elderly Americans lacked health insurance. The largest group of Americans, 154 million non-elderly people, were covered by employer-sponsored health insurance.

This reliance on employer-sponsored insurance creates several economic challenges.

Economic Burden of the Current System

The United States economy is currently hampered in numerous ways by having an inefficient, inequitable healthcare system. The research on which we relied was completed before the full implementation of the Patient Protection and Affordable Care Act (ACA). However, we expect that even if the law works as intended, it will not resolve the problems that we raise because the law largely preserves our employment-based healthcare system.

Harm to Business

The United States Trails Many of Its Competitors by Various Economic Measures. If the United States were to implement a system to ensure universal care, American companies would no longer face a disadvantage in competing with businesses from countries, such as Canada, that provide national healthcare systems. Additionally, healthcare would cease to be a large factor guiding individuals’ career decisions. A national, universal care system would level the playing field among domestic businesses, and eradicate the free-rider problem.

Business has a vital concern in the financing of health care. This report adds to the plethora of evidence that business owners would be better off if they were relieved of their responsibilities of providing health benefit programs for their employees.

The Affordable Care Act (ACA) calls for a financial penalty for larger employers who do not provide health care coverage for their employees. If ACA requirements on employers were lifted, they may be willing to provide their employees with a voucher to purchase plans in the private exchanges. Another possibility is that they might want to give their employees raises and then let them select their own plans in the state-based ACA exchanges.

High Healthcare Costs

Health care expenditures in the United States are currently about 18 percent of GDP, and this share is projected to rise sharply. If health care costs continue to grow at historical rates, the share of GDP devoted to health care in the United States is projected to reach 34 percent .This level of reduction will require hard choices and the cooperation of policymakers, providers, insurers, and the public.

Small Business Challenges

Increasing health care costs is not sustainable for small employers. They want change and are willing to take pragmatic steps. This desire for change does not adhere to party lines; across the ideological spectrum, small-business owners are open to a range of possible solutions. Surprisingly, there was an openness to concepts that might be construed as extreme, like Medicare for All or a single-payer system. Other options, such as a Medicare or Medicaid buy-in, also found favor. Though business owners tend to be a conservative group, we did see an unexpected and almost apolitical frame on the issue of health care.

Small-business owners often lack a human resources professional or the personnel enjoyed by their large competitors. Small-business owners are taking steps to alleviate the problem. Unfortunately, without policy action their tools remain limited. They need support from policymakers to address the issue in a way that ensures they can continue to compete and employ millions of Americans in the future.

Impact on Workers

Rapidly rising premiums put a strain on businesses, wages and jobs. When premiums jumped 52 percent from 2000 to 2005, the rising cost of compensating workers led businesses to cut jobs, particularly in sectors like manufacturing that tend to offer workers good health coverage. Over a longer period, workers generally bear the cost of higher premiums in the form of lower wages.

Inefficiencies and Market Failures

While the American health care system has many virtues, it is also plagued by substantial inefficiencies and market failures. Some of the strongest evidence of such inefficiencies comes from the tremendous variation across states in Medicare spending per enrollee, with no evidence of corresponding variations in either medical needs or outcomes. These large variations in spending suggest that up to 30 percent of health care costs (or about 5 percent of GDP) could be saved without compromising health outcomes. Examples of such inefficiencies in the current health care system include payment systems that reward medical inputs rather than outcomes, high administrative costs, and inadequate focus on disease prevention. Market imperfections in the health insurance market create incentives for socially inefficient levels of coverage.

Job Lock

America’s patchwork, incomplete system of health insurance impedes the flexibility the economy needs to thrive and grow. Many workers are effectively locked into their jobs because they fear losing health insurance. According to one study, improvements in labor mobility would benefit both workers and firms by 25 percent.

Universal Healthcare: A Potential Solution?

Universal health care is an umbrella term for “a system that provides medical services to all people.

Universal healthcare simply means that everyone is guaranteed coverage, which can also be handled using a private health insurance system or a combination system. The Affordable Care Act (ACA), for example, was designed to improve coverage within a private insurance system.

Types of Universal Healthcare Systems

There are several models for achieving universal healthcare.

Single-Payer System

Single-payer health care is one type of universal health care in which the “government provides free health care paid for with revenue from income taxes.… Every citizen has the same access to care”; service providers may be public or private health care facilities, but the care is free at the point of service. Contrary to a multipayer system, in which various entities-such as employers, individuals, or private insurance companies-can pay for the health care, a “single-payer” system is so-called because only one entity (the federal government) pays for the health services; a single-payer system eliminates the role of private insurance companies and replaces them with government-funded services. The United Kingdom, Spain, New Zealand, and Cuba have single-payer systems.

Social Health Insurance

Social health insurance is also a kind of universal health care in which “everyone [is required] to buy insurance, usually through their employers. Employers deduct taxes from employee payrolls to cover the costs, and the taxes go into a government-run health insurance fund that covers everyone. Private doctors and hospitals provide services. The government controls health insurance prices.” Germany, France, Belgium, the Netherlands, Japan, and Switzerland use the social health insurance model.

National Health Insurance

National health insurance is yet another kind of universal health care, one that “uses public insurance to pay for private-practice care. Every citizen pays into the national insurance plan. Administrative costs are lower because there is one insurance company. The government also has a lot of leverage to force medical costs down.” Canada, Taiwan, and South Korea all have national health insurance.

Potential Benefits for Businesses

There are several reasons to believe that a universal care system would mitigate this impact on businesses. Primarily, such a system would cause future costs to be lower, or at least stem the trend of cost-increases far exceeding inflation. Secondly, businesses’ overall share of healthcare bills would likely be lower.

Leveling the Playing Field

If the United States were to implement a system to ensure universal care, American companies would no longer face a disadvantage in competing with businesses from countries, such as Canada, that provide national healthcare systems. Additionally, healthcare would cease to be a large factor guiding individuals’ career decisions. A national, universal care system would level the playing field among domestic businesses, and eradicate the free-rider problem.

Mitigation of Cost Impact

No universal care systems, including pure single-payer systems, are a free lunch for businesses. There is an argument that the taxes to finance such a system would constrain business. This claim is seriously undercut by examples from around the world. For instance, Hong Kong, viewed by many as a “beacon of capitalism,” has universal healthcare. So does Denmark, which has higher levels of entrepreneurship than the United States.

Streamlined Billing and Reduced Administrative Burden

Doctors will gain broader access to patients and specialists, as well as less time spent dealing with billing and insurance, and will no longer have to deal with issues such as payment plans for uninsured patients.

More Consistent Patient Access to Care

For physicians and their patients, universal healthcare can provide a variety of benefits. There is reduced risk of a patient stopping care because they or a family member are facing financial difficulties. Because patients have more consistent access, they will come in more regularly. This can make clinic income more predictable and reduce cash flow issues. Standardized reimbursements help physicians plan by allowing them to predict what they will be reimbursed for any given procedure. When a patient comes in with private insurance, practitioners have to establish whether the procedure is covered, file the claim, get reimbursed, then bill the patient. Single payer systems tend to have standard reimbursements that are sent automatically. Single payer also typically means one set of rules for every patient, with no need to look up specific details, and that physicians can refer a patient to any specialist without needing to check with the patient’s health insurance.

Potential Drawbacks for Businesses

Increased Taxes

Taxes are likely to go up under a universal system, although this is offset by reduced or absent insurance premiums and reduced costs for businesses who no longer have to provide employer sponsored care. However, in times of downturn, benefits could have to be reduced and/or taxes raised further.

Concern About Increased Burdens

Many physicians are concerned about this expanding under a universal system and having to spend more time complying with regulations, although this is obviously offset by less time dealing with health insurance.

Potential for lower reimbursement rates for physicians

Not all physicians are enthused about universal healthcare. commonly point to low reimbursement rates from Medicare/Medicaid as a concern.

Physician Perspectives

Universal healthcare is sometimes a contentious issue, with physicians presenting solid arguments on both sides. Proponents point to improved healthcare equity, improved public health, fewer ethical issues caused by insurance companies, and lower costs to society. Opponents, on the other hand, cite increased bureaucracy, longer wait times for some procedures, and, potentially, reduced physician pay. Overall, 71% of physicians surveyed on Sermo support universal healthcare and a further 15% are not sure which way to jump. These are all valid arguments.

Pros of universal healthcare for physicians

More consistent patient access to care
Potential for more predictable income
Reduced administrative burden
Increased public health improvements
Guaranteed access to essential healthcare services
Reduced financial barriers to treatment
Less stress about medical bills and insurance coverage

Cons of universal healthcare for physicians

Potential for lower reimbursement rates for physicians
Increased patient loads and longer working hours
Risk of lower quality care in overstressed systems
Less autonomy in treatment decisions
More bureaucracy and administrative oversight
Longer wait times for appointments and procedures
Economic strain could lead to higher taxes

Historical Context and Ongoing Debate

Throughout the 18th and 19th century the US federal government did not finance or otherwise provide health care to the public. In the early 20th century, a debate over universal health care began to emerge.

Government-funded health insurance was considered by President Franklin D. Roosevelt’s Committee on Economic Security, but it was not included as part of the 1935 Social Security Act, in part due to opposition from the American Medical Association.

In 1945, in another attempt at universal health care, President Harry S. Truman sent a message to Congress asking for a new national health insurance program to be run by the federal government. The voluntary program would have allowed individuals to pay monthly fees in return for coverage of all medical expenses. The program was introduced in Congress as the Social Security Expansion Bill.

In 1971, President Richard Nixon laid out a National Health Strategy to reform the health insurance system and move towards universal health care. In a 1972 message to Congress, President Nixon continued to advocate for universal health care, arguing that “reform of our health care system - so that every citizen will be able to get quality health care at reasonable cost regardless of income and regardless of area of residence - remains an item of highest priority on my unfinished agenda for America in the 1970s.”

President Clinton brought the issue of national health care back to the forefront. On September 22, 1993, he delivered a speech to Congress stating that the “most urgent priority” of the nation was to provide “every American health security, health care that can never be taken away, health care that is always there.”

After intense debate, lawmakers passed the Patient Protection and Affordable Care Act (PPACA), also called the Affordable Care Act (ACA) or Obamacare, which was signed into law on March 23, 2010. As of January 8, 2025, almost 24 million people had health insurance under the PPACA.

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