Doctors would a) be paid by the facility that employs them, the same way they are now, or b) if self-employed, would bill the government for the services they provide patients. The only real difference between that system and the present one is that rather than billing insurance companies or individuals who don't have insurance, medical providers would bill the government--as in, "single payer."
Compensation for individual services would likely be fairly standardized, but there would probably be higher prices paid to specialists or those who provide difficult or esoteric procedures. I think it would be presumed that any given doctor who has a diploma hanging on the wall would be qualified to perform a procedure. We make that assumption now.
Labs would bill the government, the same way they currently bill insurance companies or individuals who don't have insurance. The labs would have no reason to close--especially since their business would increase! And since those labs would continue to pay their employees, I can't see any reason for a walkout.
I would expect an expansion in the number of doctors long-term as there would be more demand. And yeah, they would probably make less money overall, because the government would be a tough negotiator in order to keep costs down.
I know conservatives hate to make the comparison, but things would work they way they do in, say, Great Britain with the NHS. Their system works fine and doctors there earn as much as other skilled professionals.
If you want another type of comparison, the medical industry would in effect be a giant government contractor. Compare that with sectors like the defense industry, which sells all of its products to the government.
I also doubt that private medical practice would completely disappear--there would doubtless be ways to jump the queue if you were willing to pony up.
