U.S. Health Care Is from Mars

Experts can differ on solutions to the problem, but few could disagree that the United States has the most costly and one of the least equitable health-care systems in the world. Among the major western nations, U.S. health care comes from Mars while all other nations have plans that come from Venus. The United States spends on average twice as much per capita on health care as these other nations, but has over 46 million people without any health-care insurance at all, and many of those who are insured find that they do not have the coverage they thought they had when they actually seek medical treatment. All the other major countries in the West, without exception, provide some form of coverage for all of their people. Each year, up to 45,000 Americans die unnecessarily because they lacked health insurance.

President Obama has pledged to bring “affordable” health care to as many Americans as possible. This will be a formidable task. In 2007, Americans spent 2.4 trillion dollars on health care, or 7,900 dollars per capita. The United States currently spends about 17 percent of GDP on health care, whereas no other major nation spends over 12 percent. The United States also spends over four times as much on health care as on national defense, and the typical American family spends more for health care than for housing or food. Tragically, over three-fifths of American bankruptcies in 2007 were linked to medical bills, up nearly 50 percent in just six years.

Annual health-care costs have consistently increased at a rate well above the overall consumer price index, and at the current rate of increase these costs would absorb at least 20 percent of U.S. GDP by 2017, 28 percent by 2030, and 34 percent by 2040. These costs represent a major impediment to the future competitiveness of the nation as U.S. businesses are asked to pay appreciably more in health-related fringe benefits than their overseas competitors. Since 2004, the Big 3 automakers together produced more cars and light trucks in Ontario than in Michigan because they could save roughly one thousand dollars per car just in health-care costs in Canada. The onerous health-care burden, which is part of the overall “legacy” liabilities of the Big 3, also helps explain why two of these automakers fell into bankruptcy in 2009. Because 59 percent of insured Americans under 65 receive health care through their employers, they sometimes forfeit the opportunity to seek better or more rewarding jobs elsewhere because of the fear of losing coverage for themselves and their families, especially in situations involving pre-existing medical conditions. Consequently, from the vantage point of both businesses and employees, the United States is placed at a distinctive competitive economic disadvantage because of the lack of a universal, affordable, and portable health-care system.

The costs of medical care in the United States also differ dramatically from one part of the country to another, without any differences in medical outcomes. For example, expenditures in the last six months of life have been nearly twice as high for Medicare patients at certain leading academic medical facilities than at other leading centers, again with no difference in outcomes. As Princeton University economist Uwe E. Reinhardt has quipped, “How can it be that ‘the best medical care in the world’ costs twice as much as ‘the best medical care in the world?’”

Debate on bringing about universal coverage often gets bogged down in the notion of socialized medicine versus a system reliant on private commercial insurance and privately run medical offices and hospitals. This debate is an absolute red herring and diverts attention from the pressing issue of providing coverage for all Americans in an effective and affordable manner. Reinhardt has shed much-needed light on this vitally important issue. He defines socialized medicine as a health system in which the government owns and operates the financing of health care and its delivery. The United Kingdom has this type of system, but so does the U.S. Veterans’ Administration which provides medical coverage for America’s veterans. Social health insurance, according to Reinhardt, is a system “in which individuals transfer their financial risk of medical bills to a risk pool to which, as individuals, they contribute taxes or premiums based primarily on ability to pay, rather than on how healthy or sick they are.” This could be used in socialized medicine but is usually “coupled on the health-care delivery side with a mixture of government-owned facilities (e.g., municipal hospitals), private nonprofit hospitals (roughly 90 percent of all American hospital beds) or private for-profit facilities (investor-owned hospitals, private medical practices, pharmacies and so on).” Under private commercial insurance, individuals transfer “the financial risk of bills for health care to a risk pool, but the premium the individual contributes to the risk pool reflects that individual’s health status.” This insurance can be coupled with private or public delivery systems, or a combination of the two.

With this in mind, U.S. policymakers have the luxury of examining many models abroad which could assist in designing equitable,comprehensive, and effective spending and delivery systems. The UK has the most socialized health system in the western world. The French provide insurance via payroll taxes through 144 independent, not-for-profit, local insurance funds. Doctors in France run their own offices and as Atul Gawande points out, the French have a higher life expectancy, a lower infant mortality rate, more physicians proportionally, and lower costs than the U.S. Switzerland did not switch to universal coverage until 1994 and now requires every resident to purchase private health insurance but guarantees no one will ever pay more than about ten percent of his or her income for health care. The Canadians actually have 15 separate plans divided among the ten provinces, three federal territories, natives who live on reserves, and the Canadian military. Doctors are independent contractors and hospitals are also autonomous and mostly run by local health authorities. Doctors are usually paid on a fee-for-service basis. Canadians pay taxes for their health care but never receive bills for covered treatment from their doctors or hospitals.

None of these other systems is close to being perfect. All face rapidly escalating health-care expenses related in part to aging populations. Patients may wait for long hours for emergency treatment and some procedures are rationed. Some do not have the best equipment or cutting-edge technologies in all of their medical facilities. Canadians normally have to pay out of pocket for most dental work, some prescription drugs, and eyeglasses.

On the other hand, these systems are far less expensive than their counterpart in the United States and they cover all of their citizens. In a comparison of U.S. health care with systems in Canada, Germany, Japan, Sweden, the UK, and France, the U.S. Council of Economic Advisers reached this stark conclusion: all of these other countries “have better health outcomes” than the United States. No one in these other nations will face bankruptcy because of a catastrophic illness or injury. If they move from a job in one part of the country to employment in another part, they and their families will always be covered by health insurance.

Tremendous progress has been made in medical science in the United States and many other countries. For example, a person born in 1800 in the United States had an average life span of 35 years, in 1900 47 years, and in 2007 an expected life span of 78 years. The U.S. infant mortality rate in 1900 was roughly 100 deaths per 1,000 live births; in 2007 it had decreased to below 6.8 per 1,000 live births. Nevertheless, it is still shocking that the CIA’s World Factbook ranks the United States as only 46th in the world in longevity, right behind Cyprus, and 42nd in infant mortality, right behind Cuba. American babies are three times more likely to die in their first month than babies in Japan, and 2 ½ times more likely than babies in Finland, Iceland, and Norway. African-American babies pass away at twice the average rate of all American infants.

In 2000, the World Health Organization ranked the United States 37th in the world in overall health system performance. Horror stories abound concerning people who do not seek treatment because they feel that they cannot afford it. Approximately 1.5 million families lose their homes to foreclosure every year mainly because of unpaid medical bills. In times of economic stress, companies are dropping health-care coverage for their employees or requiring their employees to pick up a higher percentage of the overall tab. Average annual premiums for family coverage obtained through an employer doubled over the past decade to more than 13,000 dollars in 2009. Ninety-six percent of U.S. firms with more than 50 employees offer health insurance to their employees, but only 43 percent of firms with fewer than 50 employees, and the number of small companies offering insurance benefits has been declining since 2001. As health premiums increase, companies are also less likely to offer higher wages to their employees. And, to top it all off, the huge costs of medical care are eroding the overall business competitiveness of the United States and persuading many companies to offshore their operations, much as the Big 3 automakers did when they moved so much of their production north to Canada.

Arguably, the 2010 U.S. health-care law should be considered as a step in the right direction. Many presidents since the time of Teddy Roosevelt have recommended a universal health-care plan and the Obama administration finally delivered. However, without strict cost-containment, the plan will be of marginal benefit at best. In addition, the law which covers almost 2,000 pages is filled with loopholes and other favors to powerful interest groups such as the insurance, pharmaceutical, trial lawyers, and hospital lobbies.

America has great doctors, nurses, and other medical professionals. It also has workable models available from overseas, and within its own borders as represented by the Mayo Clinic, Cleveland Clinic, Intermountain Healthcare, and Kaiser Permanente. The health-care infrastructure must be altered drastically so that these skilled professionals can provide their services at an affordable price, allowing all American citizens access to medical care without endangering the overall economic competitiveness of the nation.

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