U.S. Health Care Is from Mars

July 23rd, 2010

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.

Americans Are Suffering

July 22nd, 2010

Princeton economist Paul Krugman recently warned that the United States may be facing a “lost decade” from 2010 to 2019.   Krugman should have added that many American households have already endured a lost decade spanning the period 2000-2009.

Let’s knock on the door of the average American household and see if we will be invited in.  Once inside, we may be despondent with what we observe.  Over 90 percent of Americans consider themselves as “middle class” and their wealth is usually derived from three major sources:  jobs, home equity, and pensions.  Today, job insecurity is rampant with 1 in 6 adults out of work or facing only part-time employment opportunities.  Equity in homes is down sharply since 2007 and about 20 percent of homeowners owe more on their mortgages than their houses are worth.  Pensions are generally linked to the stock market which is still down dramatically from its October 2007 peak.

Three million fewer private-sector jobs existed at the beginning of 2010 than at the beginning of 2000, even though the U.S. population expanded by nearly 30 million during that period.  The median household’s real income was lower at the end of the decade than at the beginning.  The average wage of workers was still below what was paid in 1972, factoring in inflation.  A record 1 in 8 Americans, including 1 in 4 children, are reliant on food stamps in 2010.  A higher percentage and higher number of Americans are without health insurance today than in 2000, and the average family’s premium for health-care coverage more than doubled during the past decade to $13, 375.

Many households are overwhelmed by factors beyond their control.  Americans are very hard workers, laboring more days and taking less vacation time than their counterparts in all other major western nations.  Many large and medium-sized companies once offered their U.S. employees generous defined-benefit retirement plans.  Today, far more offer 401 (k)-style plans with the employees themselves putting up most of the money.  Fewer companies also offer comprehensive health-care coverage, and even those that do require employees to pay a larger proportion of the premiums and the co-pays to visit doctors.  Health care, higher education, and energy costs have all escalated far beyond the consumer price index.

Seven in 10 occupants of these households consider that the United States is headed in the “wrong direction.”  Half of parents perceive that their children will have a lower standard of living than the parents enjoyed.  They look into the future and wonder how they will be able to cope with the challenges ahead.  Many are aware that the federal government’s debt doubled during the past decade and is expected to double again during the current decade.  They know that they will eventually be saddled with the interest payments on this debt in the form of higher taxes.  They are also cognizant of the impending retirement of the baby-boom generation which represents over a quarter of the U.S. population.  Younger Americans will be asked to pick up the tab for these retirements because the Social Security trust fund is filled with IOUs and not real money, and Medicare costs are increasing at outlandish rates.

Modern technology permits us to take a satellite view of the earth and then to zoom in and focus on one typical house in a typical neighborhood.  Within that house discontent is brewing which may be more virulent than at any time since 1933 when a tsunami of fury swept Franklin D. Roosevelt into office.  Americans are fed up with a profligate federal government which spends far more than it takes in and still seems to do so little for the average American.  They are dismayed at the Wall Street crisis which has distorted the capitalist system by privatizing profits and socializing losses.  They despise crony capitalism which permits the rich and powerful to exercise the golden rule—he who has the gold makes the rules within the corridors of power in Washington, D.C.  Ominously, 34 percent of all private wealth is now concentrated in the hands of the top one percent of U.S. households, more than the combined wealth of the bottom 90 percent of households. 

The state of the union is not well.  American households are suffering and they are beginning to mobilize on the right through the Tea Party movement which despises Big Government, and on the left through growing demonstrations protesting Big Business and Big Finance.  A record 60 percent of Americans insist that the incumbents in Congress do not deserve reelection.  Perhaps one day in the not-too-distant future the frustrations embroiling American households will result in a much-needed cleansing of the Augean stables on Capitol Hill.

DISCUSSION OF CURRENT ISSUES LINKED TO U.S. COMPETITIVENESS

July 22nd, 2010

From time to time, I will be commenting on current issues and examine them within the prism of U.S. global competitiveness and America’s role as a superpower. Any feedback would be greatly appreciated.

Is America’s Superpower Status in Jeopardy?

May 1st, 2010

TALKING POINTS FOR LAMENT FOR AMERICA

The United States continues to be the world’s sole superpower, but is in relative decline in terms of global GDP, trade, investment, educational performance, and other important indicators

America’s relative decline will likely extend over the next few decades, based on 3 major trends:  (1) the rise of competitor nations or groups of nations such as China and the European Union; (2) the potent combination of globalization, rapid technology change, and creative destruction; (3) the presence of 15 major “fault lines” within the United States

Americans will personally endure more rapid change over the next few decades than at any other time in human history-this roller-coaster ride will include periods of exhilaration and periods of high anxiety and uncertainty.  These changes will have a dramatic effect on life within the U.S. and on relations among the nations of the world

The major fault lines which must be confronted include the following:  (1) Beltway follies; (2) corrosive campaign financing system; (3) massive government debt; (4) burgeoning external debt and dwindling importance of the U.S. dollar; (5) unsustainable entitlement explosion; (6) unaffordable health care; (7) faltering educational system; (8) plight of the American household; (9) a new Gilded Age and Wall Street’s debacle; (10) infrastructure deterioration; (11) intergenerational strife and festering cleavages; (12) dysfunctional immigration system and failure to attract the best and brightest; (13) haphazard federalism; (14) general apathy and paucity of civic engagement; and (15) an overextended U.S. foreign policy

Concrete and at times painful solutions are offered to surmount each of these fault lines, including a drastic rethinking of U.S. foreign policy priorities, and major changes in the system of taxation, campaign financing, lobbying, congressional procedures, intergovernmental relations, immigration, homeland security, entitlements, health costs, and public education

The Author:

Earl H. Fry is Professor of Political Science and Endowed Professor of Canadian Studies at Brigham Young University.  During his long career, he has served as Special Assistant in the Office of the U.S. Trade Representative and as Fulbright Professor at the Sorbonne and the University of Toronto.  Some of his earlier books include America the Vincible:  U.S. Foreign Policy for the Twenty-First Century (1994); The Expanding Role of State and Local Governments in U.S. Foreign Affairs (1998); and The Urban Response to Internationalization (2005).

Lament for America:  Decline of a Superpower, Plan for Renewal, University of Toronto Press, ISBN: 978-1-44260-191-8  Paperback–$19.95

Publication Date:  May 1, 2010

Click here to purchase your copy

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Lament for America

March 5th, 2010

Earl Fry has written a penetrating analysis of what ails contemporary America. As he documents, we live in a time with a surplus of problems and a deficit of workable solutions. Fry, however, does not shy away from offering solutions which are refreshingly devoid of ideology. Lament for America will unsettle both the left and the right, and thus should be required reading for conservatives, liberals, and moderates alike.

David E. Campbell
John Cardinal O’Hara, C.S.C. Associate Professor of Political Science
University of Notre Dame

All I can say is “excellent.”  It is wonderfully written, expertly researched, and convincingly presented.

Allen J. Morrison
Professor of Management
INSEAD

This book is bold, controversial, and thoroughly stimulating.  Not everyone will agree with its author.  But everyone will want to read his book.

Charles Doran
Andrew W. Mellon Professor of International Relations
Paul H. Nitze School of Advanced International Studies (SAIS)

Essayists have predicted American decline since the founding, but rarely with as much evidence and insight as Earl Fry. Readers will appreciate that Fry has not produced a mere jeremiad - he concludes with a concise recounting of America’s enduring strengths and smart ideas for how we might yet avoid the dark future he foresees. Whether you accept his thesis or not, this book is important to read, and read carefully.

Christopher Sands
Senior Fellow
The Hudson Institute

This extraordinarily valuable, well-researched book fills a real need in public discourse.  Whether it’s educational decline, our new Gilded Age of growing inequalities, or a governmental system buckling under the weight of massive debt and imperial overreach, Fry’s book skillfully dissects the major challenges now facing the United States.  His carefully reasoned proposals for an “American renewal” should engage all civic-minded citizens who care about the state of our democracy.

Steven P. Erie
Professor of Political Science
University of California, San Diego

‘A republic, if you can keep it’ observed Benjamin Franklin at the conclusion of the 1787 convention that gave America what is now the oldest, written constitution in the world. In Lament for America, scholar Earl Fry, enumerates the fifteen fault lines that are bringing America down. There are the problems of today’s headlines - costly foreign wars, debt and Wall Street greed, faltering public education, a dysfunctional immigration system and, health care that is broken and increasingly beyond reach for many Americans. There is also what Fry calls the ‘Beltway Follies’: campaign financing gone mad, a deep, visceral polarization that divides legislators and a federalism that fails to meet contemporary needs.

Great powers don’t usually die in their beds but like Gibbon, who described the fall of the Roman Empire, Fry’s appreciation and elegant description is essential reading to understand the dilemmas that face America today. The book is more than an elegy. It is also an articulate prescription for recovery and responsible citizenship based on the virtues that inspired the Founding Fathers - liberty and limited government, balanced budgets. It puts the emphasis on  prudence in foreign policy and on statecraft rather than force of arms. Most of all, it is a clarion call for reform based on the spirit of openness and innovation that inspired the creators of the Great Republic and that has remained the essential ingredient of American vitality and resilience.’

Colin Robertson
Former Canadian diplomat and frequent commentator on Canada-US relations

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New Book Lament for America

March 5th, 2010

The University of Toronto Press will be publishing in the next few weeks Earl Fry’s new book entitled Lament for America: Decline of the Superpower, Plan for Renewal. The book highlights 15 “fault lines” which must be addressed if the United States hopes to maintain its superpower status through mid-century.  Please see the University of Toronto Press link for additional information about the book.

Is America’s Superpower Status in Jeopardy?

April 25th, 2009

This blog will be examining the global competitiveness of the United States. America is currently mired in its worst economic downturn since the Great Depression of the 1930s. Most Americans consider that the downturn will be cyclical and that their nation will recover fully within a few years. Many also perceive that the 21st century, just like the 20th century, will be known as the “American century.”

In 2007 my article entitled “The Decline of the American Superpower” was published in the electronic journal The Forum: A Journal of Applied Research in Contemporary Politics 5 (#2 2007), 1-22. It is available to be viewed for free by going to The Forum’s website.

In this article I predicted some of the economic and financial problems which the U.S. is now enduring. I assert that America may not be considered a superpower by 2040 for three major reasons: (1) the exigencies of globalization and complex interdependence which make it extremely difficult for any nation to solve problems unilaterally, even a superpower; (2) the rise of competitor nations or groups of nations such as China, India, and the European Union: and (3) numerous festering problems at home which in combination are weakening America’s position in the world.

The decline of the United States as a superpower is not inevitable. Historically, the nation has exemplified tremendous resiliency and innovation. It has also overcome challenges more ominous than the current economic and financial crisis, including the Civil War, the “Long Depression” of the latter part of the 19th century, the Great Depression, and World War II.

On the other hand, remaining a superpower is not set in concrete and wishful thinking, “business as usual,” and general apathy are tendencies which will undoubtedly weaken the country in at least relative terms over the next couple of decades. I once observed a bumper sticker in Australia which read, “There is too much apathy in this country, but who cares?” That bumper sticker is certainly applicable to life in contemporary America.

In the days that follow, I will be reflecting on a number of challenges facing the United States. Of course, it is easy to criticize and any good analyst should at least attempt to provide workable solutions to these challenges. I will certainly attempt to do so.

Finally, I am not an ideologue, although I believe that a market-oriented democratic system provides the best opportunties for the greatest number of people. I do not believe in unregulated capitalism and the current crisis on Wall Street has certainly exemplified the need for some regulation. Conversely, I shudder to think that Washington would take over from Wall Street and begin to direct the financial system. I also believe that socialism has too many flaws to be considered seriously, and I am worried about the “state capitalism” which is currently evolving in various parts of the world. I tend to view myself as pragmatic, a problem solver, and a believer in “best practices” which can be adopted across state and national boundaries.

I am neither a Democrat nor Republican and am proud to label myself as an Independent. I would like to see fewer professional politicians within Washington’s Beltway and more statesmen and stateswomen who would enter public service for a “season” and not do so in search of private enrichment or glory. I served for a short time in the Reagan administration and have directed numerous student programs in Washington, D.C. I know Washington quite well and admire various facets of life within the Beltway and feel dismay toward other facets.

In addition, I have lived abroad for several years and feel that I can view the American experience within a comparative perspective. I believe that the rest of the world can learn many positive things from the U.S., and that the U.S. can also learn so much from other countries scattered around the globe.

Until next time!