One of my book groups decided to read T.R. Reid’s The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care. I wanted to read a whole book on health care policy about as much as eating broken glass. But actually it was pretty good (written pre-Obamacare).
Here are some observations.
Health care debate is full of comparison arguments, but making valid comparisons is dicey. Example: we’re continually told the U.S. spends more on health care than other countries, but gets poorer results. However, health outcomes are dramatically worse for those without insurance, skewing our national averages downward. For the 85% who are “in the system” (and bear its costs, either as patients, insurance payers, or taxpayers) results are probably at least as good as anywhere.
It’s also tricky to determine what a nation “spends” on “health care.” French doctors earn a fraction of American levels. But their medical education is totally paid by government (i.e., taxpayers). Shouldn’t that be counted in France’s “health care” spending?
We’re also constantly told that while administrative costs (this includes profit) are 20% of U.S. health spending, it’s only 2-5% for government-run systems like Medicare or Britain’s NHS. But it’s easy to “forget” many government overheads. For example, a private company incurs costs in billing and collecting its revenues. Government does that through the IRS – a very costly operation – but none of that IRS overhead is allocated to Medicare. More important, a private company has to pre-fund its pension plan. Government does not (though it does pay pensions). Thus its administrative overheads might appear lower.
The chief reason why nations with universal care spend less than America is that they pay doctors and hospitals way less. Government just sets prices. In Japan, an overnight hospital stay is $11 (including dinner of course). In the U.S., they charge so much because they can. The U.S. system makes shopping around by patients largely both impossible and pointless. Thus we have the worst of both worlds: the profit-seeking aspect of a market system, without a free market’s discipline of competition. In countries where providers and insurers can’t compete on prices (which are fixed), they at least tend to compete vigorously on service. (Click here for an excellent discussion by David Goldhill of how U.S. health care is messed up by not functioning as a market. Our system has all the wrong incentives, and Obamacare does nothing to fix this.)
Other nations also have lower costs because they ration care in ways we don’t. A big chunk of U.S. health spending goes on terminally ill elderly patients whose quality of life doesn’t really benefit; other countries don’t thusly waste resources.
Reid’s book presents health care as a moral issue, with the obligatory horror stories of deaths from non-insurance. Is medical care a universal right? But what does that really mean?
America’s poorest have long been covered, through Medicaid. And prisoners get free care. But if you’re not a criminal, and too “rich” for Medicaid, and too young for Medicare (and if your insurer, after years of taking your payments, tells you to get lost), you can die from a disease whose treatment you can’t afford.
Germans are quoted saying doctor visits should simply be “free.” That may be humane and reasonable for those who can’t afford to pay. But by what moral principle should it be “free” for others? Nobody gets free car mechanic service or lawn care. Yes, health care is different – indeed, probably the most important and valuable product we consume. Why should we not pay for this – handsomely? But resistance to that idea is a key factor screwing up U.S. health care.
Another catch phrase is “treating everyone the same.” As though it’s immoral if the rich get better care. (Canada even tried outlawing any health care outside its national system.) Choosing how to spend your money is a basic freedom; and yes, the rich have more. We shouldn’t let a poor person die of a routinely treatable ailment; nor do we let him starve; but we don’t give him caviar, just because the rich can afford it, on the principle of treating everyone the same. The aim should instead be treating people humanely. What the rich can afford, society as a whole cannot. Remember, there’s no such thing as “free” care. We all, actually, pay.
But how we pay is the problem. We have a perversion of the insurance concept, originally invented to protect against a catastrophic expense, by pooling risk. Like a home burning down. We don’t expect insurance to cover every little home expense. Yet that’s exactly how we treat health care. This is why it doesn’t function as a market, with transparent pricing, and providers competing for the consumer’s dollar.
We evolved into this because employee health insurance is not treated as “income” for tax purposes, making this the cheapest way to pay for all health costs (though not from the standpoint of the nation). (Note that middle class incomes have actually grown dramatically in recent decades if you consider as income the huge cost of health care people don’t directly pay for, which in reality we’ve taken in lieu of higher salaries.)
There are certainly things done elsewhere we should emulate. The French all carry a “carte vitale,” with a computer chip recording their entire medical history, which also processes all billing. (The system was designed by – you guessed it – Americans.) In Britain a doctor gets a fixed annual payment for every patient on his roster, giving him an incentive to keep patients healthy (and out of his hair). In America, doctors and hospitals are paid for every little thing they do, incentivizing lots of doing; indeed, the sicker the patient, the greater the profit.* And U.S. insurers have scant incentive for long-term preventive care because by the time the benefits materialize, the insured person has likely turned 65 and switched to Medicare.
* Goldhill’s father was made sicker, and eventually killed, by the hospital; but that enabled the hospital to rack up a gigantic bill – paid by Medicare.