It's seems ever since President Obama passed
his healthcare bill in March 2010, politicians on the right have been
loudly protesting about the implications for American freedom. Despite health care
costs significantly higher than any other developed nation and nearly 50
million uninsured resulting in 45,000 Americans deaths a year, they have
reacted to the President’s attempt to ensure every American can afford
treatment as an assault on America's founding principles. Perhaps they are
taking Patrick Henry's "give me liberty or give me death" speech a
little too literally...
Perhaps unsurprisingly, the anger surrounding the
Patient Protection and Affordable Care Act appears to be largely due to
misunderstanding of what it contains. Talk of 'death panels' and socialism
have created a fear of the unknown. An excellent piece from the Jimmy
Kimmel show (you can
watch it here) shows Americans
first being asked if they agree with ‘Obama Care’. They all
say no. They are then asked if they support an alternative bill, the
Affordable Health Care bill and describe its principles. They all say yes. They
are then shocked to discover that the latter is in fact the dreaded ‘Obama
Care’. This is not only an interesting study on the depth partisanship in
America, but also highlights how uninformed many Americans are about this issue
and how complex healthcare provision is. And indeed Americans have one of
the most complicated and expensive systems in the world.
Americans spend $8,602 per person annually on health care. Meanwhile,
Britain spends only $3,609 per person and the Germans spend $4,495
per person. Even the “socialist” French spend less at
only $4,118 per person a year.
How to unpick this mess? In homage to the Guardian’s ‘How
to cook the perfect…’ column by
Felicity Cloake, I’ve decided the trick to finding the perfect healthcare
recipe is to look at many different versions and see what works best. I’ll
be looking at recipes from the Germans, the British, and the Singaporeans, determining
what works best and from whom America could borrow.
NB. To stay
true to Felicity’s style I’ve dispensed with my usual ingredient list. Please
find them scattered through the content of this post.
I'll begin with Germany and their Bismarck model, named after the
Prussian Chancellor who implemented their system in the 1880's. It is very
similar to what President Obama would like to see in the US. It is
mandatory to have health insurance and no one can be excluded based on any
pre-existing conditions. Employers and payroll deductions form the
basis of funding. However, one of the key differences between
the systems is the insurers themselves.
If the US was working from scratch, this model might not be
too difficult to implement. Unfortunately, the President is using some ready-made
ingredients. In Germany, compulsory health insurance is provided to 92% of
the population through "sickness funds", private non-profit
organisations none of which are allowed to deny coverage for a pre-existing
condition. In the US, health insurance has traditionally
been provided by for-profit behemoths. These companies are very reluctant
to accept clients with pre-existing conditions that will hurt their bottom line.
They lobbied heavily against the Affordable Care Act.
The implementation of this system is hindered by an
economic condition that plagues the insurance industry; adverse selection, where
the propensity to buy insurance is highly correlated with an individual’s level
of risk. Simply put, those with a higher risk of requiring medical attention
are more likely to buy insurance. If, as the Affordable Care Act ensures,
insurers are bound to serve all patients regardless of pre-existing conditions
they will suddenly find themselves with a greater number of already sick and
injured patients relative to healthy ones, pushing up their costs. To protect
profits they will have to raise prices. Of course, if coverage was truly
universal, as in Germany's recipe, this would not be an issue. The healthy low
risk citizens would bolster the expensive unwell. This is what Obama is hoping
to achieve - an influx of the young and fit by penalising those without
health insurance. However, achieving this kind of universality will
take time. Meanwhile, insurance costs will rise, further putting off the
healthy and uncovered.
If the Bismark model, so effective in Germany, works
best when made from scratch are their other recipes which could perhaps guide
the United States? Should they perhaps use a different set of
ingredients?
Perhaps if you
can't get Americans to buy, you can get them to save? In Singapore
healthcare costs are primarily covered by Medisave, a compulsory saving scheme,
where Singaporeans and their employers contribute a part of their monthly wages
into regulated account to save up for their future medical needs. Singaporeans
are expected to use these savings, and, in dire circumstances, Medishield -
a low cost catastrophic medical insurance scheme - to foot their medical bills.
While healthcare costs are heavily subsidized, they are never free. This helps
avoid over utilisation while still providing high quality health care.
And this
recipe certainly has succeeded. Singaporeans have one of the most
highly ranked healthcare systems in world - Bloomberg puts them 2nd, just behind neighbouring Hong
Kong. It also has the world’s lowest infant mortality rate.
Perhaps this
is because the Singaporean recipe avoids another pitfall of the traditional
insurance systems: moral hazard. Simply put, if an individual feels certain
that they will be protected regardless, either by insurance or by the state, they
will be encouraged to take greater risks with their health. The rationale is
that between using primarily savings and always paying for care, even if the
fee is only nominal, Singaporeans will be discouraged from overly relying in
the healthcare system and encourages them to focus on prevention. At its
crudest the logic runs something like this, if I eat healthily and exercise I
am less likely to need expensive healthcare treatments and am more likely to be
able to afford braces for my kids. One can only imagine how appealing this
recipe would be to American policy makers, where citizens suffer so much from
lifestyle diseases such as diabetes or cardiovascular problems.
But, given
conditions in the US kitchen, is this recipe transferable?
Unlike the
Singaporeans, Americans do not have a tradition of saving. US citizens have on
average $15,191 in credit card debt alone. Contrast this with
Medisave which emerged against the backdrop of high savings in Singapore. This
meant that enabling a behavioural change in Singapore was not difficult.
Encouraging U.S citizens to save the Medisave minimum sum of $40,500 would
perhaps be a cultural shock.
It should also
be noted that the American recipe needs to feed a lot more people. Singapore is
really a city state with 5.3 million people. The US population is well over 50
times that size. Dishes that work well at a small dinner party are often unfit
for serving large numbers of people.
Who then might
the US turn to for culinary inspiration? Why not look at a neighbour
closer in size and in heritage? With 63 million people the UK, though still a
relatively small island, is more similar in size and complexity to the US.
However, their approach to healthcare has been radically different.
Instead of
entrusting healthcare to private providers, the government runs the healthcare
system from start to finish. UK citizens pay taxes, a portion of which are allocated
to fund the National Health Service (NHS). The state also
runs the healthcare infrastructure for the most part, (although there are
exceptions) and pays for the doctors and nurses. In this way British citizens
using the NHS never see a medical bill and most offerings are free at the point
of service. Exceptions include a nominal fee for things such as dentist visits
and a standard prescription fee.
The
government, as the sole large employer of healthcare workers in the UK, is something
of a monopsonist. That is, it is the only major purchaser of a particular good
or service, in this case doctors and nurses, allowing it substantial control in
the marketplace. This allows the UK low healthcare costs, especially when
compared against the United States. The British government spends only $3,609
per capita or 9.4% of its GDP. The US government spends $8,602 per head or
17.2% of its GDP.
However, the
amount collected from taxes, forms the limit of what can be spent on healthcare
by the NHS. As such healthcare in this form must be rationed to some extent.
The body charged with this responsibility is, perhaps ironically, entitled NICE
(or on more formal occasions the National Institute for Health and
Clinical Excellence). They are entrusted with deciding what treatments the NHS
will and will not pay for, assessed in terms of QALYs (Quality-adjusted Life
Years). Simply put, new treatments are evaluated in terms of how many quality years
of life they will provide per pound spent.
As you may
imagine, this is not the most PR-friendly of policies - cancer sufferers frequent
news channels, explaining why the government won't pay for their treatment.
This is the kind of media minefield the US government would certainly want to
avoid, especially when talk of "death panels" already abounds on Fox
News. Furthermore, it is hard to imagine an America, still so fearful of
federal government intervention, willing to experiment in the kitchen with an
entirely government run healthcare system. And while it certainly outperforms US's
position, of 46th in Bloomberg’s healthcare efficiency ranking, the UK still
comes only 14th.
Which recipe
should the US borrow from then? I have only shown you three of the world's 40
state run healthcare systems, passing over many excellent recipes. However, what
is clear, from a very brief attempt to discern the perfect recipe is that, of
course no such thing exists. Each healthcare system is designed to suit
the context in which it exists. And the context in which President Obama is
working is particularly complicated.
Healthcare
reform in America is famously difficult to implement. Nixon planned to
introduce healthcare reform, far more radical than anything Obama has
implemented, but this was vetoed by 70's Democrats for not being far-reaching
enough. Twenty year later Hillary Clinton's attempts at healthcare reforms were
also dashed. So the fact that Obama has even managed to implement his
Bismarkian reforms is in itself a small miracle. That fact that the scheme has
now signed up 8 million mostly poor Americans is further cause for celebration.
Is it a
perfect recipe? No. So far the scheme has enrolled only a quarter of those
eligible. This is partly due to the chaotic nature of its roll-out. A multitude of technical glitches affecting healthcare insurance exchanges in their first weeks prevented many frustrated American signing up. Outside of federal mismanagement, America's day-to-day government is largely run at a state
level, leaving state administrators with a large say in the extent to which they
implement President Obama’s healthcare reforms. Democratic Vermont for example
has enrolled 85% of those eligible. Republican South Dakota just 11%.