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The US healthcare debate misses the huge and glaring point….

by Aaron McCormack on June 29, 2012

The USA spends twice as much (both per capita and as a %age of GDP) on healthcare than the UK does.  Can you really tell me that health outcomes in the USA are twice as good as they are in the UK?

Whilst US conservatives and liberals give their partisan takes on the US Supreme court ruling on Obamacare, the debate continues to miss the wider point.

The US healthcare world seems like a bizarre place when you come here from a European country like the UK with a national health service.  We were always told that “in America the ambulanceman checks for a credit card in an injured person’s pocket before they will take you to the hospital.”

It’s not that bad, of course.  It turns out that the USA is probably one of the best places in the world to be sick if you have money.  But, relative to other developed economies, it is one of the worst places in the world to be sick if you are poor.  With nearly half of all Americans under the federal “poverty line”, access to quality, affordable healthcare dominates many people’s lives.  One note, virtually any person in large parts of Africa, Latin America and Asia would love to have our first-world problems, but let’s put that to one side for a minute.

Obamacare is better described by its legislative title – the Affordable Care Act.  That tells you all you need to know – this is an exercise in making healthcare available to around 50million people in the country who cannot afford it right now.

In essence, the legislation forces people like me, who would otherwise not buy insurance, to enter the market. I have first-hand experience of this, because I live in Massachusetts – where this whole principle was first tested. (Mitt Romney will try to run away from the fact that he signed it into law as Governor, but he will struggle….).

Most Europeans have access to a basic, reasonable quality healthcare system that is funded by their taxes.  In some countries it is common for businesses to offer a private (by implication higher standard) version of healthcare to their employees as a perk, often only to the more senior staff.  But, if you get sick, no matter who you are, there is a place to go where you won’t have a huge bill to deal with.

In America, you either pay the bill yourself, or the insurance you take out pays most of it for you (usually you still have to pay some of the bill).  For those who just can’t afford insurance, state and federal governments work to provide a safety net.

Medicaid is for the poor, who cannot otherwise afford healthcare.  Obamacare defines the limit for Medicaid as 133% of the poverty level.  The program is administered separately (and differently) by each state with supporting federal funding. It effectively bundles up all these folk in a pool where the state then buys services from the private sector to meet the healthcare needs of the group.  This most closely resembles a National Health Service and about 50million Americans rely on this program.

Closely related to Medicaid is the Children’s Health Insurance Program – designed to help pregnant women and folks with children who do not qualify for Medicaid, but still would otherwise struggle to pay for healthcare.

Medicare is for people over 65 and folks of any age with disabilities. It covers about 50% of the costs of healthcare for these groups  – another 50million Americans.

There is a third support network for veterans called the VA – around 1million veterans with service-related illnesses are covered.

You can see that around 100million (or just under a third) of all Americans are supported by some form of government-initiated healthcare program.

Of the rest, around 150million people receive their healthcare from insurance that is provided as a benefit by their employer (this can include the families or dependents of employees).  This strange system evolved when government wage restraints were introduced in the 1940s. Employers found that providing benefits and perks was an excellent way of competing for labour.  Following the private-sector lead, public employers followed suit.  This is a classic example of unintended consequences and has become the foundational vehicle for healthcare in the USA.   If the right-wing believe that it is wrong for government to be involved in the healthcare business, it is surely equally bizarre that employers are in the healthcare business.  I see my friends and former colleagues choosing employment on the basis of the healthcare offered – or taking sub-optimal jobs just to get medical cover.

And then there are the 50million uninsured.  Some by choice – most because it is unaffordable and they fall outside the social safety nets described above.  A common myth is that these 50million are mainly illegal immigrants.  That is not true.  80% of these people are American-born, and the remaining 20% are either legal or illegal immigrants of various classes.

Some of these people deliberately chose not to buy insurance because they are healthy and prepared to take their chances with any bills that might result.  This can be quite a risk if you are involved in a serious accident or develop a chronic condition.  A friend (thankfully covered by his employer’s insurance) ran up a $50,000 bill repairing a broken shoulder after a crash in a bike race.

Some of these people cannot get insurance because they are currently ill (let’s say you have cancer) and insurance companies refuse to cover them.

The principle of Obamacare is to get all the uninsured into the market by making it affordable (through subsidy) and by making it illegal for the insurance companies to pick and choose who they will cover.  It is supposed to have the benefit of bringing a lot of healthy people into the the insurance pool – effectively making it more affordable for the insurance companies to give insurance to those who have pre-existing conditions.  The Federal government has promised to pay for any further subsidies to give affordable insurance to the poor.  That is supposed to be paid for by “as yet undetermined” efficiencies to be found in the federal medical programs.

But folks, here is the headline for me.  The USA spends twice as much (both per capita and as a %age of GDP) on healthcare than the UK does.  Can you really tell me that health outcomes in the USA are twice as good as they are in the UK?  Are they actually even better at all than in the UK?  I don’t know, but I know that if they are better, they are only slightly so.  What about South Korea, where healthcare spending is a quarter of the USA (in PPP dollars) and a third as a percentage of GDP?  I lived for a while in Korea – I can tell you they have a first rate healthcare system.  The outcomes in the USA are not three or four times better than those in Korea.

So, as US politicians argue over the relative minutiae of healthcare in the USA, the real big ticket items are being missed in the debate:

1. The US model is totally broken in terms of value-for-money and outcomes.  Even a fully socialized system is delivering radically better results.

2. All developed nations are seeing a huge growth in health spending in GDP% and real terms.  Healthcare is becoming a larger and more unsustainable part of our economies.

3. All the while we are becoming unhealthier.  So, as spending rises, outcomes are really getting worse in the most general terms.  We many be making incremental steps in curing some diseases, but in general we are becoming fatter, more miserable and diabetes-riddled.

It cannot last.  The chart at the top of this post illustrates, just for Medicare and Medicaid, how demographics, increased “unwellness” and (expensive) advances in medical capability are going to explode expenditure.  Most estimates see this programs doubling in absolute cost in the next decade.  This will be true for healthcare in general, and for most developed nations, not just the USA.  It’s just worse in the USA because they start from such a position of inefficiency and because it is such a looming part of the debt crisis here.

But, so much for cursing the darkness.  What can we do about this challenge?

Governments will need a radically new series of carrots and sticks to run any form of sustainable healthcare programs.  I have said it before, and I will say it again.  That will mean rationing – in terms of what the public purse will and will not pay for.  It will also mean payment to providers for health outcomes, not just treatments.

Every day millions of us are involved in health choices.  Every day millions of people work hard to help ease the suffering of others.  The humane thing to do now, however, is to start to be cruel to be kind.  We are going to have to start to draw the line on what government will pay for.  This will further make the best healthcare available only to those who can most afford it.  This will mean some really tough choices about approving expenditure on, for example, very expensive cancer drugs that may extend life a few months.  Believe me, when your mother is dying of cancer, you want nothing but the best for her.  But society is not going to be able to pay for it for much longer.   The current situation cannot last.  Every day where we allow our leaders to play political “small-ball” and every day that we lie to ourselves about the consequences of our health behaviours, we put off an inevitable rude-awakening.

To get it right will require the best blend of individual accountability and government help imaginable.  But what could be more important than our health? It is surely worth the effort.  Let’s at least start thinking clearly about the challenge ahead, and get on with the REAL healthcare debate.



From → Europe, General, Politics, USA

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