10 Issues to Consider in the Months Ahead

This is the second in a series of posts to come between now and Labor Day about ten key issues we face as Americans and need Congress to lead us to solutions on. At the end of the series, we will publish a survey aimed at uncovering the issues that matter most in each district in the country

#2: Affordable Healthcare

And I thought understanding income distribution was complex. Getting one’s head around the challenge of affordable healthcare in this country is difficult, understanding what to do about will be much more so. But we have to figure it out and, once again, any meaningful progress will at least require a concerted approach by Congress instead of ideological entrenchment.

Here’s the basic problem, and this part is pretty simple. As discussed earlier this week, for most Americans wages and income have been stagnant for a decade. But healthcare costs have not. They have been rising…fast. Since 2000, the U.S. GDP has risen 28 percent, the Median Household Income has decreased 6.6 percent and healthcare costs? According to the World Health Organization,  overall per capita expenditures on healthcare in this country were $9,146 in 2013…up 90 percent since 2000. By this measure the United States has the third most expensive healthcare system in the world (behind Norway and Switzerland) and it is not really close to any other country. Add this to the fact that the largest demographic generation in the United States, the Baby Boomers born in the years following World War Two, are working their way through their fifties and sixties and that we are not a particularly healthy nation at any age group and you’ve got the makings for a very serious problem. Oh, and the USA is also virtually alone among the countries in the developed world in not providing universal healthcare coverage.

It is telling that in an age of epidemic apathy, healthcare has gotten lots of attention in the last few years. The 2010 Affordable Care Act (Obamacare if you prefer) has become one of the most polarizing pieces of legislation  enacted in this country in decades. But the irony is, the debate over the ACA, while all-consuming for some politicians, has always been about whether or not the treatment of the symptom is helping or not- like whether our aspirin is working, not why we have a persistent and recurring headache in the first place. To understand that, it is instructive to look at the alternative models being used to deliver healthcare in other parts of the world.

Five Global Approaches

Here is an excellent full description of four main types of healthcare systems practiced in the world (though I’ve added a 5th) – its a pretty short page and worth reviewing. But to summarize:

1. “Single payer” (Beveridge) systems, where the government pays for all healthcare costs for all citizens out of the taxes it raises and provides all the services, similar to other public services such as roads and police. The U.K, Spain, Norway, Sweden and New Zealand are examples of countries using this approach.
2. Regulated “multi payer” (Bismarck) systems where insurers pay healthcare costs and are funded through employer and employee contributions. This is similar to the U.S. system with some main differences – it is universal, health insurance plans have to cover everybody, they are not for profit and they are heavily regulated. Germany, France, The Netherlands, Japan and Switzerland use this approach.
3. National Health Insurance. This is also a single-payer, universal healthcare system but it uses private sector providers and payment comes from a government-run insurance program funded by citizens. Because all payments come from one central source, like most single payer systems, the ability to negotiate prices can significantly lower costs. Canada, Taiwan and South Korea practice this approach and the U.S,. Medicare system functions in a similar way (without quite the same price negotiation benefit.)
4. Out of Pocket Coverage. In most of the developing third world there is no central healthcare policy and citizens pay for whatever healthcare they can afford out of their own pocket.
5. Hybrids. The United States system  is a hybrid of these; (actually all four of them) so is Russia’s, which purports to provide some healthcare to all citizens. In Australia a universal publicly funded healthcare system covers everyone but wealthier individuals are encouraged to get off the government system and buy private insurance themselves, which also offers a much broader menu of care options. Finally, in the small country of Singapore exists, at least according to this Forbes article, one of the best examples of a “market driven” approach to healthcare. The government mandates that all citizens pay about 20 percent of wages into a health savings account which are then used to pay for all the inpatient services they can afford, while outpatient services are paid for with cash, or in some cases – private insurance. Services are provided by the private sector that compete with each other for customers in the same way other businesses do.

The arguments for this approach, often labeled Consumer Driven Health Plans (CDHP,) goes that because people have to pay for their own healthcare they are more likely to shop around for the best deal (and thus to create a market to provide less expensive services) and that they are less likely to get costly procedures they don’t really need. Because it functions as a single payer system it also avoids the administrative overhead created by insurance companies. The fairly obvious questions about this approach would be – do citizens also elect to skip procedures they do need or would protect their health in the future because they can’t afford them and does cheaper care equate with less quality care.

On the other hand, proponents of transitioning to a government-run single payer system argue that by taking the third party insurance companies and all their inherent bureaucracy and administrative costs out of the mix ((30 % of the overall healthcare cost is a number that gets cited frequently) they are successful in lowering costs while still providing a high standard of service. They also do this through negotiated contracts with providers that lower costs across the board, which is the reason the same drug generally costs less in many parts of the world, including notably Canada, than it does in the United States. Opponents of a single payer system call it “socialized medicine,” which carries with it a stigma first seen in this country a half century ago during the depths of the Cold War despite the fact that government healthcare is no more inherently socialist than public roads and schools. Critics of this approach also contend that government healthcare causes long waits for service and more difficult access to it. It also seems quite likely that without some type of a private insurance option on top the universal program many people in this country would lose coverage for a lot of services they are now entitled to. Finally – there is room for debate about whether a single payer system would actually save money at all in this country.

Ironically, the system that many healthcare system experts on both sides of the political spectrum point to as exemplary is Switzerland’s – a multi payer government subsidized approach to buying insurance from private insurance markets (exchanges) with an “individual mandate” that everyone has to have insurance. Sound familiar?

But one of the most challenging aspects of what to do about healthcare costs is one of the least discussed politically. It demands the question – should we be careful what we wish for? The healthcare industry is an enormous part of the U.S. economy. In many, perhaps most of the 435 congressional districts around the country the local hospital or health system is the largest employer.  The Health Insurance industry is worth more than a trillion dollars annually in its own right,  not surprisingly it has a very powerful lobby.  With healthcare costs rising across the world (this is not a U.S.-only problem) it may  be difficult to  positively impact cost without at least scaling back profits in that industry. Do we have the political will for this?

Questions to Ask

In order to make any progress at all. it seems clear that we need members of Congress and candidates for their seats to be much more specific and collaborative about how to approach this problem than the anti Obamacare rhetoric that currently dominates political discourse. By 2010, before the Affordable Care Act was passed, per capita healthcare expenditures in the United States had already risen by 72 percent in a decade. The roughly three percent increase each year since then actually represents slowed growth in that number. Let’s ask candidates why we have this headache not whether we are taking the right aspirin.

1. What can be done to slow the cost of healthcare in this country?
2. If you answered, replace Obamacare – replace it with what?
3. If you want to modify Obamacare – how?
4. Why will your approach lower healthcare costs for the average American?
5. Are there examples of other countries using this approach?
6. Why do you think almost all other developed countries spend less per person on healthcare?

Next up – Education for the 21st Century