View from the 3rd story window

Most people agree that the US healthcare system is broken and needs fixing. It is the most expensive system in the world in terms of expenditure per-capita ($6,401in 2005) and as a percent of GDP (15.3% in 2007), and for all the money spent it doesn’t even come close to having the best outcomes.

While the system is always changing and things will probably improve slowly as time goes on, a comparison with other countries makes it fairly obvious that we need a major shift in policy at the national level. The US has very little government management of the healthcare industry, and this situation has led directly to the problems that our system now faces. The lack of policy has led to a labyrinth of insurance payors that balloons administrative costs and makes obtaining halthcare a difficult and unreliable process for the patient. For clinics and hospitals, getting paid is a similarly troublesome mess.

It is tragic and nonsensical that a country with an abundance of wealth, great doctors and great medical facilities faces a crisis in its ability to adequately care for patients. Leaving aside the social justice implications of such a system — which have already been made very adequately by other commentators — it just doesn’t make sense to pay so much money for such poor results. The healthcare situation is even hurting the US economy on a macroeconomic scale, since for corporations the need to pay huge health insurance costs for employees makes it difficult to offer competitive benefits packages here. This is a major force behind the movement of auto manufacturing jobs from the Midwest to Canada.

Most of the public discourse about healthcare in the US devotes little effort to analyzing different possible solutions to the problem. It seems obvious that surveying similar countries’ systems would give us an indication of which direction to head, but this is rarely done. The primary alternative that reformers propose is the single payer model used by the UK.

The emphasis on near-complete government control of healthcare is unfortunate, and I blame it largely on enemies of reform who deliberately pose a false dilemma between private and public healthcare systems. The reality is that most countries with successful national healthcare policies have hybrid systems that combine important elements of government planning and private enterprise. This kind of mix would seem to be ideal for the US, both because it fits with our traditional preference for allowing private enterprise when possible, and because it would be a much less disruptive transformation to make.

PBS recently did a piece on the systems of five countries with different kinds of healthcare systems: http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/countries/

The five countries — the UK, Japan, Germany, Taiwan and Switzerland — all do things differently, but what they have in common is that they all have lower costs and better outcomes than the US.

Putting aside the UK, which uses a single payer system where the government pays for everything, the other four systems have the following general features in common:

• The government regulates the amount that healthcare providers are allowed to charge to consumers.
• Healthcare is universal; government assistance takes care of those who are too poor to afford it.
• Patients pay a portion of the cost of services and drugs, which creates an economic incentive not to abuse what is provided.
• Insurers may be government-run, non-profit or for-profit, but in all case the government regulates them and forbids them from rejecting any patients or any claims.

The systems that seem mostly likely to fit with the US way of doing things are those of Germany and Japan, since both allow independent insurers and private healthcare providers.

Since the pay of doctors is the single biggest expense in the healthcare system, the most important factor in controlling healthcare costs must be reducing doctors’ salaries. This will be accomplished by capping the amount that providers can charge for services, thereby forcing healthcare organizations to tighten the screws on doctors.

It is important to compensate doctors for this change, though. The medical malpractice lawsuit system needs to be reformed to reduce malpractice insurance premiums, although I don’t have a proposal right now for how to do this while still maintaining effective safeguards against malpractice. Medical school needs to be made much more affordable, both the ensure that the best and most committed students will be able to attend and so that young doctors with reduced salaries will not simultaneously be saddled with crippling debts from their schooling.

Most of all, though, I believe that nearly all healthcare personnel will be gratified to have a national system that allows their organizations to care for all patients regardless of their need and to never again worry about scrapping with insurance companies or collecting overdue bills from sick people. A lot of people would take a small pay cut to have that happen.