Universal Health Care: Cheaper and Better


Ezra Klein has an editorial in the LA Times about the eventuality of Universal Health Care. Below are my thoughts on the issue from a purely financial and economic perspective.

First, public health is cheaper. The Organization of Economic Cooperation and Development studied the health expenses of all member countries - 29 in all including the United States. The median amount of GDP spent on health care of 29 countries has fluctuated between 7.9 and 8.4 for 2000-2003. For 2000-2003, US health expense as a percentage of GDP was 13.1%, 13.8%, 14.6% and 15% respectively - by far the highest total of all countries. Germany was the next most expensive country and their totals for the same years (2000-2003) were 10.6%, 10.8%, 10.9%, 11.1%, respectively. So, as a percentage of GDP basis, the US spends between 34% and 75% more as a percentage of GDP than countries that rely primarily on public funds to provide health service.

The OECD also breaks health expenses down into amount spent per capita. For the last four years (2000-2003), the median per capital expense for 29 OECD countries ranged from $2010 to 2248. Over the same years, the US once again spent more than any other OECD country, with figures for 2000-2003 of $4539, $4888, $5287 and $5635. Over the same time, Switzerland ranked second in per capita expenditures and Germany third. It's important to notice that the US's private health care system routinely spends at least twice as much per person than other countries with public health systems.

So, the US spends the most on health care. Our system must provide some incredible benefits! Actually, the US benefits are below median for all OECD countries. In 1990, the median life expectancy of males and females for all OECD countries 75.5 years, while the US' number was 75.3. In 2000, the OECD median life expectancy was 78 and the US's was 76.8. In 2003, the OECD's number was 78.5 and the US' was n77.2. For the years 2000-2003, the OECD's infant mortality rate as expressed as number of deaths per 1000 decreased from 5.1 in 2000 to 4.3 in 2003. In contrast, the US' numbers increased from 6.9 in 2000 to 7 in 2003.

Countries with public health insurance spend less per GDP and per capita on health expenses, they live longer, and fewer infants die. That sounds damn good to me, but then again I like facts instead of faith.

The second reason why single-payer is better is it cuts down on overall administrative costs. Kash at Angry Bear offers this analysis:

We have a couple of estimates of how high administrative costs are - i.e., expenses incurred by the health care system to do things other than to provide health care services. One prominent study that appeared in the New England Journal of Medicine in 2003 estimated that the cost of administering the US's health care system was about $300bn in 1999. A more recent study in the International Journal of Health Services found that in 2003, administration costs in the US health care system ate up about $400bn, or about 25% of total health care spending.

By comparison, national health care systems incur administrative costs of a few percent of total health expenditures: according to the NEJM study Canada's national health insurance system spends just 1.3% on overhead, and the US's Medicare and Medicaid programs have administrative costs of between 2-5%.

Currently, the US health system is a hodge-podge of numerous insurance companies with differing layers of paperwork that work against efficiency. The US public system spends 80% less on administration costs.

The third reason single-payer health is better is economic competitiveness. As the OECD study points out, the US is only 1 of three member countries that does not have public health care. Because of the high cost of US health care, US companies are at an extreme competitive disadvantage caused by these high costs. Because single-payer removes this cost from the companies balance sheet, cash is freed to invest in other more productive applications. Companies clearly approve of single-payer, as evidenced by this letter from General Motors about the Canadian health system:

"The Canadian plan has been a significant advantage for investing in Canada," says GM Canada spokesman David Patterson, noting that in the United States, GM spends $1,400 per car on health benefits. Indeed, with the provinces sharing 75 percent of the cost of Canadian healthcare, it's no surprise that GM, Ford and Chrysler have all been shifting car production across the border at such a rate that the name "Motor City" should belong to Windsor, not Detroit.

Just two years ago, GM Canada's CEO Michael Grimaldi sent a letter co-signed by Canadian Autoworkers Union president Buzz Hargrave to a Crown Commission considering reforms of Canada's 35-year-old national health program that said, "The public healthcare system significantly reduces total labour costs for automobile manufacturing firms, compared to their cost of equivalent private insurance services purchased by U.S.-based automakers." That letter also said it was "vitally important that the publicly funded healthcare system be preserved and renewed, on the existing principles of universality, accessibility, portability, comprehensiveness and public administration," and went on to call not just for preservation but for an "updated range of services." CEOs of the Canadian units of Ford and DaimlerChrysler wrote similar encomiums endorsing the national health system.

These business leaders see the clear advantage of a single-payer health system. When US leaders see the same advantages, they will slowly come on board.

A system that is cheaper, better and increases national competitiveness is a winning situation for all involved. It's time the Democrats started to make the case along these lines to the American people.

Links for sources are available here.


Bonddad December 26, 2006 - 11:03am

Thanks Bonddad for this interesting and timely post. I posted a diary entry yesterday linking to this article from the Washington Post, which details the various health care proposals favored by the new Democratic congressional leadership. My points were two-fold: (1) that these proposals, however commendable, would likely add to what you refer to above as the "hodgepodge" nature of the American health care system; and (2) that the Democratic leadership did not have the political will to consider a more rational and centralized system of health care.

One of the reflexive positions taken by Americans of all political persuasions is that the current system in the U.S. allows for greater choice, as compared to more centralized systems such as in Canada. I would be really interested in comments from Canadian posters about this "choice" argument. My only experience with the Canadian system dates back to the early 80s, when a brother-in-law of mine from Ottawa was treated for terminal cancer. I recall that he was able to spend his last few months at home with daily visits from an absolutely incredible team of medical professionals.

It would be really useful to learn, anecdotally and otherwise, about how folks feel the Canadian system works in the ordinary course.

Bruce December 26, 2006 - 1:01pm

... As I've posted on another thread, a major accident a few years back saw me seriously injured; I was operated on by one of the top surgeons in this speciality in Western Canada within 24 hours (he's a specialist who also treats one of the biggest Western Canadian sports teams, the Vancouver Canucks). He saved the use of my arm.

I spent a desultory amount of money, certainly less than $100 CAD in prescription painkillers, on the six-month recovery path to getting well. I never saw a bill; in Canada, you just don't. Who needs to deal with money stresses when they're recovering from major illness or injury?

No excessive waits. Ever. Not in my entire life. Family history that encompasses members' pregnancy, cancer, injury, illness... absolutely not one single solitary point of commonality between the anti-Canadian-health-system smear job I'm hearing lately and my own real life experience.

Once in a (rare) while I've run into mediocre doctors (by the time I was in my early twenties, it had become pretty obvious that our family GP was one of those, but family loyalty and comfort prevailed 'til then); when I have, I've excercised my freedom of choice as a consumer and obtained a second - or third - opinion or simply opened the Yellow Pages and chosen another doctor.

Which freedom incidentally just had a price tag placed on it. We recently privatized the handling of our medical records to an American firm. Naturally within a year afterwards they instituted a fee for transferring our medical records from one doctor to another. It was quite steep. I was in shock when I was first told that a service that had been done immediately for me several times in the past as a courtesy between doctors was now going to cost me around $150 if I wanted it done in under a week.

I'm not saying it's the same everywhere in Canada; I'm saying that my personal experience and that of all of my circle of acquaintance completely contradicts this.

( ... Link ... )

and...

The last time I was seriously injured - three years ago - the top Western Canadian specialist in the relevant field operated on me within 24 hours. I had been abroad for years and had let my BC medical lapse. I was permitted to rejoin with date effective retroactive to my accident.
I was treated very professionally, healed fully and never once saw a bill. The operation could have cost $15,000 or $90,000 - I admit I have not the faintest clue. Who cares? I paid about sixty bucks after discharge - in prescription painkillers.
I'm certain there are worse examples than my own - however, also anecdotally, I have never heard anything from any of my extended family and friends, my colleagues, students, or in fact anyone I know that has any complaints whatsoever about our provincial healthcare system that amounts to anything more systemic than the occasional mediocre doctor.

( ... Link ... )

The threads to which these comments are attached have some more anecdotes (and some disinformatsiya tracking).

Escher Sketch December 26, 2006 - 2:57pm

There is a treasure-trove of information in your links, and now I am definitely not getting much work done for the rest of the afternoon. I'm a bit embarassed that I didn't realize that this issue had been addressed so comprehensively on Agonist in the past. Much obliged.

Bruce December 26, 2006 - 3:15pm

I am trying to understand "greater choice". I think "greater choice" is an excuse for improved insurance company profits. My son was born at a hospital of our choice in California. The hospital was close to our house but the main reason for choosing it was its membership in our medical plan; a "preferred provider"; that is, insurance would pay 85% of the cost of my son's birth beyond our low deductable. This is the story of my son's birth almost seven years ago and how one of the nations largest health care benefits providers would pay only 40% of the cost.

Everything was approved by our insurance company including my wife's Epidural anesthesia but, unbeknownst to us on the night of my son's birth, the on-duty anesthesiologist was a contractor who was not a member of our health plan; not a "preferred provider". There was "no choice" to be made even if we had known. The hospital, it turns out, could not find anyone else to staff their night shift. This little glitch would cost us an extra $5,000 USD out of pocket.

Next I caught the nurses, making mistakes with the Epidural and the electronic monitoring equipment hooked up to my wife. The bag full of anethestic went empty, they did not understand the monitor etc. Several times I had to call the nurse for a new bag of anesthetic. By far the biggest mistake was that the nurses did not call a doctor in when they should have. This was my first experience at being a father and I was trusting their judgement; my mistake was not trusting my own judgement.

I first noticed the problem when the babies heart rate started to jump. Eighteen full hours after admittance, a doctor has yet to see my wife and my son was in trouble. A doctor would not see my wife until 23 hours after admittance; she was already 5 cm dilated when she was admitted.

He was just a little too big but the nurses refused to call the doctor. Time after time his heart rate jumped. "Why didn't anyone call me", was the doctors only comment when she finally arrived. By now, 23 hours after admittance, it was too late for cesaerian. It was a birth with forceps and the doctor bracing against the end of the birth table with her feet and pulling as hard as she could finally brought the 9 lb plus baby out of the birth canal. My wife sufferred third level tearing from the forceps birth. She still suffers, seven years later, from their mistakes.

I was helpless as the seconds ticked by and still not a breath from the baby. "Come on little guy", was the comment from the revival team. Finally, after more than a minute came a little cry from my son.

My wife was sent home after spending one more night. It was all the insurer would cover. Twenty-eight hours of labor including the time before she was admitted and one night's sleep and we were on our own. I can tell you she was too tired and too badly beat up to leave the hospital. I was tired too but she was in bad shaped; but all the same, we were sent packing. She should have been in the hospital for at least another week.

Later we were notified that the insurer would only pay 40% of the birth. The hospital, though a "preferred provider" was evidently charging too much and the contractor anesthesiologist was not on a preferred list and he was charging too much as well. We were left to fight out the balance with the hospital. Three years later my son is diagnosed as autistic and we are referred to the Early Childhood Intervention program in our school system; that is the last our health care system has to say about it.

So when people say that we have "greater choice" here in the States, I am wondering for what?

Joaquin December 26, 2006 - 3:59pm

we get many bad ones. That's my interpretation, anyhow.

Bolo December 26, 2006 - 4:50pm

I don't think there is any choice. You have to have something to base a choice on. There is no accountability so there is no information to support a choice. Having said that, the service we received was criminally bad. The nurses were incompetent. The Doctors too few. We ended up paying for most of the costs even though we paid as a family $750/ month for insurance.

Joaquin December 26, 2006 - 4:57pm

which highlights at the threshold the importance of preserving malpractice claims (not to say that any malpractice award could ever compensate what Joaquin and his family were and have been forced to endure). Without in anyway wishing to minimize Joaquin's central points, I think he has identified a fairly universal problem insured Americans often encounter in the hospital, and that is that, for whatever reason, the cost of an anesthesiologist ends up not being covered by insurance. This would seem to be yet another hole in the "hodgepodge" system of American health care.

Bruce December 26, 2006 - 5:26pm

What I am trying to say is that its not just who pays for what. The level and quality of care will have to change; that should be just as important as access.

Joaquin December 26, 2006 - 5:38pm

I didn't mean to suggest otherwise.

Bruce December 26, 2006 - 5:45pm

saved my life. I had ovarian cancer in 1971 and received excellent care. The operation and the cobalt treatments that followed did not cost our family a dime. Nor were there any out of pocket fees for the 5-year follow-up.

Drugs are covered when in hospital, but there is no coverage for drugs under the national plan when not admitted to a hospital. Dental is not covered either.

By not bankrupting us for this disease, we have paid into the system rather than being gouged by it. Because we've been self-employed for most our lives, we have not had matching contributions from employers, and premiums are deducted from our income tax and are affordable.

No, we don't have as much choice in caretakers. There is a shortage of family physicians and unless you were prepared to travel, patients are drawn from the physician closest to them.

Most doctors, trained in Canada, stay here, but some are attracted to the higher salaries and opportunities in the United States.

Private insurance, like Blue Cross, would not cover me, and would place a rider on policies for a recurrence of the disease even though it's been thirty-five years.

Canadian doctors are dedicated people, well paid and I would have my choice of doctors if there were enough doctors. Family physicians refer patients to specialists (similar to the USA system).

We do have a separate policy from my bank that costs us $288/year for travel to the United States for emergency procedures in the event of an accident. We could not afford to have a serious illness/treatments for conditions while in the United States. The $288 would fly both of us back to Canada.

When I say national...it is because the federal government pays each province so the less wealthy provinces are able to offer like services as the wealthy provinces provide. The health plan is 'really' provincial and there is some variance from one province to another--but every man, woman and child is covered regardless of the province of residence.

All seniors over the age of 65 do have drug coverage--prescriptions cost $6.11 to fill after the first $100.

We also have a great retirement system--partly private (RRSP's, amount that can be contributed based on percentage of earnings), Canada Pension Plan that everyone pays into--employers match deductions and at the age of 65, everyone receives a pension (that is clawed back if the earnings are too high).

canuck December 26, 2006 - 1:16pm

experience, and needless to say, thank heavens that you are with us and hopefully well.

Let me just add some personal perspective as a union lawyer in the U.S. As you might imagine, unionized workers in this country are, on average, far better off when it comes to health care as compared to their non-union counterparts. But the price is extraordinary. Health care cost containment is the dominant theme in 90 percent or more of the collective bargaining negotiations I am involved with. My principal client is party to what is called a multi-employer health plan that is administered by an equal number of union and management trustees. Most participants in this fund receive incredible health coverage while employed and also benefit from retiree health coverage, beginning at age 55, if they have more than 25 years of service in the industry (they then switch to Medicaire when they become age-eligible). The problem, of course, is the cost; most employers that contribute to the plan are paying almost ten dollars per hour for each hour worked up to forty in a week. As you might imagine, the pressure to change the plan, beginning with the retiree component, increases in every negotiation. And this is as good as it gets for American workers.

In short, the current system, even in the shrinking unionized sector, cries out for reform.

Bruce December 26, 2006 - 1:39pm

and the amount that can be contributed by an individual is based on gross salary. There are ceilings for high earners that individuals cannot go over.

canuck December 26, 2006 - 1:43pm

but it really, really is crying out to be done. I have had friends in the United States that employers paid into their plans and when the person retired...the companies after the first couple of years reniged and charged premiums. I have a friend that is engineer...earned excellent sarlaries during his working life, but now the insurance company gets quite high premiums for he and his wife.

The greediness is just unbelievable from my point of view.

A single payer system is a very efficient way to drive down medical costs and hassle for everyone concerned. Doctors get paid and patients get the services. Its win/win for everyone, except the thieves.

Unions and civil servants in Canada also get a better deal than people who work for themselves. But no one is afraid to get sick and not seek medical treatment.

Yes...I am very well and thankful that I'm here to talk about it. I can't praise the Canadian system highly enough. Doctors are well qualified. Thirty million people scattered over 4500 miles, 100 miles wide was a daunting task. The US population is much more concentrated and should be easier to do, but the scale of your much large population makes it both more affordable and more difficult to implement. Ten dollars an hour for each worker for health coverage is a ridiculous amount!

Check out Hawaii...they have had universal coverage in that state for a number of years. If Hawaii can offer that type of health care, so can all the other states. Get the lobbyists out--they're vermin.

canuck December 26, 2006 - 1:54pm

I envied my sisters who with the birth of each child, received the services of a nurse/maid/hostess/cook/housekeeper/babysitter for 10 days post delivery. This person would look after the mother, the new born, other children, the husband (not including sex, off course:-)), visitors etc. All paid for by the insurance. The monthly payments were a nominal amount.

In Canada, giving birth is free, but no post-birth services exist other than a weekly visit from a nurse.

adrena December 26, 2006 - 6:56pm

See my comment below. We found going with a midwife was a great choice. The post-partum visits were frequent and went over 6 weeks. One of the reasons that the midwife service is so good is that, in Ontario, it was structured based on feedback to OHIP (the health insurance plan) about what mothers wanted.

Maid service would have been great, though. Fortunately I get along really well with my in-laws, whose 4 week visit was *really* welcome.

ssclift December 27, 2006 - 10:14am

Here in Denmark, it's similar to the Canadian system. My wife is due to give birth in 4 months, all of course is paid for by the national system. She will be entitled to 12 months maternity leave and I am entiltled to 6. Individuals and families also choose there GP. There is much greater dependence on GPs and preventive care yet the system is facing some difficulties. The increase in medical specialization (which pays more) is drawing medical students away from GP work. Furthermore, an ageing population is putting additional strains on the system. Many Danes complain about having to pay for previouslly provided prescription drug costs but overall, it's still a very good system. Furthermore, the Danish national health insurance covers all its citizens/residents treatment in all EU member countries.

STN

stuart noble December 27, 2006 - 3:53am

legislation in 2006 for Universal Health Care

Maine Proposal passed in 2003 Wow…does it sound complicated! Premiums are based on income and include assets?

text of the State of Maine's, Dingo Health Reform Act

How odd, the plan is not a single payer system. Administrative fees will prevent the plan from achieving the lowest cost. 21st Century Town Meeting” revealed there was support for single payer. It is a start that could be built to be more efficient and reduce cost. Seems to be similar to the State of Hawaii, who are more advanced in obtaining Universal coverage.

-----

This is how the Ontario Health Care Premiums are calculated, based on taxable income: There are no exclusions and everyone who lives in Ontario gets an OHIP card. A non-exclusionary concept is in effect in all ten of the provinces and the three Canadian territories.

“ranges from no premium for those with taxable incomes under $20,000 to an annual premium of $900 for those with incomes over $200,000 in 2005 and later tax years. Ontario joins Alberta and British Columbia as the only provinces charging premiums to individuals for health insurance. Individual health care premiums were eliminated in Ontario 15 years ago and replaced with an employer health levy by which companies paid the health insurance premiums.” Each working person files their own return…so the combined premium of a married couple who had taxable incomes of more than $200,000 would be an annual payment of $1,800. It doesn’t matter if the couple have children…the premium would be the same. Couples who have children would have deductions from their taxable income for each child and single people would not have those deductions.

Chart of premiums, based on taxable income Example: Two people with taxable incomes of between $48,600 to $72,000, combined would pay an annual premium of $1,200. The Ontario Health Insurance Plan (OHIP) does not include prescriptions, dental, or eye care examinations, or the cost of glasses, private or semi-private hospital rooms. (Drugs while in hospital are covered by OHIP). Seniors do receive prescription coverage--drugs cost $6.11/prescription--not all drugs for seniors are covered by OHIP. People with more deluxe health care insurance plans have supplementary insurance coverage through private companies or as benefits paid for by the employers, governments or unions.

Ontario companies that pay the health care premium are those who had payrolls over $400,000 annually. Small villages do have doctors in Community Health Centres. The Community Health Centres give doctors in rural communities, the opportunity to share the burden of their patient load with other family physicians.

Employees who earn less than $20,000 are exempt from paying premiums, but the amount they receive would be used in the calculation of the employer’s health care premium of 1.95% of their total payroll.

When OHIP was introduced in the 1960’s, employees paid the health care premiums—employers did not. That was revised in 1990 when employers were required to pay them and employees did not. (Exception self-employed people paid the premiums). In 2004, the premium requirements were "revised" again to make the premiums payable by both the employer health tax and individuals resident in Ontario.

----

Joaquin, your experience was dreadful. $9,000 in annual premiums should have ensured there was an anesthetist on duty to monitor your wife. But I do know of an American millionaire who will soon be broke from having to pay the cost of prescription bills for his wife. He may have to liquidate all his assets in order for his wife to receive the drugs she needs. I knew of another case with a friend in Iowa, whose mother deliberately waited 'til her cancer was too advanced because she did not want to burden her family with her high bills for the treatment of her cancer.

canuck December 27, 2006 - 5:29am

Here in Kitchener-Waterloo the waiting time, on average, for a CAT scan is 1 day.

1 (one as in unity, as in single) day.

My wife had a choice of going to a midwife or to a doctor for the birth of our daughter. We chose a midwife, and she was super. Here in Ontario they are trained to the level of a nurse practitioner, apprenticed and licensed; many of them are R.N.'s. We lay the credit for the 4 1/2 labour (and my wife is well over 35) for this first time birth squarely, and with thanks, to the great preparation from the regular visits beforehand. When there was a minor complication a doctor we knew was on call and the problem handled swiftly and competently. My wife stayed the night in hospital, and everyone came home the next day. The midwife visited nearly every day for the first week to make sure breast feeding was going well and the visits continued for the first six weeks.

Total bill: $0.

(If you're in my area: http://www.stjacobsmidwives.on.ca/ <- These guys.)

I dislocated my shoulder kayaking in a local gorge, and was treated and out the door at the local hospital on first priority. After repeating that injury surfing in New Zealand, they showed me the courtesy and generosity of treating it.

Total bill: $0 (although my supplementary insurance only covered the $400 of physio to 80%), both times.

Choice is for things like the colour of your new tie. If you die on the operating table can you take the operation back and exchange it? If a doctor is rated best in America can all 300 million of you choose to have her as your family doctor?

That said, when I requested a (non-urgent) referral from my family doctor to specific orthopaedic surgeon for my shoulder, it was no problem. He saw me a couple of weeks later.

ssclift December 27, 2006 - 9:20am

available when I had my daughter in 1960. What sticks out most in my mind is when they brought her to me for breast feeding. She would take a couple of gulps then fall asleep. Several days of her falling asleep went on before I said to the lady in the bed beside me, "My baby keeps falling asleep and does not take enough nourishment." Fortunately, she had just had her fourth child and told me to flick my fingers on the bottom of her feet to ensure she stayed awake long enough to get enough food. Had there been instruction in how to feed one's child, I would have known that.

I had spinal epidural anaesthetic which was brand new in 1960. Unfortunately, it did not take effect on my right side. After my daughter was born, it was discovered I had an ovarian cyst--the first of three operations ensued. The labour squeezed the cyst and caused the epidural to be ineffective. Because I was so young at the time, a midwife would have been of great benefit. Doctor's don't have enough time to devote to pregnancy and to the birthing process, but well-trained midwives do and their talents if there are no complications are far superior.

My daughter was born on a Saturday night and my family doctor had been wearing a tuxedo when he arrived at the hospital. I could no longer go to him because a bill for $150 for the delivery was in our mailbox when the two of us arrived home six days later. Haydn was really ticked off that our family doctor could not delay the arrival of his invoice. We did find a family physician that was interested more in my health than sending us bills.

It is very disturbing to me that women after giving birth are not kept in the hospital for a minimum of five days; especially new mothers who are in labour for more than 24 hours. New mother's bodies do not repair themselves immediately after such an intensive period of enormous stress. Having meals delivered and not having to worry about housework was of great importance to my recovery from the ordeal of birthing.

canuck December 27, 2006 - 6:00pm

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