Why Americans Won’t Tolerate Overseas ‘Models’

Everyone knows that American health care is in crisis. Its poor quality arrives accompanied by a huge bill and lack of universal coverage. Like dining in an amusement park, Americans are captives to a cafeteria that serves up cold, fatty food at double the price, leaving those who can’t pay, hungry.

Nonsense. Americans have created the health care system that suits our culture. It’s expensive in total, uneven in quality, and totally non-egalitarian. It has no central point of control, a frustrating fact for social reformers. Multiple streams of revenue allow providers to innovate and cater to niches. Private payers subsidize the uninsured and those on government-paid insurance. Although designed for those who can pay, it uses collective dollars to ensure that everyone has access to care. But it does not ensure that everyone has the same health care plan or even a plan at all. It provides prompt, comfortable care to the sick. It’s a mix of public goals, payers and private providers, entrepreneurs, and administrators. Profit-seeking drives innovation at all levels of the system, from hospitals that compete based on who has the best oncology, birthing and cardiac care to physician practices offering white glove service for flat annual fees.

This is a horrific description for egalitarians. Yet it’s akin to how Americans produce and consume life’s other necessities: food, housing clothing, transportation and even education. In short, we’ve built the health care system we want. Reformers are unable to change it because we don’t really want it changed.That may not be what Americans tell pollsters, but it is how Americans will vote. In the abstract, they are happy to ration the next fellow and provide subsidized insurance for the “near poor” (those above the poverty line but well below middle class). But you better not ask them for a sacrifice to make it happen. It1 1994, we didn’t want to be German, when President Clinton, First Lady Hillary Clinton and White House health policy adviser Ira Magaziner proposed we all get together in health collectives and purchase managed care plans. We’ve never wanted to be Canadian, forking over high taxes to provincial governments in exchange for what is essentially a Medicaid plan and a place in line. Today’s politicians will discover that we don’t want to be French, Swiss or Dutch, either.

Health care. presents policymakers with three competing goals: insulating people from costs of care, keeping total costs down and providing access to top-quality care. Economist Arthur Kling dubs this the “trilemma.”

No health care system can maximize all of these goals. Our system maximizes providing access to top quality care. Hyperbole aside, it actually does a fair job of insulating citizens from experiencing the direct cost of their care. Americans pay out of pocket for a mere 12 percent of the health care they consume. It’s not until Americans reach age 55 that they spend more on health care than they do on entertainment. Our relief valve is total expenditures. The sky is the limit.

The countries to which the United States is so unfavorably compared place different weights on these values. Some seek to insulate their citizens from costs at point of consumption. They keep total costs down through global budgets and rationing. Those that reject global budgets and rationing – notably the Netherlands, Switzerland and France – either embrace HMO-style gatekeepers or employ significant patient cost sharing.They are, it just so happens, also quite expensive.

There are no new ideas under the sun, simply different tradeoffs to be made. The effective ingredient of every system now being touted as models for a reformed American health care system has been utilized at some point in our system. Some are in force in limited areas – the British-style National Health Service (NHS) government-run model is reflected in our Veterans Administration system, for example. Others, such as the gatekeepers that parcel out care in the Netherlands, practically started a revolution when used in the United States. Our experiment with managed care actually succeeded at controlling expenditures on health care. Yet it came at the cost of perceived access to top quality care. The bipartisan response was a Patients’ Bill of Rights to guarantee access to top-quality care.

Massachusetts is experimenting with the Dutch and Swiss mandatory purchase of private insurance. The Bay State is running into a few challenges, most stemming from the fact that Bostonians aren’t Dutch or Swiss and the politicians aren’t funding Swiss or Dutch health care.They are purchasing Massachusetts- style care-the most expensive care in the most expensive country in the world . Therefore, the result has been 330,000 new people insured. 232,000 of them are in taxpayer-supported care plans. It will not achieve universal coverage. Politicians exempted one in five uninsured from the mandate on grounds of affordability. And it is rough on the state coffers. It was $150 million over budget in Year 1. The budget for fiscal 2009 is $869 million and Gov. Deval Patrick is predicting it will cost $1.2 billion.

With the American character firmly in our minds, let’s examine the possible models that we might adopt. While we are at it, we must remember that none has achieved the elusive cost control. Monetary expenditures are increasing in each country. The costs are just moving from a higher base expenditure in the United States.

There is no doubt that a government-administered single payer system is the preferred objective of those on the left of the political spectrum. As recently as 2003, Sen. Barack Obama enthusiastically voiced support for a government-financed system. Sen. Edward Kennedy (D-Mass..), while practical in pushing incremental reforms, has always had his heart set on “Medicare for all.” Proponents claim that such systems,most notably Canada’s (the country of my birth),are able to fairly deliver all the medical care people need with maximum administrative efficiency.

The reality is that the political allocation of resources and constraints of global budgets produce a health care system that Americans would not tolerate at any price. Whereas patients are revenue centers in the American health care system, they are cost centers in the Canadian system and in others, like Great Britain’s NHS, that operate on global budgets. Americans are accustomed to hospitals competing for their business.They invest in the Iatest technology, present it in convenient spaces and advertise their expertise on billboards, radio and print.

The imperative of global budgets is to limit technology and ration care. Given the fixed budget, patients in need of expensive care drain the system. Therefore, less intensive medicine will be the norm. That’s the Canadian reality. In 2007, on average, Canadians waited 18.3 weeks from the time they saw a general practitioner to receiving treatment by a specialist for a diagnosed condition, according to Canada’s Fraser Institute. Canada ranks low among OECD countries in availability of MRI, CT Scanners, and Lithotripters per million of population. Every so often the system’s imperatives produce absurd results. In 1998, &for example, the Toronto Star reported that a major medical center was renting out its MRI machine to veterinarians for after-hours use while Canadian patients waited to be diagnosed by the machine. The vets, after all, produced marginal revenue for the hospital.With no way to charge humans, they were simply a drain on the budget.

The architects and third-party observers alike have repudiated the logic of the system. Claude Castonguay, the man called “the father of Quebec Medicare,” recently called for major reforms, including allowing people to use private sector medicine. In 2005, the Supreme Court of Canada ruled that the Quebec health system’s prohibition of private pay medicine violated the province’s guarantee of human rights. “Access to a waiting list,” wrote Madame Chief Justice Beverly McLaughlin, “is not access to health care.” And, noted Madame Justice Marie Deschamps, “the idea of a single-payer system without waiting lists is an oxymoron.”

Americans will never vote for single payer, but we may evolve into it. Other features, such as choice, competition and freedom, must be the selling points of any plan to expand government health care.The international models capturing most interest are those of France, the Netherlands and Switzerland. Each relies on privately administered insurance to achieve close to universal coverage. If they can do it. why can’t we? We could. I guess, if we were willing to accept restrictions on which doctors we can see and when, and embrace taxes as high as 18 percent of payroll.

The Swiss and Dutch address the affordability problem that Massachusetts is struggling with through substantial premium subsidies. In Switzerland, one in three citizens gets government help purchasing health insurance, resulting in the government paying 20 percent of private health care premiums. In the Netherlands, nearly one in three citizens is eligible for government support. But infusing these subsidies into a system with no cost control features is like throwing gas on a fire, especially in the free-spending United States.

Switzerland has the fewest restrictions and is struggling the most with expenditures.”A system without cost containment IS not a sustainable one,”RutIh Dreifuss, a former Swiss government official told an audience interested in mandated health care.”I am worried about the future.”

Switzerland has the world’s second most expensive system, consuming 11.5 percent of gross domestic product (GDP). The Swiss government pays for a mere 25 percent of total health-care costs. This is lower than other countries.The result is that consumers pick up 31 percent of costs out of pocket, a consumer-driven approach which is both a major cost control feature of the system and totally unacceptable to those leading the charge for healthcare reform in the Democratic party. The other mechanism is strict controls on the amount that can be billed for services to insurers enforced by cartels and a prohibition of balanced billing. This would be fine with many Democrats, but would violate U.S. anti-trust laws and be unacceptable to physicians and hospitals in the United States who enjoy some degree of pricing freedom.

The Dutch system, two years old in its present state, is a managed competition scheme. People are required to purchase insurance from one of more than 40 companies. Premiums are set by government, as is a generous benefits package. Companies are able to alter some terms of the contracts, such as co-pays, deductibles and networks, which allow for a limited degree of competition. Patients access care either through a primary care gatekeeper or a staff model HMO. The government sets prices for pharmaceuticals. Notably, people are required to purchase health insurance, but the government, at this point, has no enforcement mechanism.

The features that are allowing the Dutch system to work are either inapplicable to the United States or have already been tried and rejected. Americans will not voluntarily purchase health care at a level approaching universal coverage. There will be extensive costs to enforce the mandate. We had our test run at tightly managed networks and primary-care gatekeepers. Suffice it to say that it was unpopular with voters.

The French system has caught the eyes of writers and analysts looking for a third-way reform of the U.S. health-care system. It appears to offer choice, universal coverage and high quality of care at a cost that doesn’t break the bank. It’s regulated by government but not directly administered by the state. While it does appear to suit the French character well, offering egalitarian access and subsidizing such medical necessities as spa treatments, it’s not clear what aspects of the system reformers want Americans to adopt. Thc government sets the prices for the base insurance plans, which are offered through large employment-based collective funds. Wages are taxed at 18.8 percent to pay these premiums. Physicians earn $55.000 a year on average, compared to $140,000 for primary care doctors in the United States. To control costs, the plans are shifting to a gatekeeper structure. Patient co-pays are as high as 40 percent. Out of pocket spending is 20 percent, reflecting both payment for supplemental insurance and co-pays.The system is parsimonious with technology and has started to cut back on in pharmaceutical offerings. To top it off, the approach requires government subsidies as the publicly funded parts exceed budgets. There is something here to raise the hackles of most voters and just about every health care lobby.

We may not get all the government we deserve. But we do get the public policy we want. I suspect that’s a lesson the health reformers in this election cycle will soon 1earn. The grass is not greener and the health care systems are not better in other countries, at least not from the average American’s point of view. If we can change the tax code so that individual buyers get the same tax benefit as those who get their insurance through their employer, we will go a long way toward leveling the playing field. It is competition and universal choice that will lead to universal coverage.

Sally C. Pipes is president and CEO of Pacific Research Institute. Her second health care book, The Top Ten Myths of American Health Care, will be published this fall.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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