What is Going on with Healthcare in the Developed World, and Why is America so Far Behind?
Healthcare policy is a complicated topic, and one that is misunderstood by many. I live in the US, and here the topic is often discussed as only having two options “Socialist Medicine vs. The Free Market” which minimizes the alternate intermediate options that have been pioneered in other countries. It also glazes over the fact that a true “Free Market” Health Care system has been confirmed to produce poor outcomes for several reasons, to the extent that it has been all but removed from the playbook of developed countries.
I set out to understand a bit more about the healthcare policy options across the developed world and how each of these options performs relative to America’s system. I will give some examples of the most widely employed models, and then discuss how the US ranks among developed countries in terms of healthcare outcomes, as well as look at some directional changes that could be made to improve US health outcomes.
Insurers: Health Insurers are the institutions that provide health insurance to cover various health categories and medical procedures. Wikipedia says: Health insurance is an insurance that covers the whole or a part of the risk of a person incurring medical expenses, spreading the risk over numerous persons. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity.
Providers: The term “provider” describes a clinic, hospital, doctor, laboratory, healthcare practitioner, or pharmacy that treats an individual. The “insured” is the owner of the health insurance policy or the person with the health insurance coverage.
GDP Spent on Healthcare: This is a percentage amount of annual GDP that is spent on healthcare.
Total Health Expenditure Per Capita: This is the average amount of money in USD spent on all healthcare, including insurance premiums, deductibles and copays. A smaller amount spent is preferred.
Public Health Expenditure Per Capita: This is the average amount of money in USD spent on public healthcare programs, including insurance premiums, deductibles and copays. A smaller amount spent is preferred.
Life Expectancy: This is the average age of death across the entire population. A higher Life expectancy is preferred.
The 4 Health Policy Models
There are four widely recognized models for healthcare policy in the developed world, the Bismark model (all payer), the Beveridge model (socialized medicine), the National model (single payer), and the Out of Pocket model. All countries in the world follow one of these models with modifications. For simplicity’s sake I will consider the investigated countries to be roughly following one model or another.
The Bismarck Model
The Bismarck model is used in Germany, Japan, France, Belgium, Switzerland, and Japan. In this model, both insurers and providers are private. Companies pay for the insurance plans of their employees. This is very similar to the insurance scheme of a working American. Unlike the America, though, Bismarck-type insurers and the plans that they offer are basically charities: They cover everybody, and they don’t make a profit. Neither insurer or purchasing company is allowed to make money off these plans.
Example Bismarck Country: France
GDP Spent on Healthcare: 11.2%
Total Health Expenditure Per Capita: 3,700
Public Health Expenditure Per Capita: 2,875
Life Expectancy: 81 years
The Beveridge Model
The Beveridge model is used in Great Britain, as well as Italy, Spain, and most of Scandinavia. There are no medical bills; rather, medical treatment is a public service. Therefore both the medical providers as well as the insurers are publicly owned. This is what is widely referred to in the US as “Socialized medicine”. Critics say that this model increases wait times because there is an incentive for everyone to see their provider for the smallest incident.
Example Beveridge Country: Britain
GDP Spent on Healthcare: 8.7%
Total Health Expenditure Per Capita: 3,130
Public Health Expenditure Per Capita: 2,585
Life Expectancy: 79.7 years
The National Model
The National health insurance model is employed by countries such as Taiwan and South Korea, with the iconic example country being Canada. In this model the providers of healthcare are private but the government runs all insurance plans, collecting the premiums from all of its citizens and paying for their medical care. Because of the government’s responsibility as the insurance provider, this model is also called the ‘single payer model’.
Example National Healthcare Country: Canada
GDP Spent on Healthcare: 10.4%
Total Health Expenditure Per Capita: 4,080
Public Health Expenditure Per Capita: 2,863
Life Expectancy: 80.7 years
The Out of Pocket Model
The Pay out of pocket model of healthcare is only found in rural regions of Africa, India, China, and South America. In this model the basic rule is simple: The rich get medical care; the poor stay sick or die.
Example Pay out of pocket Country: India
GDP Spent on Healthcare: ??
Total Health Expenditure Per Capita: ??
Public Health Expenditure Per Capita: ??
Life Expectancy: ??
Healthcare in the US
Healthcare in the US is a mix or a patchwork of these different concepts. And this patchwork is not working. We spend 150% or more of what other developed countries pay for our healthcare as a share of our GDP, and 200% or more if you take that spending on a per person basis. Here are the statistics for the US, as of 2006.
GDP Spent on Healthcare: 16%
Total Health Expenditure Per Capita: 7,670
Public Health Expenditure Per Capita: 3,507
Life Expectancy: 77.9 years
It is clear looking at these top level numbers that the US underperforms, and the deeper you dig, the more you find the US fails in many areas of healthcare. Neonatal mortality, the number of infants that die within one year of birth, the US ranks lower than all other developed nations. In “healthy life expectancy at age sixty.” a metric that predicts not just how many more years a sixty-year-old can expect to live, but how long she can expect to feel pretty good; that is, how long she can expect to live before the onset of predictable ailments of the aged, such as Alzheimer’s disease and rheumatoid arthritis, the US also ranks in the bottom tier of developed countries. The US does perform exceptionally when it comes to outcomes for certain conditions like breast cancer, but this is not the general rule.
Directions for the US
So what are the real problems that we can begin to address to help the system improve and produce better outcomes for Americans? I am not a healthcare researcher or even a healthcare professional (so please defer to the research in the footer), but it seems like there are at least 2 main categories of improvements that we could focus on to help Americans live healthier and happier lives:
The first is to address a core moral issue with the system, which is our current system is leaving some Americans without coverage and allowing citizens to lose their coverage. This is a fundamental issue simply because of the nature of healthcare. Firstly healthcare needs to include all members of a society because otherwise those who are not insured will massively burden the system when they are caught in the government’s safety net. Secondly healthcare needs to be consistently held by each citizen, because you are paying for a service that if you are lucky, will not pay off for another 40 to 50 years. It is not like home insurance where you can simply switch an insurer yearly and get roughly the same price on your plan. If you only purchase an insurance plan at 60, after years of missed coverage, you are burdening the system and reducing effectiveness for everyone. This is in my mind, the primary issue, that without resolving, none of the other improvements will be worthwhile.
The Second is to regulate and control private insurers. The United States is the only developed country that relies on profitmaking health insurance companies to pay for essential and elective care. About 80 percent of non-elderly Americans have health insurance; generally they get it through the job, with the employer paying part of the premium as well. The monthly premium goes toward paying the worker’s medical bills, but the insurance firms also soak up a significant share of the premium dollar to cover the costs of marketing, underwriting, and administration, as well as their profit. Economists agree that this is about the most expensive possible way to pay for a nation’s health care. That’s why all the other developed countries discussed in this article have decided that basic health insurance must be a nonprofit operation. In those countries, the insurance plans — sometimes run by government, sometimes private entities — exist only to pay people’s medical bills, not to provide dividends for investors.
The final method is simply to reduce the complexity of the system. A great passage from The Healing of America by TH Reid describes the patchwork system that we have in America:
“When it comes to treating veterans, we’re Britain. For Americans over the age of 65 on Medicare, we’re Canada. For working Americans who get insurance on the job, we’re Germany. For the uninsured or underinsured, the U.S. is rural India, with access to a doctor available if you can pay the bill out of pocket at the time of treatment or if you’re sick enough to be admitted to the emergency ward at the public hospital.”
Reid also states: “We have developed, more or less by accident, the most fragmented health care system in the developed world, with “providers” sending bills to a vast array of different payers. All the other developed countries have settled on one health care system for everybody; that means every patient is treated equally, and there’s one set of rules governing treatment and payment. (Some countries have a separate military medical system for soldiers overseas, but as soon as those soldiers get home, they go into the national system with everybody else.)”
There are a few different proposals for healthcare reform. All of which seek to more tightly regulate insurers or to eliminate them from the system.
Proponents of the “Medicare For All” National healthcare model championed by Bernie Sanders, estimate that we predict that a single-payer health-care system (like Canada) would require $3·034 trillion annually, $458 billion less than national health-care expenditure in 2017.
Another option laid out by the Center For American Progress, is Medicare Extra, a variation of medicare for all that looks more like the Bismarck model, where there is not only a distinct National or single payer system, but a single payer system existing next to private insurers. Expert-backed alternatives to a national or Bismarck system at this point seem to be flaccid at best.
Though I don’t see a clear political will to move forward with any of these initiatives at the current moment, mostly because of political influence exercised by insurance companies, I can feel that many Americans know that we need a dramatic shift in the way we handle healthcare, and so I hope that by sharing this research I can help kick off more conversation around the topic. I will leave you with a quote from the 2000 “Health systems: improving performance” report by the WHO:
Ultimate responsibility for the performance of a country’s health system lies with government. The careful and responsible management of the well-being of the population — stewardship — is the very essence of good government. The health of people must always be a national priority; government responsibility for it is continuous and permanent.
- US health System Performance, 2006
- OECD, Health at a Glance, 2009
- Reid, T., 2009. The Healing Of America. New York: Penguin Press.
- The world health report 2000 Health systems: improving performance