Sunday, October 26, 2014
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Don’t Follow America on Health Care

TORONTO – With the United States Supreme Court set to begin considering the Affordable Care Act (the historic health-care reform derided by opponents as “Obamacare”), it is worth noting that the number of Americans without health insurance reached an all-time high in 2010, the year the law was enacted. Roughly 50 million US residents (one in six) pay out-of-pocket for medical expenses.

The 2008 recession is not the only reason for this staggering figure; long-term political and policy choices are also to blame. Globally, but especially for rapidly growing economies, the lesson is simple: avoid America’s private health-care model.

The US is one of the few high-income countries that does not finance health care through a publicly funded prepaid system. On average, wealthier countries spend roughly 11% of their GDP on health, with more than 80% publicly financed and only 14% of spending taking place on a fee-for-service basis. Public finance (or, in some cases, government-regulated cooperative insurance funds that amount to public financing) pays for most discretionary medical services, with private insurance supplementing only minimal extra services.

Most rich countries choose to finance their health care publicly for several reasons. First, free-market health care is usually inequitable and inefficient. Individual needs vary significantly, and private companies are often unwilling to insure the very people who need the most care (such as those who are already ill, or who have conditions like diabetes, which predispose them to other health problems). Moreover, those who buy care – insurers and patients – are unlikely to have the information necessary to choose the safest and most effective treatments.

At the same time, public spending acts as a brake on overall spending, and prevents the rapid cost escalation to which America’s private insurance companies contribute. The US spends 1% of its GDP annually simply to administer its complex, unwieldy insurance system. Without reform of the type now before the Supreme Court, total US health expenditures will rise from 16% of GDP today to 25% by 2025.

The economic impact of the current system already is severe. The last US census showed a marked increase in the number of Americans living below the poverty line, a fact closely related to lack of health insurance, which in turn reflects over-reliance on employer-based insurance coverage.

In emerging-market economies, governments should bear in mind five considerations when devising health-care systems. First, investments in health provide an important safety net against poverty traps, especially in times of economic upheaval. For example, each year, 37 million uninsured Indians fall below the poverty line because of catastrophic health expenditures (generally defined as costs exceeding 10% of a household’s total expenditures).

Second, public financing of health care frees the poor to use their money to satisfy other needs. In low-income countries, half of all health-care spending (about 2.5% of GDP) is out-of-pocket (compared to 2% in middle-income countries). This spending consumes a large proportion of poorer households’ income, precludes more productive household investments, creates few jobs, and often remains untaxed, as doctors and hospitals are frequently paid under the counter.

Third, publicly financing health could increase overall employment. Canada’s provinces phased in national health insurance from 1961 to 1975. Employment and wages rose where the program was introduced, even though average working hours were unchanged. Provinces with high levels of private insurance coverage, on the other hand, had lower employment rates and slower wage growth. More recently, Canada beat the US in a bid for a new Toyota plant, in part because private health-insurance costs in the US add several thousand dollars to the cost of manufacturing a car there.

Fourth, existing national health-care systems in wealthier countries can serve as models for emerging-market economies that choose to adopt similar systems. Importantly, public finance need not mean only public delivery; private hospitals and clinics can sometimes deliver services more effectively. Taiwan initiated a single-payer system in 1995, significantly curbing health-care costs and improving the population’s quality of life. Mexico’s new universal health-insurance system was implemented first in the poorest parts of the country.

China, on the other hand, provides a sobering example of the consequences of withdrawing publicly financed health insurance. In the early 1980’s, market reforms left roughly 100 million rural citizens without insurance, almost overnight. Out-of-pocket costs skyrocketed, infant mortality rates stopped declining, and the disease surveillance system was weakened, which may have contributed to the SARS epidemic in 2002-2003, which took more than 900 lives worldwide and caused economic losses worth an estimated $60 billion. The Chinese government has acknowledged that the reforms were a flop, and has committed to spending several billion dollars on publicly financed health care.

Finally, following the principle, “everyone is covered, but not everything is covered,” governments must investigate which services are most cost-effective, and which should not be publicly financed, because they are both expensive and ineffective. The list of insured services can always grow in step with incomes and government revenues. In particular, higher tobacco taxes yield a double benefit: they reduce smoking, a leading cause of adult death, and raise revenue.

China, India, and South Africa have all committed to adopting national health insurance. Which country achieves this goal first will depend not only on revenue, but also on the political will to overcome vested interests. It will also depend on institutions’ ability to design rational health care, monitor delivery, and properly assess new treatments.

Health-care costs in the US are exorbitant, with low value for money. One can only hope that “Obamacare,” together with the models being implemented by the US’s future competitors, will nudge the US to adopt a long overdue universal, publicly financed health-care system.

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  1. CommentedBJ Beard

    This opinion piece does not cite a single source for the claims used to support its arguments, while relying heavily on irrelevant coincidences. It doesn't mention the imploding of the British National Health System, nor the cash profits of Cuba's medical tourism that does not provide adequate minimal care to Cubans excluded from those facilities, nor its profits from renting out its doctors overseas. It doesn't address the long waits for tests and treatments in Canada that are non-existent in the USA. My dog got an MRI within 24 hours of her veterinarian ordering one within 4 miles of home. I can get a CAT scan within 2 miles of my house within one hour if I need it. I personally have met hundreds of "snowbirds' who purposely come to my state annually for world-class healthcare they can afford here but can't get in their home Province. Some facts about American healthcare that eviscerate the author's over-generalized unresearched premise and conclusion: 1. The decline in Americans carrying health insurance since the start of the Obama Recession correlates to unemployment reaching and sustaining Great Depression levels of 9% officially registered and 17-21% when self-employed ineligible for benefits, entry level young people who have not worked enough yet to get benefits and be countede cannot enter the workforce, those who have been unemployed so long they no longer receive benefits, and those who began collecting government disability income when unemployment benefits ran out are counted. 2. A percentage of low-risk Americans have always chosen to forego health insurance premiums - healthy young adults just out of school working in entry level jobs paying all their own living expenses for the first time, buying cars, taking vacations, retiring student loans, then saving for a first home. Upon marriage and family responsibilities they prudently begin to carry health and life insurance. It is a matter of personal priorities and choices. Many self-employed do not carry health insurance during the early years of building their business, and add it later when they have a few employees for whom they wish to offer the benefit with wages. At that point the small group coverage became an affordable business expense - which will disappear under the new healthcare law, forcing people into "pools." The ability to choose how to respond to a variety of life's risks, and to run one's own life is the essence of America, and seems to have served the country well over the long haul. 3. "Poor" people tend to be covered by Medicaid (state health insurance for the poor), also paid for through federal taxes, and almost exclusively provided at government facilities by government employees, are: the Armed Forces Health Services, caring for military and their dependents, Veterans Healthcare (federally funded The Obama Administration released its FY2011 budget on February 1, 2010. It requests $48.8 billion for VHA for FY2011, an increase of $3.7 billion over the enacted amount in FY2010. Furthermore, the Administration is requesting $50.6 billion in advance appropriations for FY2012 for the three medical care appropriations: medical services, medical support and compliance, and medical facilities. The majority of veterans who qualify for VA care prefer private healthcare service and can get it. Anyone like me who has considerable personal experience with both private and VA healthcare facilities and service can instantly see the glaring differences in favor of private and "would give their eye teeth" to avoid using the VA. Thank goodness the majority of us DO still have the CHOICE. Bureau of Indian Affairs Health System (federally funded Population Served: Members of 565 federally recognized Tribes
    2 million American Indians and Alaska Natives residing on or near reservations Annual Patient Services (Tribal and IHS facilities):Inpatient Admissions: 50,349
    Outpatient visits: 11,778,527 Dental Services: 3,568,201
    FY 2010 IHS budget appropriation: $4.05 billion Total IHS employees: 16,159 (70% are American Indian/Alaska Native) Includes about 900 Physicians, 2700 Nurses, 350 Physician Assistants/Nurse Practitioners, 300 Dentists, 650 Pharmacists, and 650 Engineers/Sanitarians. The remaining 10, 609 65.65% are bureaucrats.) Additionally, the FY 2009 budget included several proposals affecting the State Children's Health Insurance Program (SCHIP): Reauthorizes SCHIP through FY 2013 (at a cost of $19.7 billion over 5 years);
    Limits coverage to children at or below 200 percent of the Federal poverty level, which was, according to the budget materials, what the program "originally intended";
    Establishes outreach grants to support enrollment initiatives (a cost of $50 million in FY 2009 and $100 million in each of FYs 2010 - 2014; and Clarifies what counts as "income" when determining enrollment eligibility According to the budget materials, the SCHIP proposal would cover 5.6 million low-income children by FY 2013 and nearly nine million at some time during the year. Note that the US Health and Human Services definition of "poverty" is more generous than the Census Bureau's for determining eligibility, and does not include the value of other government subsidies for housing, aid to dependent children, food stamps, or disability benefits. For fiscal 2011 it is: 2011 HHS Poverty Guidelines Persons in Family 48 Contiguous
    States and D.C. Alaska Hawaii
    1 $10,890 $13,600 $12,540
    2 14,710 18,380 16,930
    3 18,530 23,160 21,320
    4 22,350 27,940 25,710
    So 200% for a family of 4 is an income of $44,700. The federal minimum wage is $7.25/hr or $15,080/yr - most states have enacted higher minimum wage laws.

    Those who aren't covered by a state or federal program simply haven't applied for it, despite the government spending millions annually to "recruit" them. The total number of people who do not have health insurance or government care is, by Health and Human Services' own calculation, 11 million out of 310 million people, a total population that includes 15 million non-citizen residents. 4. American hospitals have been legally required for 60 years to treat all regardless of ability to pay. Since 50% of those hospitals are non-profit charitably or religiously funded, most were doing so anyway. For example The Shriners Hospitals for Children are world-class and all treatment is free and funded by private donation. Everyone in the USA has access to quality healthcare. 5. The single largest driver of healthcare cost increases since 1960 has been Medicare - the artificially low-cost federal insurance program for seniors. Because it covers so much for our highest-cost users of the system, but pays so much below market price for services, providers must make up the difference by raising fees on the other patients, and thus their insurance - somebody has to pay. Health insurance premiums thus outpaced inflation in increases every single year. Further, the bureaucratic overhead, in paperwork to process claims, government reporting, and government employees required to administer federal healthcare (Medicare, Veterans, Indian, and State Medicaid) skyrocketed, due to lack of market accountability, efficiency, and patient interest in controlling expenses - the government workers and the recipients are all on an anonymous someone else's dime. Corruption and fraud to the tune of millions of dollars in claims in the government systems have been aided by the very ponderous bureacracy, which had no incentive to catch and stop it. In a suburb of my town, a fellow signing people up for motorized wheelchairs and "scooters" for the $6,000 apiece to be paid by Medicare filed thousands of fraudlent claims and pocketed over a million dollars before a whistleblower caused investigation in 2009. Public spending on healthcare is crippling state budgets. In my state: In order to cover Arizona’s large deficit, Gov. Jan Brewer and other Arizona lawmakers approved a budget earlier this year that cut Arizona’s Medicaid program, also known as the Arizona Health Care Cost Containment System or AHCCCS. The current AHCCCS program covers 1.3 million people in Arizona. That is 20 percent of the entire population as well as 20 percent of the patients treated by each private hospital system, and over 70 percent of the patients treated at county and state hospitals and university teaching hospitals.

    The first change to this program came on May 1 when enrollment for the AHCCCS “spend down” program was frozen. This program covers people who normally would not qualify for AHCCCS, but who have sustained medical expenses that reduced their income to below 40 percent of the federal poverty level. Without medical expenses, these people's income would not qualify as "poor." Taxpayers receive a tax deduction of 100% on annual medical expenses at or above 6% of their income.

    The next set of changes to the AHCCCS program will go into effect on July 1st. These changes include:

    •The elimination of enrollment for childless adults.
    •The elimination of enrollment for parents earning 100 percent of federal poverty level. (The children themselves are still covered 100% by the federal SCHIP program.)
    •The elimination of Federal Emergency Services (for non-qualified aliens, of which the poor economy has reduced our state's numbers from 500,000 to 360,000).
    •Current enrollees will be required to have eligibility redetermined in 6 months. (Thousands have been kept on the benefit rolls for years after no longer qualifying, enabling them to opt out of enrolling in coverage offered by their employers.)
    •There will be more mandatory co-payments. (More than 70% of services presently have no co-payment. Typical co-payments for privately insured citizens are $5 to $15 until a maximum annual figure is reached.)
    •And there will be new benefit limits, such as for emergency room visits and inpatient days. (The typical government-subsidized patient uses emergency services at a rate six times that of non-government subsidized patients.)
    Then on Oct. 1st, there is yet another change. AHCCCS will cut the payments to health care providers by five percent. This reduction of payment is in addition to the previous deduction of five percent that occurred on April 1st. ( Physicians estimate they will need to cut back on the number of AHCCS paid patients they see as a result. Due to government regulation and paperwork, in addition to their own insurance, equipment, and staff costs these patients cost more to treat than private payors or privately insured patients. One such additional expense, embedded in the 2008 "Stimulus" Bill to begin preparation for "Obamacare" was a requirement that all physicians report all treatment of all patients to the federal government electronically - not just any treatment for an infectious disease or condition the Center for Disease Control wants to study. That alone added $20 to the cost of every doctor visit. State aid healthcare patients also tend to sue service providers at a rate seven times higher than non-government subsidized patients. Law firms that specialize in this abound.)
    The statement "In particular, higher tobacco taxes yield a double benefit: they reduce smoking, a leading cause of adult death, and raise revenue." is a half-truth at best. Tobacco taxes pour millions into American healthcare and education systems annually, but is not spent on care for smokers. The leading cause of death in the US is not smoking (users are 20% more likely to develop cancer than non-users) but rather heart disease and other deadly ailments caused significantly by diabetes, obesity, and, golly, aging!
    This assertion by the authors would be right if turned on its head "At the same time, public spending acts as a brake on overall spending, and prevents the rapid cost escalation to which America’s private insurance companies contribute. The US spends 1% of its GDP annually simply to administer its complex, unwieldy insurance system. Without reform of the type now before the Supreme Court, total US health expenditures will rise from 16% of GDP today to 25% by 2025." It SHOULD READ "America's private system ENJOYS a 1% administrative cost, compared to a 25% administrative cost for its government healthcare, which does not have to account for costs of capital expenditures and numerous other line items ordinarily included in business budgets. This benefits research and development, and service delivery. For the last 50 years, public spending on healthcare has driven up costs at double or triple the inflation rate, whereas before public spending, health care cost increases remained in line, or were below general inflation, due to continued improvements in diagnostics, treatment, and private sector efficiencies responding to market needs. Also by the government's own estimates, DUE TO OBAMACARE, the percentage of the GDP that will be sucked up by healthcare instead of productive industry will rise from 16% to 25%, and its costs will be 400% higher in the first decade than what was claimed to the American taxpayer when it was rammed through Congress unread by the legislators. America is dedicated in its charter to personal liberty, which Obamacare violates with an unconstitutional tax requiring personal participation in public healthcare with a requirement to purchase it, despite heavy taxation for it already. To implement it, a majority need to be persuaded it trumps freedom enough to fundamentally change our national Constitution. The majority are not even remotely persuaded to forsake freedom for inferior medical care at a higher cost.
    The authors can prefer public healthcare on ideological grounds, but are disingenuous at best in their attempt to defend it on economic or quality terms when using America as their bogeyman.


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