This book was recommended by one of our summer interns, MBA/JD student, when I mentioned that I was looking to understand our healthcare system. By solely listening to politicians, policy makers, or reading the news I knew it was going to be hard to synthesize the essentials of healthcare in the United States.

The Healing of America comes to the rescue. We follow Dr. Reid in his quest to heal his semi-frozen shoulder in different countries and to understand how those nations think about and administer healthcare.

Healthcare Models

Dr. Reid describes four basic models: Bismarck, Beveridge, National Health Insurance, and Out-of-Pocket. The first three function quite efficiently in other developed countries, while the out-of-pocket model is found typically in poor countries where only those with resources can afford healthcare.

The United States has elements of the four models in our convoluted healthcare system. This introduces and incredible degree of inefficiency to U.S. healthcare. The U.S. spends the most (18% of GDP as of 2016, while the next spender is at 11%) and gets less. Take access to healthcare for example: there were approximately 30 million people without health insurance in 2016 (down from 44 million in 2013, but still represents a significant percentage of the population).

The models are easy to understand and, when describing them, Reid does away with several myths that we’ve grown accustomed to hear in the U.S.: wait lines are unacceptably long in other countries, quality of care standards are lower…

What’s broken: Financing Healthcare

One of the stark distinctions between the U.S. and the rest of the developed world is that the financing of healthcare is consistently a non-profit endeavor outside the U.S. Healthcare in other countries is financed through not-for-profit insurance companies (private or public). This way, they avoid the inherent conflict between profits and healthcare. In the U.S., private insurance companies routinely decline coverage in favor of their bottom line.

What’s broken: the essential moral question

Dr. Reid postulates that we have evaded in the U.S. the essential question: is it morally acceptable to let Americans die (from lack of access to healthcare) or go broke when they get sick?

In the U.S., the political discourse on healthcare has focused on macroeconomic figures and on which interests might “win” or “lose” under a given healthcare plan, or many times the public attention’s was diverted to threats of “government takeover” or “socialized medicine.”

The essential moral question that should drive reform is thus swept aside. Unless we answer this question, our system is doomed to remain, as Henry Aaron from the Brookings Institution puts it:

“… an administrative monstrosity, a truly bizarre mélange of thousands of payers with payments systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.”

Solutions?

Dr. Reid does not propose any solutions, but provides the example of a country whose system resembled that of the U.S. and was able to conduct a complete overhaul of healthcare: Switzerland.

But the change in Helvetia only happened after the Swiss answered the essential question.


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Book notes

The essential moral question is: is it morally acceptable to let Americans die (from lack of access to healthcare) or go broke when they get sick?

Socialized medicine

  • The term is supposed to end the argument for universal access.
  • Popularized by the AMA in the late 1940s to disparage President Truman’s proposal for a national healthcare system. The label, at the dawn of the Cold War, effectively drew associations with “communism”.
  • “In U.S. policy debates, the term “socialized medicine” has been a powerful political weapon -even though nobody can quite define what it means.”

Models

The U.S. has elements of all four models in our convoluted health care system.

  • Bismarck Model
    • Both healthcare providers and payers are private entities
    • Tight regulation of medical services and fees provides cost-control clout
    • Germany, Japan, Belgium, Switzerland, Latin America
  • Beveridge Model
    • The government is both the provider and payer
    • Many (If not all) hospitals and clinics are owned by the government; some doctors are public employees, others are private
    • Low cost per capita, given the purchasing power of the government
    • Great Britain, Italy, Spain, Scandinavia… U.S. Department of Veteran Affairs too
  • National Health Insurance Model
    • Provider: private
    • Payer: government-run insurance program
    • Low cost:
      • Easier to administer: no need for marketing, no expensive underwriting offices to deny claims, no profit
      • Buying power of the government
      • Limits medical services to be covered, and patients may need to wait to be treated
    • Canada, Australia, South Korea
  • Out-of-pocket Model
    • Most medical care is paid by the patient
    • No government-related health care paying system
    • Most of the developing world

Coverage: moral issue

  • “All the other developed countries see to it that every person has a right to healthcare when necessary. We don’t.”
  • Approximately 11% of the U.S. population is uninsured, as of 2017.
  • Between 500,000 and 1 million Americans declare bankruptcy each year due to medical bills
    • All the other developed countries have zero medical bankruptcies

Quality

  • Among wealthy countries, the U.S. ranks last in curing people who could be cured with decent care. (2008 report from the Commonwealth Fund).
  • The U.S. also ranks low in survival rates from major diseases (e.g., asthma, diabetes).
  • The U.S. also ranks last on infant mortality.

Cost

  • The U.S. is the world’s biggest spender on healthcare.
  • Providers (doctors, nurses, hospitals, drug companies) make more money than their counterparts in other countries.
  • The major reasons for our high spending level are:
    • Health insurance practices: the U.S. is the only developed country that relies on profit-making health insurance companies to pay for essential and elective care.
      • In other countries, insurance plans are either run by the government or are private non-profit entities
      • The U.S. is the only developed country that allows insurance companies to refuse coverage to people (but companies are forced to do this because of the “adverse selection” problem: people who refuse to buy insurance when they’re healthy)
    • Complexity of the health care system
      • A different system for: Americans over 65, military personnel, veterans, Native Americans, people with end-stage renal failure, people under 16 in poor families, people over 16 in poor families, members of Congress… and there are hundreds of private insurance plans.

Insurance in the U.S.

  • Recission (outlawed by the ACA): legal maneuver to cancel the policies of a customer who had a serious accident or contracted a major disease
  • If you leave your job, you lose your insurance. “In the rest of the world, this is considered unbelievably cruel.”
  • Henry Aaron (Brookings Institution): “I look at the U.S. health care program and see an administrative monstrosity, a truly bizarre mélange of thousands of payers with payments systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.”

France: the Carte Vitale

  • Insurance funds are non-profit entities with administrative costs below 5% (vs. 20% for U.S. insurance companies)
    • French insurance funds can’t turn down individuals for coverage, regardless of pre-existing conditions
    • Funds can’t terminate coverage when an individual loses his job
    • Funds can’t deny a claim
    • There’s no deductible
    • Long delays in payment reimbursement are illegal (all paid within one month)
  • Efficiency and completeness of information: the carte vitale contains the patient’s entire medical record, back to 1998.
    • Doctor visits, referrals, injections, operations, X-rays, diagnostic tests, prescriptions, etc.
    • It also includes records on how much was the doctor paid by the insurance funds and by the patient

Germany

  • Devised by Otto von Bismarck in the 19th century
  • Private, non-profit insurance funds that do not discriminate and spend 1/3 of U.S. insurers in admin costs
  • Premiums are paid through payroll deductions, but Germans don’t lose coverage when they lose their jobs (the Government steps in and pays the premiums)
  • Germans can easily switch plans anytime they want
  • Costs are generally on the rise, and the government is responding by squeezing doctors and hospitals

Japan

  • Similar to the Bismarck model
  • Great diversity of insurance plans: 3500 in Japan (vs. 200 in Germany, and 14 in France)
  • Patient pays 30% of the doctor bill as co-pay, with a limit of $650 per month
  • Insurance companies can’t turn anyone down for coverage, and they cannot deny a claim either
  • Insurance premiums are split between the individual, his employer, and the government
    • Everyone is required to have insurance – individual mandate
  • Insurance companies are not-for-profit entities
  • The Government negotiates prices with health providers, resulting in a single fee schedule that applies to every doctor, clinic, and hospital in Japan

The U.K.: Beveridge-Bevan model

  • All costs are covered by the government
  • An apparent characteristic of the UK system is its economy
    • Fewer surgeries, medications, X-rays, etc.
    • Focuses on being cost-effective for the population

Too Big to Change

  • The American system is so complex and involves so much money that significant change is politically hopeless.
    • The arguments quickly focus on which interests might win and which might lose under a given plan.
    • The basic moral question that should drive reform is swept aside.
  • Many have concluded that health care reform is beyond the power of a democratic government.
  • In Switzerland, the “right to healthcare” is not a concept advanced by left-wing parties, but rather a “basic truth of modern life.”
    • Healthcare providers are private; insurance companies are also private but they must offer a basic healthcare plan for no-profit to all citizens; they can make profit on supplemental services.
    • But in the early 1990s, the Swiss system resembled that of the U.S.; private insurance companies had acquired non-profit insurance companies and were denying coverage and claims to benefit the bottom line.
    • Switzerland ranked second only to the U.S. in per-capita healthcare spend.
      • Switzerland is still one of the highest spenders in healthcare, but they now have universal coverage.
  • It seems that the American healthcare system was developed without much planning and, more importantly, without asking the first moral question: is healthcare a basic human right?
    • Most of the debates and arguments set forth by politicians have been focused on the economy or the idea of “government takeover” or “socialized medicine”

Providing vs. Financing Healthcare

  • Providing healthcare can or cannot be a for-profit enterprise
  • Financing healthcare should be a not-for-profit enterprise, otherwise the inherent conflict between profits and healthcare will favor shareholders at the detriment of the sick

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