Economist Victor Fuchs addresses this question in a recent issue of The New England Journal of Medicine. The explanations he offers: Health care in the US is much more expensive than in other countries; the US lacks an egalitarian ethos; while the US government is a major consumer of health resources, it fails to use its bargaining power to obtain lower prices.
US health care is very expensive
Health care in the US is much more expensive than in other countries. Americans spend 50% more than the next-highest country. If you look at the average cost of health care in the 34 European countries that belong to the OECD, the US spends 200% more.
Fuchs asks: Could this be because the US government is held hostage by special interest groups? Why would this be true only in the US?
The answer probably lies in part in the structure of the U.S. political system, including the role of primary elections, long and expensive election campaigns, the separation of powers, the numerous congressional committees and subcommittees with overlapping authority, and the need for supermajorities in the Senate in order to pass meaningful legislation.
So yes, the way we conduct politics favors special interests, and the result is higher costs for health care.
The inequitable distribution of health care in the US
A second major difference between the US and countries with national health insurance is that these countries offer greater equality of access to health care. They also pay for health care in a more progressive way. In other countries, health care is paid for by taxes on income, sales tax, or some other form of taxation that’s proportional to income. Europe, Canada, Australia, New Zealand – all have a more egalitarian ethos when it comes to health care.
There is no agreement on why the US emphasizes individualism at the expense of egalitarianism.
Possible contributors to the phenomenon include the heterogeneity of the population, the revolutionary origins of the country with its dedication to “life, liberty, and the pursuit of happiness,” and the absence of many centuries of a common language, history, and culture. … De Tocqueville painted a grim picture of individualism taken to the extreme. … “Each . . . living apart, was a stranger to all the rest — his children and private friends constitute to him the whole of mankind; as for the rest of his fellow citizens, he is close to them, but he sees them not; he exists but in himself and for himself alone.”
The lower cost and more equitable distribution of health care in other countries complement each other. If health care was more expensive, the taxes needed to pay for it would be a drag on the economy. When a country values equitable distribution, it is forced to control costs.
The US government fails to use its bargaining power
One way other countries control costs is by using their leverage as the (almost) exclusive buyer of health care services. These foreign governments control 70 to 90% of health care expenditures. This creates bargaining power that helps keep prices low. The US pays for almost 50% of health care, but makes little use of its purchasing power to control costs.
Americans wind up in the worst of all worlds, with government bearing a big part of the burden of paying for health care, with the concomitant large burden of taxes, but exercising very little control over the cost of care. As an indication of how absurd the situation is in the United States, government currently spends more per capita for health care than eight European countries spend from all sources on health care.
Though life expectancy is far from a perfect measure of the quality of care, it is not without interest to note that life expectancy at birth in every one of these eight countries is higher than that in the United States.
A bleak assessment indeed. Especially since there is so little evidence that a political solution will be forthcoming. The longer we wait, the more painful the solution will be. Call it whatever you like, but what it will come down to is the need to deny care.
Why do Americans oppose universal health care?
David Leonhardt, in his Economic Scene column for the New York Times, takes on a related question: How to explain American opposition to universal health care. “Nearly every time this country has expanded its social safety net or tried to guarantee civil rights, passionate opposition has followed.”
The opposition stems from the tension between two competing traditions in the American economy. One is the laissez-faire tradition that celebrates individuality and risk-taking. The other is the progressive tradition that says people have a right to a minimum standard of living — time off from work, education and the like.
Both traditions have been important to the economic success of the US. “Laissez-faire conservatism has helped make the United States a nation of entrepreneurs, while progressivism has helped make prosperity a mass-market phenomenon.” But conservatives view any expansion of government as a threat to capitalism.
In Leonhardt’s view, the current health care bill is much more conservative than Medicare or the programs proposed by Nixon or Clinton. “It is clearly one of the least radical ways for the United States to end its status as the only rich country with millions and millions of uninsured.”
But the individual mandate – requiring all citizens to purchase health insurance – is a sticking point for conservatives. In the recent Federal District Court ruling in Virginia, Judge Hudson said the mandate “would invite unbridled exercise of federal police powers.”
I argued in a recent post that this amounts to an emotionally manipulative argument.
Can’t we all just get along?
Leonhardt makes a case for valuing both ends of the political spectrum. Consider the economic advantage for laissez-faire capitalism of universal health care.
Guaranteeing people a decent retirement and decent health care does more than smooth out the rough edges of capitalism. Those guarantees give people the freedom to take risks. If you know that professional failure won’t leave you penniless and won’t prevent your child from receiving needed medical care, you can leave the comfort of a large corporation and take a chance on your own idea. You can take a shot at becoming the next great American entrepreneur.
We’ll see what happens when health care reform gets to the Supreme Court. Today I’m not optimistic, but perhaps something could change in the next two years.
Can Congress Force You to Be Healthy?
The Supreme Court and health care repeal politics
Health care inequality: The US vs. Europe
A reason for health care reform
Why is it so hard to reform health care? Rugged individualism
Why is it so hard to reform health care? Political structure
Why is it so hard to reform health care? The historical background
Why is it so hard to reform health care? National identity
Victor R. Fuchs, Ph.D., Government Payment for Health Care — Causes and Consequences, The New England Journal of Medicine, December 1, 2010
David Leonhardt, Opposition to Health Law Is Steeped in Tradition, The New York Times, December 14, 2010