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U.S. spending on health care is nearly double the GDP average for Organization for Economic Cooperation and Development (PDF) (OECD) member-countries--almost all of which offer some form of universal coverage. A number of middle-income countries have also recently achieved universal health care or are moving in that direction. This has raised concern among some economists and U.S. business leaders that mounting health care costs not only affect U.S. domestic health but its ability to compete globally. President Barack Obama has made reform of the U.S. health care system a top priority. "We have a long-standing critical problem in our health care system that is pulling down our economy," Obama said in June 2009. In the United States, reforming health care has come up against ideological hurdles such as whether to include mandates for insurers, individuals, and employers, level of government participation (NYT), and how to pay for it. Countries that have instituted universal health care have wrestled with issues of financing, the mix of public and private insurance, cost control, and shoring up health infrastructure and could offer valuable lessons to U.S. policymakers.
A Concern over Competitiveness
The U.S. health care system is a mishmash of employer-provided insurance, government-provided Medicare and Medicaid, and state-provided high-risk pools for the "medically uninsurable," as well as out-of-pocket payments by the uninsured, which do not fall into any of these programs. U.S. health care costs have outpaced inflation, and some policy experts argue these costs impede competiveness. A March 2009 study from the Business Roundtable, an association of top U.S. CEOs, found that U.S. employers and employees received 23 percent less value (PDF) in health care spending than most other countries within the G-8, including Japan, France, England, Canada, and Germany. "When our health care system fails to deliver value, it does not just affect individual companies and their workers, it harms our nation’s ability to compete in the global economy," Ivan Seidenberg, chairman and CEO of Verizon, said following the study. "This raises the cost of our products and services and diverts resources from needed investments."
Others dispute the competiveness angle. "When health costs rise, firms don’t become less competitive, as if insurance were lopped out of profits," argues a June 2009 Wall Street Journal editorial. "Instead, nonhealth compensation drops. Or wages rise more slowly than they otherwise would." A similar argument is included in a December 2008 Congressional Budget Office report on U.S. health care reform (PDF).
The Public versus Private Debate
Countries instituting health care reforms in the last two decades have employed mixtures of public and private health care that build on existing health systems. Health Policy Monitor, an international database, has examined health reforms in twenty-two countries and whether those reforms can be taken up by other countries. The issue of public versus private insurance can often be contentious. For example, the U.S. private insurance industry is protesting a proposed U.S. government-run health plan that individuals and small businesses could buy into on the grounds that they could not compete. Michael Tanner, a fellow at the libertarian Cato Institute, disputes that government-run models do any better than the current U.S. system (PDF). He says the biggest lesson the United States can learn from countries such as France, Britain, Japan, and Canada is to avoid government participation in systems. Meanwhile, Jacob Funk Kirkegaard, a fellow at the Peterson Institute for International Economics, argues countries with socialized medicine are better than the United States at containing costs and U.S. health care is in fact more socialized than many other developed countries. According to his research, the share of health expenditures paid out-of-pocket by Americans declined from about 50 percent to 12.8 percent between 1960 and 2008.
Developing Universal Healthcare Models
In creating a universal health model, governments must decide how health care should be financed. Health journalist T.R. Reid divides the world’s health funding models into four basic categories (PBS): a government service, similar to a police force or library, paid through tax revenue; government-run national insurance paid into by employers and workers via a payroll tax; mandated or voluntary private insurance; and out-of-pocket-only payments. Many governments with universal health care pay for some portion of it using payroll taxes. Whether to follow suit is one of the biggest debates in the United States.
Another issue for the United States is what to do about skyrocketing health care costs. Other governments employ a number of methods to control costs once a universal program is in place. In countries such as Taiwan, which adopted a universal health care program in the early 1990s, efficiency has been a major component of reform. Other methods for reducing costs range from placing ceilings on drug prices to controlling fees for services to limiting medical tests. Japan, for instance, cut payments in 2002 for magnetic resonance imaging (MRI) tests, which in turn encouraged manufacturers to make less expensive machines.
Another major issue for extending universal coverage, say experts, is health infrastructure. The United States has a shortage of primary-care doctors (NYT). Michael S. Chen, vice president and chief financial officer of Taiwan’s Bureau of National Health Insurance (NHI), recommends building up health care infrastructure before embarking on universal health coverage. Notably, many of the countries with majority government participation in insuring people have abundant private health services. In Japan, 80 percent of all hospitals are private, says Japanese health economist Naoki Ikegami.
Models in Process
A number of countries, some of which are emerging economies that are competitors for U.S. businesses, have achieved near universal health coverage in the last two decades. Such countries include:
Brazil, the government service model. The current model was established after a right to free health care was codified in the country’s constitution in 1988. Brazil, a country of roughly 191 million people, spends about 8 percent of gross domestic product (GDP) on health. According to a 2008 WHO paper, about 70 percent of Brazilians get government health services (PDF), with about 30 percent supplementing these services with additional private insurance. The program is financed through federal tax revenues but is largely administered by state and local governments. Experts give the health system a mixed review, noting that it has improved immensely since its inception but continues to face challenges, particularly in health infrastructure and cost. Lines continue to be long at hospitals, says Michel F. Guiraldelli, a research fellow at the National Institutes of Health who formerly worked for the Brazilian Ministry of Health. A 2002 Inter-American Development Bank report also found instances of people with private insurance (PDF) turning to public health services for costly procedures, which contributed to the overall scarcity of resources for those relying solely on the public health system.
Taiwan, national insurance model. Taiwan (population: 23 million) managed to increase health coverage from 57 percent of its population to about 99 percent (PDF) between 1995 and 2000. The country now spends about 6 percent of GDP on health. Its compulsory system is financed largely through shared deductions by employers and employees on a sliding income-based scale, with the government funding a portion of services through the general budget. The system has one of the lowest administrative costs in the world. Chen, of the country’s National Health Institute, notes Taiwan’s health system applies "information technology to the maximum" with its smart card system, which enables everything from making payments to disease monitoring to abuse detection to instant medical histories. Chen argues one of the biggest lessons for U.S. policy reform is that single-payer systems provide the best protection for the sick and the elderly because everyone is in the same risk pool. Despite its achievements, the long-term financial viability (PDF) of Taiwan’s system is a concern--as of 2008 the program was running a $30 million deficit(Taiwan Review) per month, according to Chu Tzer-ming, president of the Bureau of National Health Insurance. The government is so far unwilling to raise premiums (NPR).
Netherlands, private-insurance/managed-competition model. Prior to 2006, the health system of the Nertherlands (population: over 16 million) had similar qualities to U.S. health care (PDF), with social insurance schemes for the elderly and poor and private insurance for the more affluent. Its problems included inequities of service based on income status, rising costs, and rationed health services. In 2006, the country created a mandatory scheme requiring the purchase of health insurance but relying on private insurers (PDF). It now spends about 9 percent of GDP (PDF) on health. Adults pay a set premium to the insurer of their choice for a basic package of services and the government collects about 6.5 percent in payroll taxes from all employees to fund health services--such as those for children, which are covered by the state. The government also subsidizes low wage earners and insurance companies for taking on high-risk individuals. In 2008, the Dutch health care system was rated overwhelmingly the best in Europe (PDF) for consumers by Health Consumer Powerhouse, Swedish policy institute.
Models in Development
Other countries have just recently embarked on the universal health care path, including:
Mexico, national-insurance model. Mexico’s voluntary insurance program, Seguro Popular, started in 2003. It targets the country’s estimated 50 million uninsured--nearly half the population of 110 million--for coverage by 2011. According to financial analysis firm IHS Global Insight, 27 million people had signed up for the program by 2008 and it is expected to grow another 10 percent in 2009. The government now spends about 3.6 percent of GDP on health, more than half of the country’s overall health spending (PDF). A Harvard study of the program released in April 2009 found that catastrophic health spending--where families pay out-of-pocket for medical emergencies--had been reduced by 60 percent. The government continues to increase health spending, but the 2009 outbreak of swine flu may slow near-term spending, says Philip Musgrove, a former economist for the World Bank and the World Health Organization. Some flu victims said they avoided hospitals because of long wait times or were turned away (NYT) because of lack of capacity.
China, yet-to-be-determined model. China (population: 1.5 billion) has undergone a number of health reforms in the last twenty years with poor results. The Communist government attempted market-driven reforms in the late 1980s that resulted in an "over-commercialization of hospitals" that caused fees to soar, according to one government report. Though the government instituted reforms for urban areas beginning in 1997, a 2005 report found they were "basically unsuccessful." China spends about 5.5 percent of GDP on health care (JAMA). In April 2009, the government sketched out a plan to increase health coverage from about 30 percent to 90 percent by 2011, with the aim of universal coverage by 2020. Details on the new system are still in the works. A 2009 paper from the Nixon Center, a U.S.-based policy institute, examines ten health proposals submitted to the government (PDF), noting that public discussion has focused on the health systems of the United States, Germany, and the United Kingdom--which received the most attention because it employs a "classic state-led model."
Turkey, national insurance model. Turkey (population: 72 million) passed a universal health insurance law in October 2008. A unified government-provided mandatory insurance scheme financed by employee/employer contributions of 12.5 percent in income tax is set to roll out in 2009. Turkey currently spends around 6 percent of GDP on health. As of 2003, about 15 percent of the population did not have health insurance, according to a joint World Bank-OECD 2008 review (PDF) of Turkey’s health system. The review notes that the government will need to monitor solvency for the new system. Without cost containment measures, Turkey’s spending will begin to act like that of other OECD countries where the "percentage growth in health expenditure exceeds the percentage growth in GDP by 29 [percent] per year."