There Is No Mystery To Health Care

There are four models of health care financing in the world today. The Bismarck model, used in Germany, Japan, Switzerland, and Belgium, is built on employer-provided private insurance with subsidies and cost controls to make the system universal. The Douglas model, used in Canada, France, and Taiwan, establishes a universal public insurance model that includes all legal residents and is financed by taxation. The Beveridge model, as seen in the UK and Hong Kong, is built on public clinics and hospitals that all legal residents can access without payment at point of service. The fee-for-service model is the tyranny of the market: If you have money, you see a doctor; If not, you stay sick and die needlessly. What ALL of the countries that have fully implemented one of these models have in common is that they cost a lot less per patient than what we spend in the United States. What the first three models have in common is that they cover everybody AND cost a lot less. While they all have problems, those problems pale in comparison to the insane costs and needless suffering of the chaos in the American non-system.

The root of the problem with the US health care system is that we try to implement all four systems.

Veterans use the VA system, which like the UK’s National Health Service, offers state-owned hospitals and clinic staffed with government employees that provide care and medications directly for no or nominal cost. By directly providing services to patients, costs are kept very low, making it the cheapest part of the American non-system, despite the fact that its patient population is a high-risk subset of the population. That’s the Beveridge Model.

Americans with disabilities and those over 65 use the Medicare system. The poorest Americans may qualify for Medicaid, depending on which state they live in. Those systems are government-provided health insurance plans that pay largely private providers according to mandated rates for defined services, like Canada’s Medicare national health insurance. Unlike Canadian patients, American Medicare enrollees usually pay copays at the point of service. That’s the Douglas model.

Americans with white-collar jobs at large companies get their health insurance through work. They enjoy “community rating” and “guaranteed access,” meaning that they and their dependents cannot be denied coverage or charged more because of age or medical history. Employers and younger or healthier colleagues are in effect subsidizing the costs of covering older, sicker employers and family members. While each company is treated as a risk pool for purposes of establishing premiums, the private health insurance companies make a profit through risk arbitrage because of their much larger risk pool. If each policyholder could take advantage of the cost savings of unifying the whole risk pool of all private insurance companies, the result would look a lot like a national Bismarck-style system. In such a system, public plans or subsidies would cover the unemployed or those at small companies, while making prices uniform across the system as a whole to control costs.

Tens of millions of Americans fall through the cracks of these partial systems. Providers must maintain large staffs to navigate multiple billing systems. Networks of providers keep getting larger to provide more negotiating power with insurers, continually driving up prices of medical goods and services. All these interest groups hire armies of lobbyists to make laws and regulations absurdly complex, making services more expensive yet.

The whole premise of conservative political thought on health care reform in the United States today is that there is some combination of policies that will turn a fee-for-service model into a functional system, because markets. One of the major ideas of the conservative movement is that health insurance shouldn’t cover routine care, but should be like homeowner’s insurance or auto insurance, and only cover catastrophic events. The problem with this theory is that 46 percent of Americans couldn’t produce $400 in an emergency, it costs hundreds of dollars for the uninsured to see a doctor in this country and those most at risk from chronic disease would be those most likely to forgo primary and preventive care. This will dramatically increase the risk of illness among those least able to provide for their care and push them onto public health programs at the state level that will be cut or curtailed because the poor have no political power in America.

The Affordable Care Act is the most workable form of pro-market ideology in health care. Despite all the conservative apoplexy it has attracted, the intent of Obamacare was to implement a Bismarck model in the United States using the existing systems of employer-provided care and Medicaid, while filling the gap by creating new state-level risk pools to make the individual market operate like the group market as seen at large companies. The problems with that system are an indictment of the incompleteness of the ACA, not of the Bismarck model itself. The basic ideas in the ACA derive from conservative thought, originating at the Heritage Foundation and first implemented during Mitt Romney’s time as the governor of Massachusetts. It’s an attempt to provide something like universal coverage with minimal state intervention. Of course, conservatives are universally in favor of scrapping it, because reasons.

There isn’t some magical formula issuing forth from the ghost of Milton Friedman. If there was, it would have been found during the forty years in which conservatives have run the economics profession in the United States. The right-wing think tanks have published many thousands of papers in the search for such a model. Obamacare is the direct descendant of those ideas, using private insurance and the individual mandate to move toward universal coverage. Conservatives of both parties successfully defunded the risk corridors, killed the public option, largely scuttled the Medicaid expansion, and weakened the mandate, thus creating the actuarial problems the ACA has today. The purpose of all of that was to prevent the ACA from working, because if it did, it was feared that the resulting ideological dislocation would weaken the conservative movement. The fact that they felt this way about an idea that began life at Heritage highlights how extreme the American right has become.

The ugly truth is that there is no fifth model. There are four, and if you want a functional system, you have to implement one of them. The reason our system costs so much without delivering very much is that we have tried to implement all four simultaneously. There simply is no intellectually honest conservative approach to health care policy. The right claims to want to fix the incomplete Bismarck model we have, but really wants to replace it with a fee-for-service model, which would benefit only the wealthy at the expense of everyone else.