“Among health care economists, the consumer’s free choice of any insurance plan (where they cannot be turned away), and the resulting competition among the insurers, is one of the most admired features of the German system. ‘Americans tend to think the profit motive is the only driver of competition,’ Karl Lauterbach, a German economist who won a seat in the Bundestag, the national parliament, told me, ‘But our Krakenkassen (private health insurance companies) compete because the executives earn more money, and higher prestige, if they have a larger pool of members. So we have universal coverage, and nobody can be turned down because of a preexisting illness. You have the required package of benefits, so the insurer can’t deny a claim for any covered treatment. And then you have competition to attract more customers.”
Germany has an individual mandate, where everyone is required to purchase health insurance, and every health insurance company has to accept anyone who wants to purchase their insurance plan.The insurance companies operate nonprofit, meaning simply that the premiums are used to pay for health care rather than to pay dividends to shareholders. Overall the German administrative costs are less than a third what they are in America. You can’t lose your insurance when you lose your job; government unemployment benefits automatically cover the premiums until you get a new job. Each consumer is free to choose among the over 400 plans that are offered, and not tied to the single one their employer offers, thereby increasing competition to provide better coverage.
“In America, drug companies and medical device makers argue that they have to charge high prices to fund their research and development. But Japanese experience shows that tough cost controls tend to drive innovation, not stifle it. Because the permitted fee for an MRI scan is so low, for example, Japanese doctors went to the MRI manufacturers–Hitachi, Toshiba, etc.–and demanded a new line of compact, inexpensive MRI machines. The industry responded. Today, Japanese doctors and clinics can buy MRI scanners for around $150,000–about one-tenth the price of the bigger machines used in the U.S. That helps keep prices down for the Japanese health care system. And the new line of cheap, simple, MRI machines has been an export boon for the Japanese manufacturers, giving them a lock on the MRI market in poorer countries. So cost control not only keeps prices down; it also encourages innovation.”
These are just two specific examples of health care working in other developed democracies in ways that encourage competition and innovation, and do so without the profit motive for insurance companies. Overall in America we spend twice per capita what any other industrial democracy does. And we have worse outcomes by most measures, including things like infant mortality. One might think the pro-life crowd would take note. America is different than other countries and we need to develop our own better health care system. And we can learn from other countries. There are a couple universal key differences. Every developed nation in the world has made the moral choice that health care is a right for all citizens and so have figured out a way to provide universal coverage. How they do that differs, exactly what is covered differs. Yet there is a baseline; no one dies because of easily curable diseases. The one exception is the United States, where we have not had that moral conversation or made that moral decision; or if we have we have defaulted to the moral decision that corporate profits are of higher value than guaranteeing every American basic health care.
A key difference between the U.S. and every other industrial democracy (all free market capitalist nations like us) is that we are the only country that allows selling basic health insurance coverage for a profit. We are also the only country that allows insurance companies to deny claims once a doctor or hospital has signed off on that claim. As we have seen in the examples given above, taking the profit motive out of selling insurance does not eliminate competition or innovation.
It is also true, it must be said, that in most other countries doctors do not make as much money as in the United States. There are a couple important facts to point out along with that. In most other countries medical school is free or highly subsidized, so doctors starting out do not begin hundreds of thousands of dollars in debt as they do here. Also, they either have very low (less than a tenth or so of U.S. doctors) or no cost for malpractice insurance, as it is taken care of by the government in one way or another. That doesn’t mean they are always happy with their health care systems any more than American doctors, and even with these caveats, they are not as wealth as American doctors; they are good upper middle class jobs. And that is the choice every other developed nation has made in order to fulfill their moral obligation to ensure every citizen has access to basic health care (and non-citizens who happen to be there as well).
Other countries do not have perfect systems. They also continue to reform their systems. The one thing they all have in common is that they have made the moral decision as a nation that universal health care is something they have to have. Until the United States makes that moral decision, all reform movements will ultimately fail and fall short. If we ever do make that decision we will be able to figure out a way to provide good, cost-effective health care for every American. Until then, we will continue to leave millions of our neighbors without access to medical care (various studies by different groups show that anywhere from 10,000 up to over 44,000 Americans die each year because they lack access to basic health care that could have saved their lives) and continue to pay far more per capita than any other developed nation. There are many good examples to take the best ideas from to come up with an American system that works for America. Obamacare is probably something like ten steps forward and nine steps back, mainly because we have not yet made that moral decision about who we are as a people.
The quotes above are from what may be the most important recent book (2009, with an updated appendix) about health care in America and around the world: “The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care” by T.R. Reid, a long time correspondent for the Washington Post.