Reports from the Economic Front

a blog by Marty Hart-Landsberg

Health Care And Profits

The Supreme Court has ruled favorably on the legality of the Affordable Care Act.  Actually, despite its name, the Act has more to do with extending and attempting to improve private health insurance coverage than it does with improving care or reducing its cost.

Unfortunately for us, the effort to improve our health care system has remained within bounds set by the needs of private health care providers and insurers.  As President Obama made clear from the start of his push for health care reform, there would be no consideration of a universal system.

Critics of such a universal system are always quick to argue that only market forces driven by the private pursuit of profit can ensure an efficient health care system.  Of course, in determining whether this is true, we need to recognize that efficiency is a complex term and that our health care system, like all systems, produces multiple outcomes.  The most obvious ones are private profit as well as the quality and cost of the relevant health care.

In terms of private profit there can be no doubt that our health care system functions well.  However, the story is quite different if we evaluate it in terms of quality and cost.  The fact that we continue to embrace a private health care system makes clear which measures of efficiency are considered most important and by whom.

The following map shows the countries, colored green, that have adopted a universal health care system.      


As Max Fisher explains:

What’s astonishing is how cleanly the green and grey separate the developed nations from the developing, almost categorically. Nearly the entire developed world is colored, from Europe to the Asian powerhouses to South America’s southern cone to the Anglophone states of Australia, New Zealand, and Canada. The only developed outliers are a few still-troubled Balkan states, the Soviet-style autocracy of Belarus, and the U.S. of A., the richest nation in the world.

The handful of developing countries that provide universal access to health care include oil-rich Saudi Arabia and Oman, Latin success story Costa Rica, Kyrgyzstan, and, famously, Cuba, among a few others. A number of countries have attempted universal health care but failed, such as South Africa, which maintains a notoriously inefficient and troubled public plan to complement the private plans popular among middle- and upper-class citizens. . . .

That brings us to another way that America is a big outlier on health care. The grey countries on this map tend to spend significantly less per capita on health care than do the green countries — except for the U.S., where the government spends way more on health care per person than do most countries with free, universal health care. This is also true of health care costs as a share of national GDP — in other words, how much of a country’s money goes into health care.

The OECD just published a major study on the health care systems of its 34 member nations.  It found that:

Health spending accounted for 17.6% of GDP in the United States in 2010, down slightly from 2009 (17.7%) and by far the highest share in the OECD, and a full eight percentage points higher than the OECD average of 9.5%. Following the United States were the Netherlands (at 12.0% of GDP), and France and Germany (both at 11.6% of GDP).

The United States spent 8233 USD on health per capita in 2010, two-and-a-half times more than the OECD average of 3268 USD (adjusted for purchasing power parity). Following the United States were Norway and Switzerland which spent over 5250 USD per capita. Americans spent more than twice as much as relatively rich European countries such as France, Sweden and the United Kingdom.


What does all of this mean in terms of health outcomes?  According to the OECD report:  

Most OECD countries have enjoyed large gains in life expectancy over the past decades. In the United States, life expectancy at birth increased by almost 9 years between 1960 and 2010, but this is less than the increase of over 15 years in Japan and over 11 years on average in OECD countries. As a result, while life expectancy in the United States used to be 1½ year above the OECD average in 1960, it is now, at 78.7 years in 2010, more than one year below the average of 79.8 years. Japan, Switzerland, Italy and Spain are the OECD countries with the highest life expectancy, exceeding 82 years.

One possible explanation for this lagging performance, highlighted in an earlier OECD report, is that the U.S. ranked 26th in terms of the number of practicing physicians relative to its population, 29th in terms of the number of doctor consultations per capita, 29th in terms of the number of hospital beds per capita, and 29th in terms of the average length of hospital stay.  At the same time, the “U.S. health system does do a lot of interventions . . . it has a lot of expensive diagnostic equipment, which it uses a lot. And it does a lot of elective surgery – the sort of activities where it is not always clear cut about whether a particular intervention is necessary or not.”

Private health care providers and insurers are clear about how they measure health care efficiency.  And as long as we rely on them to set the terms of the debate we will continue to suffer the consequences.


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