The problem with health care in the United States is that it does not cost enough.
First, some relevant points of comparison. There are many ways to do government-supported health care, but, if you took the popular American political debate as your sole source of perspective, you’d think that there were only three: the British National Health Service, the Canadian single-payer system, and the wildly dysfunctional dog’s breakfast we have just created and nicknamed Obamacare. But there are other models that are useful to examine, not necessarily because we want to replicate them in the United States but because they help to illuminate the underlying institutional failures that all of us, progressive and conservative alike, are interested in ameliorating: the remorseless price inflation in both health insurance and health care itself, uncertain access to care for the poor and for some of the middle class, and the heavy burden that rising health-care expenditures place on both household and government finances.
If we can bear for a moment to expand our national gaze past the Anglosphere, consider the health-care system in Singapore, everybody’s favorite city-state cum air-conditioned fascist shopping mall. Singapore has some interesting and effective public institutions, almost none of which seems very likely to be fully functional outside of the unique contours of Singaporean culture. Sometimes they make you smile — Singapore’s top anti-corruption official faces up to eight consecutive life sentences for a range of venal crimes, such as misappropriating funds — and sometimes they make you cringe, but in either case they make you certain that Singapore simply would not tolerate, e.g., the tens to hundreds of billions of dollars in entitlement fraud that our own federal government puts up with. (If a politically connected firm won a no-bid contract and offered up Singapore something like Healthcare.gov, keeping their incompetently gotten gains would be the least of their concerns. This is a country with mandatory caning for drunk driving.) Honest governments enjoy a wider sphere of possible action — it is no accident that Singapore sits between Sweden and Switzerland at No. 5 on Transparency International’s rankings of most honest governments.
So while the U.S. government cannot even operate a health-care website, Singapore’s government operates a system of public hospitals in which 80 percent of hospital care is delivered, with very little waste or fraud. There is no such thing as free health care anywhere, and in Singapore there is not even the illusion of free health care: Everybody pays for doctor visits, hospital stays, insurance premiums, etc. And because the Singaporean government deducts 6 to 9 percent out of your paycheck to deposit in a tax-exempt, interest-bearing, heritable health-savings account (HSA), almost everybody has the ability to pay the relatively high co-pays and other out-of-pocket expenses that characterize the Singaporean system. It is not a free-market utopia; to the contrary, it is very interventionist, with subsidies, price controls, and the HSA mandate, but there is a strong element of consumer choice and incentives for thrift.
“There is always a co-payment component as part of our fundamental policy philosophy of individual responsibility,” Singapore’s top health-care official told the consulting firm EY last year. “There is no first-dollar subsidy or insurance coverage under the national insurance scheme. This helps to shape behavior and moderate demand, because people will question spending that dollar from their own pockets unless it is really necessary.”
Switzerland has a very different kind of national health-care system, one with more than superficial similarities to the Affordable Care Act regime: an individual mandate with profit controls on insurers (which are not allowed to profit at all on the most basic health-insurance plan), price controls, coverage mandates, etc. Premiums run on average just over $1,000 a month for a family comprising two adults and two minor children. And like the Singaporean system, it is characterized by relatively high out-of-pocket costs: the highest of any OECD country, in fact.
Both Singapore and Switzerland have systems in which overall health-care spending is lower than it is in the United States but out-of-pocket health-care spending is higher. The shocking thing is this: So does practically every other country. A recent World Bank study finds that in the United States, only 20 percent of health-care spending comes in the form of out-of-pocket expenses paid by consumers. In Singapore, it is 88 percent and in Switzerland 72 percent. But even the single-payer systems of Canada and the United Kingdom feature more out-of-pocket spending by consumers, 49 percent and 53 percent respectively. How is it that in countries with “free” universal health care consumers pay more out of pocket than they do in the United States? The short answer is that treatment in single-payer systems tends to be kind of terrible, which is why a tenth of British subjects use private plans rather than the NHS. And a significant share of Britons who use the NHS must be turning to private care fairly often, since it is estimated that the typical medical specialist in the U.K. supplements his income by 50 percent moonlighting in private practice. In Canada, about 75 percent of people carry supplementary private insurance, and about 28 percent of all health-care expenditures happen in the private sector.
What that means is that health care in Singapore and Switzerland is less expensive because it is more expensive. And both countries enjoy superb quality of care.
What do we have to look forward to? Obamacare in effect outlaws traditional insurance and substitutes in its place a mandatory system of prepaid health care administered by the kind and gentle souls who run insurance companies, which is in fact in many ways similar to the mandatory health-savings accounts in Singapore — minus the property rights, wealth building, heritability, efficiency, and consumer choice. Likewise, Obamacare is in some ways similar to the Swiss system, but without the downward price pressure associated with high out-of-pocket expenses, and, as we have seen in recent weeks, also minus the competence and efficiency. As they say in Switzerland: Ich be chrank.
And it is worth remembering that under Obamacare there will still be millions of Americans with no health-insurance coverage, while many (and possibly most) of those added to the coverage rolls will simply be given Medicaid cards, which practically come with their own spinal infections. All together, that means that we have managed to combine the worst elements of the state-run systems with the worst elements of the private systems. We have designed a structurally defective system and entrusted its execution to a gang of politically connected incompetents with less technological sophistication than your AOL-using grandmother.