We Need to Talk About Healthcare...Again!

(This page last updated April 11, 2011)

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For those of you who have come to this page from somewhere else, a word of explanation. This page has "spun off" from an ongoing series of messages that Retiree Council No. 4 director/webmaster Dick Steinfeldt has sent via email to retired teachers in the western NY area covering topics of interest to retirees. In April, one of the topics was Rep. Paul Ryan's Republican budget proposal. Of particular interest to retirees are the changes envisioned for Medicare.

It's becoming increasingly obvious that healthcare costs are the major obstacle to getting the country's deficit situation under control--at least on the expense side of the equation. "Oh, good grief," many will say. "Didn't we just spend a whole year yelling at each other about healthcare? Do we need to go through that again?" It looks that way. It will probably be a major topic of discussion from now through the 2012 election.

You'd be hard pressed to find anyone who would argue that we should just keep our hands off healthcare, leaving it just as it was before the new healthcare law was enacted. Anyone who can do simple arithmetic can see that the projected increase in healthcare costs will eventually eat us alive.

While the new healthcare law makes some wonderful improvements in coverage, and appears to do some things to hold down costs, it seems that we'll only get the kind of savings we really need when we're brave enough to look at the basic structure of healthcare financing in the USA.

That's where this series of messages begins. From this point, we'll let the actual messages speak for themselves.


April 6, 2011:

From my earlier message: "One of these columnists has touched on the key to solving our deficit problems, if only we can be grownup enough to have an intelligent discussion." Did you catch this sentence from Harold Meyerson's column: "Skyrocketing medical costs are the chief factor in rising government expenses..."

That's the 800-pound gorilla in the room. If we can get future medical costs under control, that alone takes care of most of our problem. "Here it comes," I can hear you saying. "Here comes the pitch for socialized medicine." If that's what you think, you'll be disappointed.

As the late Senator Moynihan used to say, "Everybody is entitled to their own opinion, but not to their own facts." So, let's look at some facts:

1) When you look at healthcare in all of the wealthy, industrialized economies of the world, the measurable outcomes of our healthcare system put us nowhere near the best in the world. (I know, that sounds like an opinion, but I will back it up with hard facts. NOTE: Click here for tables and charts.) Why, then do rich folks from other countries come here for care when they get sick? I promise to answer that, but not just yet.

2) On a per capita basis, we spend twice as much on healthcare as other countries. NOTE: Click here for tables and charts.

Just based on these two facts, I would argue that we have something to learn from other industrialized nations about the economics of healthcare. And here's where most Americans stick their fingers in their ears and yell, "Nah, Nah, Nah I can't hear you...We're number one!...High taxes...Government control...Socialized medicine...Not gonna happen here!"

Based on our federal budget situation, that could well be the most expensive opinion ever, and I'm willing to bet that it is also the most ignorant!

Here's an interesting experiment. Pick an American at random, you might even try this with yourself, and ask them a simple question: "Briefly, tell me how healthcare is financed in Germany." I'll bet that they won't have any idea. If they even attempt to answer, it will probably be something like, "high taxes, lots of government control, socialized medicine." Try France instead of Germany, or Spain, Italy, Japan, India. Unless you ask about Canada or England (the countries we tend to be most familiar with), or if the person you asked happened to live in that country for a while, I predict you'll get the same result: blank stare or "socialized medicine."

Here's where it gets interesting. Let's do a short quiz. Everybody likes these when they find them in magazines, and this one could eventually save you--and your kids and grandkids--lots of money.

According to the folks who deal in the economics of healthcare, there are only four basic methods countries use to finance medical costs. The healthcare experts give them names, but the names will make the quiz too easy, so I'll just identify them by numbers. Here they are:

Method 1 - In countries that follow this model, both healthcare providers and payers are private entities. The model uses private health insurance plans, usually financed jointly by employers and employees through payroll deduction. Your doctor's office is a private business, and many hospitals are privately owned.

Method 2 - In this system, healthcare is provided and financed by the government through tax payments. There are no medical bills; rather, medical treatment is a public service, like the fire department or public library. Many (sometimes all) hospitals and clinics are owned by the government; some doctors are government employees, but there are also private doctors who collect their fees from the government.

Method 3 - The providers of healthcare are private, but the payer is a government-run insurance program that every citizen pays into. The national, or provincial, insurance plan collects monthly premiums and pays medical bills.

Method 4 - Most medical care is paid for by the patient, out of pocket, with no insurance or government plan to help.

OK, here's the quiz. Match the following countries with the method of financing healthcare: England, Germany, France, Italy, Canada, India, Cuba, Japan, most of Latin America, most of Scandanavia, Spain, Hong Kong, USA, Taiwan, South Korea, Cambodia.

Have fun with the quiz. I'll send you the answers tomorrow, along with some additional interesting information.


April 7, 2011

Before I hand out the answers to yesterday's healthcare quiz, I want to point you to a column in today's Washington Post by Matt Miller. Miller is the host of public radio's Left, Right and Center program, and he writes a weekly column for the Post. His column fits perfectly with what I said yesterday about the need to find an intelligent answer to healthcare costs, and it does a very nice job of adding some new information to the discussion concerning Paul Ryan's Republican budget proposal. He takes it right down the middle, not being happy with the choices offered by either major party. Here are his first two paragraphs:

"Paul Ryan’s new fiscal blueprint doesn’t balance the budget until sometime between 2030 and 2040, and racks up more than $14 trillion in new debt by then. By Ryan’s own reckoning, his plan adds $5.7 trillion to the debt in the next decade alone, while more than tripling interest payments, from $212 billion this year to nearly $700 billion in 2021. The only way such a profligate plan can be called “fiscally conservative” is by comparison to Barack Obama’s budget, which never comes close to balance and loads on more debt even faster. Meanwhile, both the House budget chairman and the president shortchange needed investments in America’s future. The question sane citizens should ask in the face of these dueling disappointments is: Why are these the only choices? [Emphasis mine.]"

"There will be plenty of overheated reactions to Ryan’s budget, declaring him to be either a savior or the devil incarnate. Since neither is the case I want to give folks who are amenable to reason a few facts and perspectives to make sense of it all:"

There is one additional paragraph I'd like to point out:

"My own view is that unless we can find a politically viable way to shrink our radically inefficient health sector’s claim on American output, we won’t be able to retire the boomers, provide decent coverage to the uninsured, shift health costs from corporate payrolls to government budgets (which would be good for business and for workers), and invest in the nonelderly priorities I’ve cited ...."

I think I said something like that yesterday! Here's the link to his column:

http://www.washingtonpost.com/opinions/ryan-vs-obama--is-that-all-there-is/2011/04/06/AFdH19oC_story.html

OK, it's time for the answers to yesterday's quiz. I hope you had some fun with it! If you recall, I asked you to match countries with their systems of healthcare finance. The countries were: England, Germany, France, Italy, Canada, India, Cuba, Japan, most of Latin America, most of Scandanavia, Spain, Hong Kong, USA, Taiwan, South Korea, Cambodia. Here are the financing methods, followed by the countries that use them.

Method 1 - In countries that follow this model, both healthcare providers and payers are private entities. The model uses private health insurance plans, usually financed jointly by employers and employees through payroll deduction. Your doctor's office is a private business, and many hospitals are privately owned. (Germany, Japan, France, Latin America (to a degree). I didn't ask about them, but Belgium and Switzerland fit in here as well.)

Method 2 - In this system, healthcare is provided and financed by the government through tax payments. There are no medical bills; rather, medical treatment is a public service, like the fire department or public library. Many (sometimes all) hospitals and clinics are owned by the government; some doctors are government employees, but there are also private doctors who collect their fees from the government. (England, Italy, Spain, Cuba and most of Scandinavia. Hong Kong also has a version of this system.)

Method 3 - The providers of healthcare are private, but the payer is a government-run insurance program that every citizen pays into. The national, or provincial, insurance plan collects monthly premiums and pays medical bills. (Canada. Taiwan and South Korea has variations on this system.)

Method 4 - Most medical care is paid for by the patient, out of pocket, with no insurance or government plan to help. (Cambodia, India, and most other poor countries of the world.)

Wait a minute! What about the USA? What system do we use? That's an interesting question, that leads to some really fascinating information, but that's for tomorrow!


April 8, 2011

What about the USA? What system do we use? I promise to answer that question today, but first I must do something that my teachers pounded into me: I must cite my sources!

The information I am sharing with you is based on the work of T. R. Reid. Reid was a foreign correspondent--yes, Virginia, newspapers used to have things called foreign correspondents and foreign bureaus, once upon a time--for the Washington Post. During his career, he spent a good amount of time living in England and Japan and, of course visiting many other European and Asian countries. While in these countries he and his family experienced their healthcare systems from the inside.

In 2008, the PBS series Frontline, used Reid and his experience for a documentary titled Sick Around the World. He revisited five countries (England, Japan, Germany, Taiwan and Switzerland) for extensive interviews with patients, healthcare providers, government officials, insurance executives and healthcare experts in each country.

It has been more than 3 year since I first saw Sick Around the World, and there are two things that I still remember from seeing it the first time:

1) In each country, Reid asked "How many of your citizens went bankrupt last year due to medical expenses?" (In 2008, that number in the USA was around 700,000. I would expect the 2010 number would be considerably higher because of job losses accompanied by loss of medical coverage.) The answer from the President of Switzerland was "No one. If anyone did it would be a scandal!" Officials of the other countries said the same thing.

2) Around 1995, the Taiwanese formed a national commission to upgrade their healthcare system. They looked at the systems used by all the other nations to find what parts of their systems were working well and to learn from the problems in those systems. I remember thinking, "You've got to be kidding. The Taiwanese can do this without starting a civil war and the USA can't?! Seriously, the Taiwanese!!"

Reid went on to amplify his Frontline work into a book titled The Healing of America. He included additional countries, and was able to expand upon information first presented in the documentary. The book made it to the NY Times bestseller list. Here's the link to the book's page at Amazon.com:

http://www.amazon.com/Healing-America-Global-Better-Cheaper/dp/0143118218/ref=sr_1_1?s=books&ie=UTF8&qid=1302281447&sr=1-1

I'll say a little more about the documentary later--including how you can watch it for free on your computer. But first, I need to make good on my promise.

You will recall that there are basically 4 healthcare financing systems in use. Here they are again, along with the countries that use them:

Method 1 - In countries that follow this model, both healthcare providers and payers are private entities. The model uses private health insurance plans, usually financed jointly by employers and employees through payroll deduction. Your doctor's office is a private business, and many hospitals are privately owned. (Germany, Japan, France, Latin America (to a degree). I didn't ask about them, but Belgium and Switzerland fit in here as well.)

Method 2 - In this system, healthcare is provided and financed by the government through tax payments. There are no medical bills; rather, medical treatment is a public service, like the fire department or public library. Many (sometimes all) hospitals and clinics are owned by the government; some doctors are government employees, but there are also private doctors who collect their fees from the government. (England, Italy, Spain, Cuba and most of Scandinavia. Hong Kong also has a version of this system.)

Method 3 - The providers of healthcare are private, but the payer is a government-run insurance program that every citizen pays into. The national, or provincial, insurance plan collects monthly premiums and pays medical bills. (Canada. Taiwan and South Korea has variations on this system.)

Method 4 - Most medical care is paid for by the patient, out of pocket, with no insurance or government plan to help. (Cambodia, India, and most other poor countries of the world.)

When we left off yesterday, the question was which of these models does the USA use. Here's what Reid has to say on that subject.

1) "For most working people under sixty-five, we're Germany, or France or Japan. In standard Bismarck Model [NOTE: that's the real name of this model first put together 125 years ago by the German ruler of that name] fashion, the worker and the employer share the premiums for a health insurance policy. The insurer picks up most of the tab for treatment, with the patient either making a co-payment or paying a percentage."


2) "For Native Americans, military personnel, and veterans, we're Britain, or Cuba. The VA and much of the Pentagon's Tri-Star system involves doctors who are government employees working in government-owned clinics and hospitals. Following the Beveridge Model [NOTE: Named after William Beveridge, the reformer who inspired Britain's National Health Service] Americans in these systems never get a medical bill."


3) "For those over sixty-five, we're Canada. U.S. Medicare is essentially a National Health Insurance [the official name of this model] scheme, with the near-universal participation and the low administrative costs that characterize such systems. Americans with end-stage renal disease, regardless of age, are also covered by Medicare; this group had enough political clout to get what it wanted from Congress, and the "dialysis community" opted for coverage under the government-run NHI system."


4) "For the 45 million uninsured Americans, we're Cambodia, or rural India. These people have access to medical care if they can pay the bill out of pocket at the time of treatment, or if they're sick enough to be admitted to an emergency ward at a public hospital, or if they have access to a charity clinic."


5) "And yet we're like no other country, because the United States maintains so many separate systems for separate classes of people, and because it relies so heavily on for-profit private insurance plans to pay the bills. All the other countries have settled on one model for everybody, on the theory that this is simpler, cheaper, and fairer. With its fragmented array of providers and payers and overlapping systems, the U.S. healthcare system doesn't fit into any of these recognized models."

I'll close today's message by giving you a link to the PBS website, where you can view the entire 53-minute Frontline: Sick Around the World documentary for free. When you watch it (please, please invest 53 minutes in the single most important question in our country's financial future!), remember that you will not find any one system which could be simply "plugged in" to replace of our current system. Instead, look for ideas that might make reasonable improvements in our current system. Things that might result in better health outcomes, while also reducing costs.

If you're on the conservative side, please don't think, "Oh, this is a waste of time. It'll just be another commercial for socialized medicine." I promise you that Reid points out the good points, and the warts, of each system. The only agenda he has is that, if we're willing to admit that there is intelligence in other countries as well as ours, we can use the healthcare experience of those other countries as a laboratory to help us improve our healthcare system.

Here's the link:

http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/view/#morelink

I'm going to spend one more day on this topic. Tomorrow I'll give you a "Readers Digest" summary of some interesting things in other healthcare systems, and answer a question I promised to get to on the first day of this topic.


April 11, 2011

OK, let's wrap up the discussion of what we can learn from other healthcare systems by taking a quick look at Germany, the foreign country that most closely resembles the USA in healthcare for those under 65. Healthcare providers are mostly private businesses, payment is through private insurance plans with premiums paid by an employee/employer arrangement. Here are a few additional details about healthcare in Germany:

1) On a per capita basis, their system costs about one-half what the USA system costs, yet they cover everyone from cradle to nursing home.

2) Everyone is covered and everyone must participate. (An exception is made for the very-wealthy who are allowed to opt-out of the system and provide for themselves, That's currently about 7% of the German population.)

3) Waiting times to see a doctor or have a surgical procedure are about the same as in the USA. The quality of care is world-class. Germany stands at or near the top of all comparative healthcare studies.

4) Here is a fundamental difference. While the insurance plans are private, they are not allowed to make a profit. (In fact, the USA is the only country which allows private medical insurance plans to make a profit.) How do the plans compete if not on profit for stockholders? They compete on service, such as paying claims faster than other companies. Better service will attract more participants to your plan (and Germans can choose any one of about 200 health insurance plans), and the more participants your plan has the higher the salaries of the plan executives, and the more "clout" it has negotiating prices with doctors and hospitals.

5) Because the insurance plans are non-profit (as almost all USA plans were until about 20 years ago), there is no need for huge layers of people to look over claims and find ways to "wiggle out" of paying then. (USA plans refer to paying a claim as a "medical loss" and, like most insurance companies, they try to limit their losses.) German plans must cover everyone from birth, so there is no such thing as a "preexisting condition." There is no need for large "underwriting" departments which look for ways to exclude people who might actually use their medical insurance, or look for ways to cancel a policy if someone actually gets seriously ill. German medical insurance plans operate with about a 5% administrative overhead, compared with a 20-30% overhead for USA for-profit plans.

6) Did anyone ever advise you to make a list of your medications and allergies to stick inside your wallet on a slip of paper, in case of a medical emergency? French and German citizens have something much better. They carry what looks like a credit card, but this card has "smart chip" which contains your complete medical history. Every X-ray, shot, test, procedure, etc. is contained in the memory of this chip. When you go to your doctor's office you will not see the cabinets stuffed full of medical records. They have all been digitized. Do we have anything to learn from them?

Isn't there any problem with the German system? Of course! If you look at any system there will be difficulties. German doctors feel underpaid. They make the equivalent of $100-150,000, can drive a BMW and join the local country club, but they do complain about their pay. (It should also be noted that doctors in Germany--as in many other countries--pay nothing to attend medical school, so they do not begin their careers with the crushing debt of many American doctors.)

By the way, when you're looking inside healthcare systems, you'll discover more if you are an actual patient rather than just stopping in for a chat with the doctor. Reid had a bum shoulder held together by screws from an old navy injury. He was able to see how each system would suggest to treat it, and what kind of wait he would experience for orthopedic surgery.

Here are some other quick items he discovered in other countries:

a) The Japanese go to their doctor about 5 times more than Americans, and they don't make appointments. They just show up, and are seen. Reid tried this with the top ortho specialist in Tokyo and was seen the same day. When he asked how long he would have to wait for a shoulder surgery, the doctor said, "Tomorrow would be difficult, but next week would not be a problem."

b) France has more doctors per capita than the USA, and more hospital beds.

c) In many other countries, if you lose your job you do not lose your health insurance. The government will assist with premiums until you find new employment.

d) In many other countries, doctors still make house calls. Think about what happens here. You're really sick and in bed, but you have only two choices for medical attention: drag yourself coughing, vomiting, etc. to the waiting room of your doctor's office or get yourself to the emergency room of a hospital.

Well, what about Canada? After all, it's right next door, so Americans feel that they know a lot about the Canadian system. Their impression? High taxes and long waits.

Don't forget that Canadians pay for a lot of things through their taxes, so generally high taxes does not necessarily mean high healthcare costs. Canada has generally better healthcare statistics than the USA, and achieves them at about half the cost per capita as our system.

Well, what about those waiting times? If you require care for an acute illness, accident or emergency your care will be as quick as in the USA. If your medical problem is not urgent enough for immediate attention, that's where the waiting happens. When Reid asked about his shoulder, he was told that it would take him about a year to get a consultation with a specialist, and another 6 months before surgery. That's a problem that Canadians generally don't like, and they're working on wait times.

The one thing about their system that makes Canadians proud is that everyone, rich or poor, is treated equally. They don't mind waiting if they know that the rich also wait in line with them. What does bother them is someone buying their way to the front of the line, so the Canadian system is designed to prevent that.

According to Reid: "It has been widely reported on both sides of the border, that millions of Canadians stuck on the waiting list travel to the United States to pay for the care they could not get in the free Canadian system. This 'fact' is satisfying to advocates of private-market health care, both in Canada and in the United States; it seems to prove that government-run healthcare can't work. In fact, though, the race to the south is mainly fictional. The anecdotal reports are not supported by any statistical research. Expert studies of the 'health care refugee' issue have concluded that the actual number of snowbirds heading south for health care is tiny."

To summarize: The USA has a healthcare system at least twice as expensive as other rich countries, yet our statistical outcomes put us way behind most other industrialized nations in the effectiveness of our healthcare system.
If we are willing to recognize that we are not always the smartest people on the face of the planet, we could learn from the laboratory of other nations and make adjustments to our healthcare system which might drastically reduce the cost, and allow us to deal with our nation's primary budget problem.

We must remember that there is no silver bullet. Just because we find a problem area in another nation's system, doesn't mean that we can't learn from the elements of the system that are working well.

And finally, we must be willing to work at it. "It's difficult" cannot be an excuse. Winning WWII was difficult, but it was necessary for the nation. Making healthcare affordable is equally difficult, and equally necessary.

Thanks for listening!