Wednesday, July 8, 2009

Sick America

Sick America

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In spite of all the ill spoken about it, the American health care system is even sicker than is generally believed, if only for economic reasons.

The mother of all battles began a few weeks ago in Washington over the question of reform of the American health care system. This battle is not the first; in fact, the first proposals for in-depth change go back to the Truman administration years.

As everyone knows, one of the important reasons for this desire for change derives from the fact that the United States is the only developed country in the world, the whole population of which is not covered by one or another form of health insurance. Close to 50 million Americans, or 16 percent of the population, are purely and simply left on their own.

What is less often said is that this incomplete coverage costs Americans dearly. In fact, it's the most expensive coverage of all, not only in absolute value, but also in relation to GDP. In 2005, the United States consecrated 15.3 percent of its GDP to health care, or almost double the average for developed countries. In comparison, that proportion hit 10.5 percent in France, 9.9 percent in Canada, 9.2 percent in Sweden, 8.1 percent in the United Kingdom and 8 percent in Japan.

Always very swift to characterize other systems as "socialist" because of the role governments play in them, Americans don't even have the consolation of less recourse to public money than other countries. The cost of government insurance programs for the poor (Medicaid), the aged (Medicare), veterans and federal employees, added to the costs of the bonuses and fiscal advantages conferred on private insurance companies, represent about 60 percent of the country's total health costs. In other words, the American government today spends as much for health care (about 9.2 percent of GDP) as the governments of the Canadian, British and French "socialist" systems.

One could say that Americans have every right to treat themselves to a more expensive health care system that's better than the others. The problem is that they're far from getting value for their money, even when one leaves out the 50 million uninsured and the numerous others who have to fight their insurers to get their aid when they need it.

23 Percent of Expenses a Pure Loss

It's true that the American health care system makes a good impression on the international scene when it comes to fighting breast cancer and brain cancer detection, The Economist recently noted. But it's a completely different story in other domains, such as infant mortality (6.7 per 1000 births versus an average of 4.0 for the OECD excluding Mexico and Turkey) or the rate of death following a cerebral hemorrhage (25.5 percent versus 19.8 percent).

In fact, at least 20 percent of the higher costs generated by the American system are simply due to higher administrative costs, according to the firm McKinsey Global. That's because there are so many forms to fill out and second opinions to seek out in a system that involves so many private and public stakeholders. It's also because insurance companies spend money in new product development, purchases of financial guarantees and advertising.

Another factor: nothing in the system encourages expense control, whether through avoiding useless medical interventions, by improving productivity or by favoring prevention, The Economist observed last week. Company insurance policy costs are tax-deductible no matter what their cost; doctors are paid by intervention and patients who do have insurance always prefer to get too much care rather than not enough.

One must also mention the influence of a more-than-generous legal system for the victims of medical mistakes. Hospitals and doctors quickly understood that it's always better to go in for a few extra tests and interventions in case they have to defend themselves in court.

Overall, close to a quarter (23 percent) of all the money spent on health care in the United States is a pure loss, deems one major American business association (Business Roundtable), cited last week by the New York Times.

Claiming to be ever more disadvantaged by the system's costs compared to their foreign competitors, companies are starting to withdraw from them. While 82 percent of Americans enjoyed health care insurance offered by an employer right after the Second World War, that number is only 60 percent today and could soon fall to 45 percent.

In that context, it's not surprising that practically everyone in the United States, on the left as well as on the right, agrees that changes are necessary. Reforms seem all the more urgent in that everyone sees the aging of the population and the acceleration of the increase in costs that will accompany it coming here as everywhere else.

But that's where happy agreement ends and the political battle begins: ideological debates and the play of political influence. But that's another story.

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