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Millions of United States citizens lack health insurance, in contrast to citizens of Canada and other industrialized nations where lifelong health insurance is guaranteed for everyone. Should the United States adopt universal health insurance? In this Point/Counterpoint Sidebar, physician Claudia M. Fegan argues that universal health insurance can successfully and efficiently guarantee the health coverage of all citizens. Michael Tanner, director of health and welfare studies at the Cato Institute in Washington, D.C., counters that countries with universal coverage have expensive and inadequate care and that market forces can most effectively solve the shortcomings of the U.S. health care system.
By Claudia M. Fegan
The United States is the only industrialized nation that does not cover the cost of health care for all its citizens. The United States spends more than twice as much per capita on health care than any other nation in the world—over $4,000 per year for every man, woman, and child. Still, as of 1998, the most recent year for which figures are available, more than 44 million Americans had no health insurance. People without health insurance experience more illnesses and do not live as long as those who are covered.
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Most developed countries provide universal health care. Coverage is guaranteed from birth until death. In these countries most hospital, physician, and pharmacy care is covered throughout a person’s life. Patients receive care according to their needs, not their ability to pay. From simple immunizations to serious operations such as bone marrow transplants, everyone has access to whatever care is required.
In the United States two different government agencies, the Congressional Budget Office and the General Accounting Office (GAO), conducted comprehensive studies on the cost of providing health care to all. Both concluded that the conversion of our current patchwork of private and public health insurance programs to a universal health care system would save $100 billion on paperwork alone. There would be additional savings depending on how the plan is structured. The GAO concluded that the savings created by switching to a national health system would make it possible to provide comprehensive care for all Americans.
About one-fourth of health care expense in the United States essentially comes from paperwork—having to comply with the requirements of a multitude of different insurance companies for documentation, eligibility determinations, billing of patients, and collections. Because of our complicated payment system, trying to sort out who will pay for the care of a patient means hospitals need large administrative staffs to deal with the procedures of a variety of insurers. Further complicating matters, our present system offers a limited, expensive, and ineffective form of universal coverage by requiring hospitals to provide emergency care to the uninsured. Emergency care is the most expensive form of health care.
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Physicians in the United States presently average about an hour a day completing paperwork for different insurance companies in order to get paid for services they have provided. Patients often experience long delays in receiving care because paperwork is being processed. Under many plans, insured patients must make the initial payment for medical care, then submit a request to their insurance provider to get reimbursed.
If everyone were covered under the same plan, the need to keep track of who had insurance would no longer exist. A patient in a doctor’s office or hospital would not need to provide insurance information before receiving care. Everyone would simply carry a card that would guarantee access to the health care needed.
A single-payer system of health-care financing frees physicians and their patients to keep their focus on health care and the best way to deliver it. The term single-payer describes a government-sponsored form of health-care financing in which a single insurer, the government, pays all of the bills. Hospitals in a single-payer system are paid on the basis of the costs they incur in serving a population, not by each individual patient admitted. The hospital does not need to submit a bill for each aspirin or bandage that is given to each patient. The amount each hospital receives from the government is based on its costs from the previous year plus the cost of inflation. This aspect of the single-payer system is called global budgeting.
The concept of global budgeting for hospitals allows communities and government agencies to make plans to improve the health of the population and prevent illness. By focusing on preventive medicine—the things that help people stay healthy—universal health care invests in measures such as immunizations to prevent diseases, campaigns against smoking, and mammograms to detect breast cancer in its early stages. A forward-looking health policy carries benefits for public health and government budgeting.
An increased focus on preventive medicine will improve general health conditions and help avoid many costly medical procedures in the future. The use of expensive resources for individual patients can also be reduced as care is shifted to other venues such as outpatient clinics and community care. The outpatient setting allows health-care professionals to focus on preventive care. Outpatient clinics and community health centers have been shown to reduce the incidence of pregnancy complications and to improve the treatment of chronic illnesses such as diabetes and asthma, resulting in tremendous savings on health costs.
By 1972 every Canadian had hospital and medical coverage. The Canada Health Act of 1984 was the most recent refinement of the Canadian health-care system. The act includes five basic principles that determine how care is to be provided. The act requires that care be: (1) publicly administered to avoid the profiteering and increased costs of for-profit health care; (2) comprehensive, so all medically necessary care is covered; (3) universal, so everyone will be covered; (4) portable, so people can move from job to job or city to city without losing coverage; and (5) accessible, so people do not have to go too far to receive health care. This simple act provides one successful example of how the principles of the single-payer system can be put into use.
In the United States, by contrast, the government provides health insurance only for the poor, citizens over the age of 65, and people with disabilities under the Medicaid and Medicare programs. These programs account for less than half of all Americans. The majority of the uninsured are working people and their families. Many employers do not provide health care as a benefit to their employees, or they make the employees pay for such a large portion of the premium that employees cannot afford it.
The single-payer system of health care is not the only possible way to provide universal health care, but it would probably cause the least disruption. In another alternative, known as a national health service, all physicians and nurses are employees of the government and are paid flat salaries. A national health service provides inexpensive and comprehensive care, but reduces the independence of health-care professionals. The single-payer system is more compatible with the way health care is now provided in the United States.
If the United States adopts a single-payer system, the cost of care will be included in taxes instead of the payroll deduction most people pay to cover their health insurance premium at work. Working people who are presently covered through their employment would not experience an increase in taxes. Instead, the money now deducted from their paycheck to pay their health insurance provider would go to the government to help cover the cost of universal health insurance.
Some critics contend that greater government involvement in health care will result in inefficiency and declining quality. In a single-payer system it is not necessary for hospitals to be owned by the government, or for physicians and nurses to be government employees. Government involvement in actual medical care can be minimal. Single-payer is only a method to finance universal health insurance. The government’s primary role is simply to collect money and pay bills, a role that the government can carry out effectively and efficiently.
The single-payer system allows people to decide where they would receive their health care. For many people in the present system, especially those covered by Health Maintenance Organizations (HMOs) that restrict choice, the single-payer system would provide far more choices about who they could see for their care and what kind of care they could receive. The current system often does not allow people to have long-standing relationships with a physician because coverage plans change so often that patients never really get to know their doctor.
Some people worry that if the United States adopts a single-payer form of health-care financing, problems with waiting lists might begin here. Indeed patients in some countries where everyone is guaranteed health care, such as Britain and Canada, must wait for certain types of elective care. In these countries, patients with urgent problems receive care immediately. Where waiting lists do exist, such as in Canada, governments are working on managing the systems better. More importantly, in these systems care is given based on medical need instead of the ability to pay. Those who need care the most get the best care first. It is important to note that in any system insufficient financing creates bottlenecks when people try to get access to limited resources. The problem of waiting lists arises from insufficient funding, not from any fundamental problem with guaranteed health care.
An important difference between the United States and other industrialized nations is the amount of money the United States spends on health care—over twice as much per capita on health care as the next closest nation. The United States spends nearly 14 percent of its gross domestic product (GDP), or the total cost of goods and services produced within a country, on health care, whereas most nations spend only 6 to 9 percent of their GDP on health care.
The United States is certainly spending enough money. However, in addition to the amount spent on paperwork, much of this money is diverted into profits for insurance companies and large for-profit managed care organizations. In the U.S. system, care is also rationed, but it is distributed according to the ability to pay rather than according to need.
In most industries free-market competition tends to increase the quality and decrease the cost of goods and services, but this tendency does not apply to health care. Numerous studies show that for-profit HMOs and hospitals tend to have lower quality as measured by complication rates. Increased costs and reduced quality of the U.S. system are evidenced by rising health-care premiums and decreasing patient satisfaction. At the same time more than 125 studies have demonstrated that people who lack health insurance suffer more illnesses and die earlier because they fail to obtain preventive care and receive health care only when their conditions are more advanced.
People in the United States have always had a great deal of pride in the technology and innovation available through the health-care system in their country. Some people worry that changes in the way health care is financed might diminish the incentive to create new innovations. Although many innovations in health care have originated in the United States, countries with universal health care and single-payer financing have also been on the cutting edge of medicine. The first heart-lung transplant was performed in Toronto, Canada. The first laparoscopic cholecystectomy (removal of the gall bladder with a fiber optic scope) was performed in Newfoundland, Canada. The incentive to create and innovate in medicine comes from physicians’ ambition to help patients and from the prestige and compensation that follow. Single-payer financing does not negate these rewards.
Some critics contend that physicians have less incentive to work hard under a system of universal coverage. The single-payer form of health-care financing does not necessarily change the way in which physicians are compensated for the care they provide. Physicians still have incentives to provide care under a single-payer system because patients can choose their providers based on their satisfaction with the health-care provider. For example, a physician who sees patients in a private office gives the government a slip imprinted from each patient’s health security card. The government then pays the physician according to a predetermined fee schedule. Income is determined by how many patients a physician sees. As in any system, of course, there can and should be limits on how many patients a physician may see in a given time, to ensure that each patient receives optimal care.
Universal health care with a single-payer form of financing would make the United States a more productive society and allow citizens to feel good about taking care of each other. The current system is broken and harmful. Studies have shown people stay in unwanted jobs to keep their health insurance. There is a growing dissatisfaction with the way in which health care is provided in the United States. This is especially true with the for-profit HMOs. Dissatisfaction with the health-care industry in general is increasingly driving bright, innovative people away from careers in health care.
The biggest question about universal health care is not whether it would work, but whether sufficient political will exists in the United States to make such a dramatic change in the way health care is provided. This is the challenge that lies before the United States in the new century. The public acknowledges the need to guarantee the education of all children and the obligation to provide police and fire protection for everyone. Do U.S. citizens feel it is the responsibility of society to provide health care for everyone? If not, who does not deserve to have health care?
About the author: Claudia Fegan, M.D., is former president of the medical staff at Michael Reese Hospital in Chicago, Illinois, and a clinical assistant professor of medicine at the University of Illinois. Fegan is co-author of Universal Health Care: What the United States Can Learn from the Canadian Experience (1998).
By Michael Tanner
On January 2, 2000, 23 of the 25 emergency rooms in the hospitals of Toronto, Canada, were closed because the province’s health-care system had run out of money. Canadians in need of care, including heart attack patients and accident victims, were left circling the city in ambulances trying to find an emergency room that would admit them. Many of those who were admitted had to wait 24 hours or more before a doctor was able to see them.
This is the kind of grim scenario that could await the United States if it were to adopt universal national health care.
In a sense the United States already guarantees universal health care. By law hospitals must treat all patients with emergency and life-threatening conditions regardless of their insurance standing. However, what most advocates of universal health care actually mean by the term is a government-run national health care system similar to that in Canada or many countries in Europe.
Advocates of universal health care suggest that such a system would solve significant problems currently afflicting American health care. For example, studies indicate that more than 40 million Americans have no health insurance, and health care costs are rising at an alarming rate. Some also see a government-run health-care system as an alternative to restrictive managed care plans such as Health Maintenance Organizations (HMOs) that limit patient access to certain physicians and treatments. The current system of health care in the United States does have problems, but economic principles and real-life examples show that universal health care will do more harm than good.
The problem of the uninsured in the United States is far more complex than many analysts suggest. The United States Census Bureau reports that in 1998, 44 million Americans did not have health insurance, but it must be noted that this figure represents merely a snapshot in time. It does not imply that those Americans have been without health insurance for long periods of time or that they will remain uninsured in the future. In fact nearly half of all uninsured Americans are uninsured for three months or less. According to a 1990 study, only about 15 percent are uninsured for more than two years.
A lack of insurance does not necessarily result from an inability to afford it. For young and healthy individuals, forgoing insurance may well be an economically rational choice. A 1995 study indicates that as many as 15 percent of the uninsured have incomes over $50,000 per year. These individuals are, in effect, insuring themselves by deciding to pay for their own medical expenses.
Perhaps most importantly, health insurance and health care should not be confused. Even Americans without health insurance do, in fact, have access to emergency health care. On the other hand, a simple guarantee of universal health insurance is no guarantee that individuals will actually receive the health care they need when they need it.
Indeed, the one common characteristic of all national health-care systems is a shortage of health-care services. In Sweden, the wait for heart X rays is more than 11 months, and heart surgery can take an additional 8 months of waiting. In Canada the wait for hip replacement surgery is nearly 10 months; for a mammogram, 2.5 months; and for a pap smear, 5 months.
A 1998 report of surgeons in Canada indicates that, for heart surgery, the danger of dying while on the waiting list now exceeds the danger of dying on the operating table. In 1998 alone, 121 patients in Canada were removed from the waiting list for coronary bypasses because they had become so sick while waiting that they could no longer undergo surgery. Provincial health officials in Ontario now routinely contract with hospitals in U.S. cities such as Buffalo, New York; Detroit, Michigan; and Duluth, Minnesota, for high technology medical services that are unavailable in Canada. Nearly one-third of Canada’s doctors have sent a patient to the United States for treatment in the past five years.
Sometimes the rationing of care is even more explicit, denying care to the elderly in cases where the prognosis is poor. For example, in Britain, kidney dialysis, a procedure that is essential for many patients with kidney disease, is generally denied to patients over the age of 55. In 1988 the British Kidney Patient Association estimated that at least 1,500 Britons die each year because of the lack of dialysis.
Countries with national health care systems also lag far behind the United States in the availability of modern medical technology. Despite the fact that Canada has the fifth most costly health-care system in the world, it ranks in the bottom third of industrialized countries for the availability of medical technology such as MRI (magnetic resonance imaging) and CAT (computed tomography) scanners. For every one million Canadians there are just eight CAT scanners. Canada has only 12 MRI units to serve its population of 30.7 million—the United States has more than 900 to serve a population of 270.3 million. Canada has only 12 open-heart surgery centers compared to 793 in the United States.
The shortages in systems with universal health care should not come as a surprise. Governments cannot repeal the laws of economics. Demand for care increases because individuals in a government-run system perceive their health care as free. Of course, it is not really free. The 15-year RAND Health Insurance Experiment conducted in the 1970s and 1980s, the largest study ever undertaken of consumer behavior in conjunction with insurance coverage, found that if a third party such as the government paid the entire cost of health care, individuals consumed far more health care than did individuals who were required to bear some of the cost themselves.
Of course, increased utilization would be a good thing if it meant that people were getting needed treatment that they otherwise could not afford. But, in reality, there was little significant difference in health outcomes between those who received free care and those who bore some of the cost. Researchers concluded, “for the average person there were no substantial benefits from free care.” The extra, costly consumption generated by unlimited care was usually unnecessary and did little or nothing to improve people’s health.
Faced with the choice of bankrupting their economy to pay for the increased, and virtually unlimited, demand, or reducing the amount of health care provided, countries naturally opt to cut costs. Thus, all national health-care systems end up rationing care, either directly, such as in Britain, or indirectly, such as in Canada.
To understand this phenomenon, consider what would happen if the government were to start paying for all food purchases, with a guarantee that everyone could have as much food as they wanted, of any kind that they wanted, as often as they wanted. People would eat a lot more steak, and the cost of steak would skyrocket. To avoid going bankrupt, the government would be forced to take measures to restrict consumption.
This kind of rationing is exactly what happens under national health care. Some governments impose price controls, cutting the profits of medical professionals and leading to shortages. For this economic reason shortages of supposedly free health care occur in the Canadian health-care system. The other alternative to bankruptcy would be for the government to act directly, simply forbidding people to consume more than a certain amount of care no matter how much they want or need it. This type of government rationing of health care occurs in the British system. Either way, the result is a reduction in health care.
Even with rationing, however, national health care systems actually do a poor job of controlling the rising cost of health care. Proponents of national health care make much of reported differences in the proportion of the gross domestic product (GDP), or the total value of all goods and services produced within a country, spent on health care by Canada and the United States. It is true that Canada spends only about 9 percent of GDP on health care while U.S. costs have skyrocketed to more than 15 percent of GDP. However, such simple comparisons are extremely misleading.
To properly compare the cost of health coverage in Canada and the United States, several economic factors must be taken into account. The first is economic growth: Between the mid-1960s and the mid-1990s the Canadian GDP grew by nearly double the rate of the United States. Therefore, any comparison of health spending should be adjusted to compensate for the differing rates of economic growth. Additional adjustments should be made for such factors as population growth, inflation, exchange rates, and differing demographics such as the large U.S. elderly population and higher U.S. rates of violent crime, poverty, AIDS, and teen pregnancy.
Greater commitment to research and development in cutting-edge medical technology in the United States must also be considered. A 1999 study concludes that when all such factors are taken into account, Canadian health spending is virtually identical to that of the United States and actually has been rising faster over the last several years.
In 1999 the Canadian government was forced to increase spending on its health-care system by $2.5 billion. This in a country with a population about one-tenth that of the United States. Yet the Canadian Medical Association says that funding “falls far short of where we need to be.”
Universal health care is far from free, of course, and citizens of countries with national health-care systems pay a heavy price in terms of taxes. Canada spends more than $53 billion (in U.S. dollars) per year on health care, the equivalent of more than $500 billion for a country the size of the United States. This accounts for one of the major reasons that average-income workers in Canada pay as much as 52 percent of their income in taxes.
Advocates of universal health care often note that Americans are dissatisfied with our health care system. Indeed, they are. But, they may, in fact, be happier than their counterparts with universal health care. According to a 2000 national poll, 80 percent of Canadians believe that their system is in crisis.
None of this is to diminish the very real problems of the U.S. health-care system. Health-care costs are rising sharply, and it is important to make it easier for Americans to purchase health insurance. But the solution to these problems lies not with a massive government takeover of the American health care system, but with free-market alternatives.
Increased reliance on market forces will make care cheaper. Changing the tax code to provide equal tax relief for individuals who purchase their own insurance, can break the link between employment and insurance. More equitable taxation will help workers shop for the insurance plan that best meets their individual needs and make insurance more readily available to workers whose employers do not offer a plan. Another type of coverage known as medical savings accounts can restore the idea of true insurance protection from catastrophic risk and give health-care consumers a greater stake in paying for routine inexpensive health-care services such as annual checkups and medical tests.
The Hippocratic oath reads in part, “first do no harm.” That is an important lesson for health-care reformers. Problems do exist in the American health-care system, but adopting a government-run, universal health-care program would be a cure far worse than the disease.
About the author: Michael Tanner is director of health and welfare studies at the Cato Institute in Washington, D.C. Tanner has authored several studies and books, and recently co-authored A New Deal for Social Security (1998).
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Socialized Medicine; Welfare; Taxation; Health Insurance; Emergency Medicine; Health Maintenance Organization; National Health Insurance; Hospital; Insurance; Healthcare System in Canada; Canada; Medicare and Medicaid; Medicine; Public Health
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