June 30, 2012

Victory for a Compromise: Obama Care

After the American Century

It costs four times more more money to have a baby in the United States than it does in Germany or in Canada. 

Seen from outside the United States, the Supreme Court decision, which found the new American health system to be constitutional, is only a partial victory. For the law is a compromise that keeps competition and profit-making at the center of American health care. This means that the US will continue to spend billions of dollars supporting a vast health insurance industry and a huge number of tort lawyers. All those white-collar workers and all those buildings could be put to much better uses than making money out of human suffering and human need.

Doubtless there are some areas in which competition can improve medical care, but I doubt these benefits are worth all costs associated with a medical industry that is organized for profit, with all the legal fees, court battles over malpractice, and endless form-filling and record-keeping involved. 

It is much better, surely, to have a system like that in Scandinavia where all patient costs are automatically covered through taxation, and where hospitals compete to provide the best care, researchers compete for funds, and doctor's compete to be the best in their field.  This costs little more than half as much as the US system. Yet Scandinavians compare quite well with Americans when it comes to life expectancy, child morality rates, and other measures of well-being.

According to the 2012 Statistical Abstract of the United States. health expenditures rose as a percentage of American gross national product from 9% in 1990 to 16% in 2008. They do not give statistics for after that year, but surely no one is going to argue that medical costs have dropped since then. By comparison, in Denmark medical costs were 8.9% of GDP in 1990, almost exactly the same as in the US then, but since have only risen to 9.7% of GDP.  In Germany the corresponding figures are a rise for 8.4 to 10.5%, in the Netherlands from 7.4 to 9.9%, in Japan 6.5 to 8.1%.

In short, by 2008 Americans were spending one dollar in every six for medical care, while the Danes were only spending one out of every ten kroner, and Japanese were spending only one yen of every twelve.

How about the rest of the English-speaking world? In 2008 New Zealand used 9.9% of its GDP on health care, compared to 8.6% in Australia, 10.4% in Canada and 8.7% in Britain. In short, no nation on earth except the United States uses anywhere near 16% of its GDP on health care. The closest "competitor" was France, at 11.2%.

Americans have made progress with their new health system, which requires all citizens to carry medical insurance and makes certain that they can buy affordable coverage. But it is still an expensive and inefficient system compared to what already exists in the rest of the developed world. 

Health costs for the typical American family doubled from 2011 to 2011. President Obama was right to see that such galloping growth is unsustainable, and the new system he has put into place should stop costs from rising so fast. But Americans need to develop a medical system that can reduce costs to levels common in other advanced industrial nations.Even with Obamacare, the US system is behind the competition.