The Conscience of a Liberal

If the past is any guide, during the next year half of Americans will have negligible medical expenses. Maybe they’ll buy a few bottles of aspirin, maybe they’ll have a checkup or two, but they won’t get sick, or at least not sick enough to need expensive treatment. On the other hand a minority of Americans will incur huge medical expenses—they’ll need a heart bypass operation, or dialysis, or chemotherapy. Overall 20 percent of the population will account for 80 percent of medical costs. The sickest 1 percent of the population will, on average, need more than $150,000 worth of medical care next year alone.[2]

Very few Americans can afford to pay sums that large out of pocket—especially if costly medical care goes on for years, as it often does. Modern medical care is available to middle-class Americans and their counterparts in other advanced countries only because someone else pays most of the bills if and when the need for expensive care arises.

In the United States, uniquely among wealthy nations, that “someone else” is usually a private insurance company. Everywhere else most health insurance is in effect provided by the government, and ultimately by taxpayers (although the details can be complex). Even in the United States, a taxpayer-funded insurance program —Medicare—covers everyone sixty-five and older, and another government program, Medicaid, covers some but not all of those too poor to afford private insurance. But the great majority of Americans who have health insurance get it from the private sector. That reliance on private insurance also makes the United States the only advanced country in which a large fraction of the population—about 15 percent—has no insurance at all.

A word on terminology: Opponents of government health insurance sometimes call it “socialized medicine,” but that’s misleading—it’s socialized insurance, which isn’t at all the same thing. In Canada and most European countries, the doctors are self-employed or work mainly for privately owned hospitals and clinics. Only Britain, among major nations, has actual socialized medicine, in which the government runs the hospitals and doctors are government employees.

So how does the U.S. health care system, with its unique reliance on private insurance, stack up against the systems of other advanced countries? Table 7 tells the story. It shows how much different countries spend per person on health care, and compares that spending with average life expectancy, the simplest measure of how well the health care system is functioning. The United States spends almost twice as much on health care per person as Canada, France, and Germany, almost two and a half times as much as Britain—yet our life expectancy is at the bottom of the pack.

Table 7. Comparing Health Care in the Western World
	Spending per Person, 2004	Life Expectancy, Years, 2004
United States	$6102	77.5
Canada	3165	80.2
France	3150	79.6
Germany	3043	78.9
Britain	2508	78.5

Source: World Health Organization, http://who.int/research/en/.

These numbers are so stark, and such a refutation of the conventional wisdom that the private sector is more efficient than the public sector, that some politicians, pundits, and economists simply deny them. Our health care system is “the best in the world,” says Republican presidential candidate Rudy Giuliani—except that the World Health Organization actually rates it as number 37.[3] Europeans face huge hidden costs from delays and from inconvenient or uncomfortable service, says Tyler Cowen, a conservative economist—except that cross-national surveys say that even the British have better overall access to health care than Americans do: they wait longer for discretionary surgery than we do, but they find it easier to see a doctor on short notice, especially after hours or on weekends. And the Germans and French have no significant delays of any kind.[4]

We hear endlessly that Canadians have to wait longer than Americans for hip replacements, which is true. But that’s a peculiar example to choose, because most hip replacements in America are paid for by Medicare. Now, Medicare is a government program, although it’s not clear if everyone knows that—health policy experts often repeat the story of how former Senator John Breaux was accosted by a constituent who urged him not to let the government get its hands on Medicare. The point, however, is that the hip-replacement gap is a comparison of two government insurance systems, with the U.S. system more lavishly funded. It has nothing to do with the alleged virtues of private enterprise.

More seriously, there is some question about the extent to which the American lifestyle drives up health care expenses. Ezra Klein of The American Prospect calls it the “but-we-eat-more- cheeseburgers” doctrine, and it’s true that Americans are more prone to obesity than Europeans, which in turn tends to raise medical costs, especially for chronic conditions like diabetes. Attempts to crunch the numbers, however, suggest that different lifestyles, and the diseases to which they make us prone, aren’t enough to explain more than a small fraction of the cost gap between the United States and everyone else. A study by McKinsey Global Institute estimates that the difference in disease mix between the United States and other advanced countries accounts for less than $25 billion in annual treatment costs, or less than $100 of the roughly $3,000 per person extra the United States spends on health care each year.[5]

There’s one more thing you should know: although America spends much more on health care than anyone else, this doesn’t seem to buy significantly more care. By measures such as the number of doctors per 100,000 people, the average number of doctors’ visits, the number of days spent in the hospital, the quantity of prescription drugs we consume, and so on, American health care does not stand out from health care in other rich countries.[6] We’re off the charts in terms of what we pay for care, but only in the middle of the pack in terms of what we actually get for our money.

All of this tells us that the U.S. health care system is wildly inefficient. But how does a can-do country, at the cutting edge of technology in many fields, manage to have such an inefficient health care system? The main