Financing Health Care“The United States has the best health care system in the world.”“In short, the health care system in the United States is an embarrassing, world-class mess.”Why the difference?Slide 5Is Health Care Special?Health Care as RightMarket Commodity?Market Commodity?-- IILibertarian positionAgainst LibertarianismLeonard Fleck’s argument on the basically unfair nature of today’s health care system in the U.S.Fast Food WorkerMSU ProfessorHealth InsurerSlide 16Two MythsUninsured in U.S.QuestionAnswerSavings from Waste/FraudAnother MythConclusions in Two State CommissionsSome Statistics Most People Don’t KnowPer Capita Spending on Health Care in U.S., 1970-1987Slide 26Why Excess Administration?A QuizHealth Expenditures in Public Funds Only per capita, 1994Congressional Budget Office 1994Why Not the Marketplace?The Insurance Ideal (e.g. Fire)Health “Insurance”?Disproportionate Costs“Medically Uninsurable”Case Study: Medicare HMO’sMedicare HMO’s (cont.)Slide 38Slide 39Medical Savings AccountsMedical Savings Accounts- IIProblems with MSAsSlide 43Problems with MSAs-- IIIProblems with MSAs-- IVConclusionEthics and the Clinton PlanMajor Ethical ConflictThe American people can be counted on to do the right thing, after they have exhausted all other possibilities.Financing Health CareWhy is this an ethical concern?“The United States has the best health care system in the world.”“In short, the health care system in the United States is an embarrassing, world-class mess.”-- Davidoff and Reinecke, editorial, Annals of Internal Medicine, 1999Why the difference?Is it just a matter of the technological capacity of the health care system, for patients who enjoy full access?Or is it also a matter of the ethics and fairness of access and the distribution of resources?Financing Health CareEconomicPoliticalLegalPublic policyEthical?Is Health Care Special?Is health care a market commodity--–Like a VCR?Is health care a special social good--–Like basic education?Is health care a right--–Like right to vote and right to a jury trial?Health Care as RightWide variation in how much various people “need” through lifeWith rapid advances in technology, what is “basic minimum” of care keeps changingSeems more clear and persuasive to see health care as important social good, not rightMarket Commodity?Reinhardt: Child of a poor US family with a chronic but treatable disease may have much more serious interference of health with basic life chances than richer child with same diseaseMarket Commodity?-- IIIs this unfortunate?–Like a hurricaneIs this unfair?–Like racial profilingLibertarian positionUnfortunate but not unfairIf poor could simply demand health care they cannot afford, they would be stealing goods from others who have worked hard to accumulate themRich may voluntarily create private charities to help poorAgainst LibertarianismAre health care knowledge and skills purely the result of one’s private labor and effort, or has society at large heavily subsidized the training and research process at each step?(E.g., estimated that a medical student pays 5% of the total cost of education)Leonard Fleck’s argument on the basically unfair nature of today’s health care system in the U.S.Fast Food WorkerNear minimum wagePays taxesNo health benefitsNot eligible for MedicaidExample of working poor who are most of uninsured in USMSU ProfessorFairly well paidReceives health insurance as benefitBenefits are not taxedTherefore other taxpayers subsidize health insuranceHealth InsurerSpends a lot to assure that benefits are not paid to any uncovered membersAdds to high administrative cost of US health care (enough extra to pay for all care for uninsured)Two MythsThe uninsured generally wish to be uninsured and do not suffer any ill healthWe’d have plenty of money for all the health care anyone could want if not for waste, fraud and abuseUninsured in U.S.Less likely to see doctorMore likely to delay hospital careLess likely to get preventive careChances of dying in hospital 24% to 124% greater depending on age and incomeQuestionWhat would it cost to provide the highest possible standard of medical care for every person in the U.S.?AnswerNine times the GDPSavings from Waste/FraudEliminate allwaste, fraudCosts once again risingSlope of curvebased on newtechnology, agingAnother MythUniversal coverage may be an ethically nice idea, but it would cost way too much to be economically feasibleConclusions in Two State CommissionsIf state could adopt a single-payer model with universal coverage, savings would be enough to pay for the care of all the currently uninsured•Michigan•MarylandSome Statistics Most People Don’t KnowPer Capita Spending on Health Care in U.S., 1970-1987Woolhandler & Himmelstein NEJM 324:1253, 1991Why Excess Administration?Multiple payers -> great duplication of servicesEach payer has to hire staff to assure that it does not pay for anyone else’s enrolleesTypical administrative overhead–US private insurance company 15-20%–Medicaid, Medicare 3-5%A QuizCanada has national health insurance, so essentially everything spent on health care is public $$US supposedly has a largely “free market” system, but we have some government programsHow does per person public spending compare in US and Canada?Health Expenditures in Public Funds Only per capita, 19941300140015001600USA CanadaDollarsDollarsUS figures do NOT include tax subsidies for employer-paid health insuranceCongressional Budget Office 1994Two health plans then being proposed before Congress led to cost savings in 10 years and after–BOTH plans proposed universal coverageNone of various other plans saved money–None of the other plans proposed universal coverageSame is true internationallyWhy Not the Marketplace?No one has so far proposed a genuinely “free-market” answer to the problem of universal coverageIn addition, the marketplace “solutions” that seem most popular today have their own major problemsThe Insurance Ideal (e.g. Fire)Financial protection against low-probability but catastrophic eventAffordable and practical because all who are at risk pay into the poolMost of the cost for those who receive benefits come out of the pockets of those who never suffer the harmHealth