Linda Gorman, director of the Health Care Policy Center at the Independence Institute, recently attempted to make the case on these pages for a repeal of ObamaCare. Gorman argues that the movement toward a more European-style health-care system, such as ObamaCare steers us toward, heads us in the wrong direction. This is evident, she claims, by comparing our health care system with Switzerland’s.
I’ll address that comparison at the end of this article. Before getting there, though, I want to engage Gorman’s broader argument, both because it draws for support on my research comparing health care financing in the U.S. with other countries, and because it misses the basic economics of health care policy.
To tackle the essence of Gorman’s argument, that Americans are better off with a health-care system leaving some without insurance, let’s step back from the specifics of Switzerland’s health care system.
Instead, let’s investigate the “European (or Asian)” model of health care.
A great deal of variation exists among countries’ health care systems, making generalizations among them a bit tough. But the core feature of all health care systems in developed countries, with the exception of our own, is that nearly everyone has health insurance. When this occurs, we refer to the country has having “universal health care.” This means that health insurance is treated like our K-12 system: everyone participates.
A country achieves “universal health care” through three interrelated sets of policies. First, health insurance is either required or made available to all. Second, if insurance is purchased in private markets, regulations limit the degree to which premiums may reflect individual characteristics or past medical history. Third, targeted subsidies or income-based payments ensure that everyone can afford insurance.
Take away any of these three policies, and like a three-legged stool, your universal health care system topples. Without mandates, the healthy will not buy into it. Without targeted subsidies, the poor cannot. Without regulations on premiums, those with high medical bills can’t afford insurance. In short, you’ll wind up with a health system containing both the insured and the uninsured.
By introducing insurance mandates, regulating private insurance, and providing insurance subsidies, ObamaCare inches us away from a country with 15 percent of Americans uninsured, and toward a universal health care system.
If Gorman has her way and we repeal ObamaCare, however, we would retreat back to a health system with many more uninsured. Gorman both knows this and argues that this would be better.
“Too much coverage [e.g, too many people with insurance] adds insurer overhead to the basic cost of producing medical care,” she argues.
True, paying for medical care via insurance rather than your checkbook or credit card drives up the cost because insurance introduces administrative costs via its third party payers. But this is true of all insurance, whether it is paying for fixing your rear-ended car, your roof which a tree smashed, or your broken leg. When you buy insurance, you buy the service of a third party paying your unexpected bills. Yes this drives up cost a bit, but health insurance provides a very valuable service: peace of mind from unexpected expenses.
Gorman sees another problem with too many people having insurance. She argues that “forcing everyone to have coverage encourages wasteful utilization.” Here Gorman claims that when people have insurance, they overuse the health care system (“wasteful utilization”), which drives up costs for all.
One wonders: does she wish to rid the nation entirely of health insurance? Surely if such were the case, our nation’s health care bills would be lower.
But can you imagine the gut-wrenching choices we’d all face without health insurance? More likely Gorman is saying that it’s OK if only some are faced with these choices, because then all of our health care bills would be lower. But then who are these “some”?
In the end, health insurance is an exceptionally valuable product that we all want. If we back down from ObamaCare, the poor, the sick, and the unlucky among us will be left without. Meanwhile the rest of us with insurance will enjoy the peace of mind that health insurance provides, along with affordable access to our health-care system.
And what about Switzerland, the country Gorman says we don’t want to emulate?
Quite coincidentally, this week the New York Times published the results of a “tournament” to choose the best health care system among eight contenders. Five well-regarded American experts on health care policy formed a voting panel.
The winner was Switzerland, which barely edged out France. On the US’s health care system, Princeton health economist Uwe Reinhard quips: “It’s hard to defend the messy American health system, with its mixture of unbridled compassion and unbridled cruelty.”
Indeed it is. But that’s what happens when you allow a health care system to persist with both insured and uninsured people in it.
Katie Baird is a professor of economics at the University of Washington Tacoma who has undertaken research comparing health care policy in different countries.