(By Fareed Zakaria, Time Magazine, Monday, Mar. 26, 2012)
Two years
ago, Barack Obama signed into law the most comprehensive reform of American
health care since Medicare. Most of its provisions haven't been implemented yet.
But the debate about it rages on at every level. Twenty-six states have filed
legal challenges to it. And this month the Supreme Court will hear arguments
about its constitutionality. The
centerpiece of the case against Obamacare is the requirement that everyone buy
some kind of health insurance or face stiff penalties--the so-called individual
mandate. It is a way of moving toward universal coverage without a
government-run or single-payer system. It might surprise Americans to learn
that another advanced industrial country, one with a totally private health
care system, made precisely the same choice nearly 20 years ago: Switzerland.
The lessons from Switzerland and other countries can't resolve the
constitutional issues, but they suggest the inevitability of some version of
Obamacare.
Switzerland
is not your typical European welfare-state society. It is extremely
business-friendly and has always gone its own way, shunning the euro and
charting its own course on health care. The country ranks higher than the U.S.
on the Heritage Foundation's Index of Economic Freedom. Twenty years ago, Switzerland had a system
very similar to America's--private insurers, private providers--with very
similar problems. People didn't buy insurance but ended up in emergency rooms,
insurers screened out people with pre-existing conditions, and costs were
rising fast. The country came to the conclusion that to make health care work,
everyone had to buy insurance. So the Swiss passed an individual mandate and
reformed their system along lines very similar to Obamacare. The reform law
passed by referendum, narrowly. The result two decades later: quality of care
remains very high, everyone has access, and costs have moderated. Switzerland
spends 11% of its GDP on health care, compared with 17% in the U.S. Its 8
million people have health care that is not tied to their employers, they can
choose among many plans, and they can switch plans every year. Overall
satisfaction with the system is high.
When
Taiwan--another country with a strong free-market economy--decided to create a
new health care system in the mid-1990s, it studied every existing model. It
too chose a model of universal access and universal insurance but decided
against having several private insurers, as Switzerland and the U.S. do.
Instead it created a single insurer, basically a version of Medicare. The
result: universal access and high-quality care at stunningly low costs. Taiwan
spends only 7% of its GDP on health care.
The most
striking aspect of America's medical system remains how much of an outlier it
is in the advanced industrial world. No other nation spends more than 12% of
its total economy on health care. We do worse than most other countries on
almost every measure of health outcomes: healthy-life expectancy, infant
mortality and--crucially--patient satisfaction. Put simply, we have the most
expensive, least efficient system of any rich country on the planet. Costs
remain high on every level. Recently, the International Federation of Health
Plans released a report comparing the prices in various countries of 23 medical
services, from a routine checkup to an MRI to a dose of Lipitor. The U.S. had
the highest costs in 22 of the 23 cases. An MRI costs $1,080 here; it costs
$281 in France. In 1963, Nobel Prize--winning
economist Kenneth Arrow wrote an academic paper explaining why markets don't
work well in health care. He argued that unlike with most goods and services,
people don't know when they will need health care. And when they do need
it--say, in the case of heart failure--the cost is often prohibitive. That
means you need some kind of insurance or government-run system.
Now, we
could decide as a society that it is O.K. for people who suddenly need health
care to get it only if they can pay for it. The market would work just as it
works for BMWs: anyone who can afford one can buy one. That would mean that the
vast majority of Americans wouldn't be able to pay for a triple bypass or a hip
replacement when they needed it. But every rich country in the world--and many
not-so-rich ones--has decided that its people should have access to basic
health care. Given that value, a pure free-market model simply cannot work. The Swiss and Taiwanese found that if you're
going to have an insurance model, you need a general one in which everyone is
covered. Otherwise, healthy people don't buy insurance and sick ones get gamed
out of it. Catastrophic insurance--covering trauma and serious illnesses--isn't
a solution, because it's chronically ill patients, just 5% of the total, who
account for 50% of American health care costs. That's why the Heritage
Foundation, a conservative think tank, came up with the idea of an individual
mandate in the 1980s, proposing that people buy health insurance in exactly the
same way that people are required to buy car insurance. That's why Mitt Romney
chose this model as a market-friendly system for Massachusetts when he was
governor. And that's why Newt Gingrich praised the Massachusetts model as the
most important step forward in health care in years. They have all changed
their minds, but that is about politics, not economics.
The Obama
health care plan is not perfect by any measure. It maintains the connection
between employment and health care, which is massively inefficient and a huge
burden on American business. While companies often talk about the need to
reduce regulations to be competitive globally--which is true and
important--they rarely talk about their single biggest handicap against global
competitors. American companies have to pay tens of billions of dollars to
provide health care for their employees and former employees, while their
German, Canadian, Japanese and British counterparts pay next to nothing in
health care costs in comparison. The
Obama bill expands access to 30 million Americans. That's good economics and
also the right thing to do. But it does little in the way of controlling costs.
Medicare's costs have stopped rising as fast as in the past. But for broader
costs to decline, there is no alternative to having some kind of board that
decides what is covered by insurance and what is not--as exists in every other
advanced country. This has been demagogued as creating "death panels"
when it is really the only sensible way to make the system work.
When
listening to the debate about American health care, I find that many of the
most fervent critics of government involvement argue almost entirely from
abstract theoretical propositions about free markets. One can and should reason
from principles. But one must also reason from reality, from facts on the
ground. And the fact is that about 20 foreign countries provide health care for
their citizens in some way or other. All of them--including free-market havens
like Switzerland and Taiwan--have found that they need to use an insurance or
government-sponsored model. All of them provide universal health care at much,
much lower costs than we do and with better results. Maybe there's a theoretical pure free-market
model out there that would work. But in the world we know and live in, the task
is not to abolish our system for a utopia that has never actually existed
anywhere but rather to accept the messy, mixed-up reality that we have and try
to improve it to allow people to have access to decent health care at an
affordable price--something every other rich country in the world already does.
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