The Great Divide: Public vs. Private Healthcare.
Wednesday, February 02, 2005
Health spending has been rising as a percentage of the US economy for a generation now. Back in the 60’s it was about 7% or so but it has now soared, according to the Bush administration, to over 15% of the nation’s GDP. According to published figures, raw government spending on healthcare accounts for 45% of all healthcare spending or about 6.75% of GDP.
The public figure for government spending in the US ignores certain factors though, according to a study by Harvard Medical School. Spending for government health programs like Medicare, Medicaid and the Veterans Administration ($548.7 billion in 1999) is included, but two categories that have previously been overlooked in calculating government health costs need to be included too if a true picture is to emerge. Expenditures to buy private insurance for government employees - e.g. members of Congress, firemen and school teachers - at a cost of $65.6 billion in 1999 and tax subsidies for private coverage - which totaled $109.6 billion in 1999 have never been part of official figures. These costs would be either included or saved by a universal healthcare system. The total government spend on healthcare is therefore $954 billion or 59.8% of all US healthcare spending.
Dr. Steffie Woolhandler, a study author and an Associate Professor of Medicine at Harvard, noted:
We pay the world’s highest health care taxes. But much of the money is squandered. The wealthy get tax breaks. And HMOs and drug companies pocket billions in profits at the taxpayers’ expense. But politicians claim we can’t afford universal coverage. Every other developed nation has national health insurance. We already pay for it, but we don’t get it.
Let’s look at some fairly rough figures. The US spends over $309 billion each year on paperwork in insurance companies, hospitals and doctors’ office - over half could be saved through national health insurance if paperwork costs followed the UK example and dropped to around 11% of all healthcare costs instead of 25%. It spends $150 billion on medications, at prices 50% higher than Canadians pay for the same drugs. By slashing bureaucracy and drug prices the US could save enough to cover all of the uninsured and improve coverage for the rest of the populace.
Estimated total US health spending is around $5,500 per capita and it has doubled in the last 20 years. That equates to a total spend of about $1,600 billion of which $400 billion is currently eaten up by administration costs. Cutting administration by moving to one standard universal system would save as much as $225 billion… Cutting drug costs by 50% through one block negotiated price as the Canadian system does would save another $75 billion. These savings wouldn’t just disappear as a means-based, equitable tax could then be levied. Individuals and employers would pay into the plan based on what they can afford, not what insurance companies want to charge. This tax would largely replace premiums, deductibles, co-pays and out-of-pocket expenses. For most taxpayers and businesses, this would lead to sizeable savings.
Add these savings to what the government is already paying and we have an available budget of almost $1.2 trillion or over 11% of the nation’s GDP. All without raising taxes.
As an aside, it should be noted that recent Democrat plans for a universal health system had a similiar budget, but as the formulators had not taken into account all the savings possible, they had to include a provision for a tax levy which allowed easy attacks on these plans. The other flaw in Democrat plans was to include draconian provisions to exclude private HMO’s from providing coverage for areas their universal system covered. This was simply ludicrous and smacked of a “closed-shop” ethos their fellow leftwingers in Europe gave up over a decade ago. If any new universal healthcare provision was set up properly free market competition would be a welcome playing field, it would leave the insurers able to provide luxury “top-up” covers for elective surgeries or exclusive surroundings, something the insurers would probably find very satisfactory indeed as profit margins would be far higher.
Of course, many States have already begun to think this way. Maryland, Massachusets, Minnesota, New Mexico, Wisconsin, Delaware, California,Hawaii and of course Maine are just some of the States that have either begun the process or are expecting to begin shortly. 40 States in total either have legislation in the works or studies in progress for establishing a single-payer healthcare system. In every case, savings to the State, to businesses and to individual families are expected.
Certainly, manufacturing businesses could do with the break. Employers saw their healthcare costs rise 12% in 2004 and 16% in 2003. . Such dramatic increases have damaged manufacturing in America, prompted labor strikes, and encouraged corporations to ship jobs overseas.
In one of the more exciting if little-noticed developments for progressives, a coalition is beginning to emerge that includes not just CEOs but also America’s doctors and unionized workers. Executives from the Big Three automakers, upset over insanely high healthcare costs, recently sent the Canadian government a letter urging Canada to keep its single-payer system so GM, DaimlerChrysler and Ford could hold operating expenses down.
And why not? After all, in 2003, GM spent $4.5 billion on health care for its US- based employees and retirees, at a cost of $1,200 per car, according to a GM spokesman. “If we cannot get our arms around this [healthcare] issue as a nation, our manufacturing base and many of our other businesses are in danger,” warned Ford’s Vice Chairman Allan Gilmour. Katerina vanden Hueval, The Nation
So why doesn’t the US have a universal, single-payer public system of healthcare? Well, it would seem that misunderstanding of the costs involved, coupled with the retelling of myths over the differences in quality between public and private systems, have conspired to keep universal healthcare a “not now” subject at the national level. Pressure from physicians, businesses, and individual State’s actions could well be about to change that formula. One can only hope that in this case, bi-partisan politics can be the order of the day. If kindergarten name-calling is frowned upon when it comes to supporting the troops, how much more should it be decried when it comes to supporting every living soul in the nation?
