Ross Clark
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I am not convinced by the Obama reforms. Even their supporters admit that it is going to cost US taxpayers $940 billion over the next ten years — before projected savings kick-in, if they do. It is just that no amount of free-market ideology can blind me to the obvious: that the existing US healthcare system makes the NHS — in spite of its blundering, overpaid managers and its locum GPs flown over from Germany for a nightshift — look good value for money. It is hard to escape the conclusion that, for all the choice and competition in US healthcare, Americans are being ripped off.
According to the OECD (the Organisation for Economic Co-operation and Development), in 2007 Britons between them — taking into account private as well as state provision — spent $2,900 per head on healthcare. The Germans spent $3,600 and the French $3,601. Americans spent $7,290 — half as much again as the next highest country, Norway. But surely Americans must be getting what they pay for? Well no, actually: not as a nation they aren’t. True, as they often like to boast, they have straighter teeth — or more accurately they have a better class of false teeth, as a good number of their perfect ‘teeth’ are really implants. And true the US shows up well on international comparisons of cancer survival rates — which are often quoted as evidence of the superiority of US healthcare. In the US, for example, 90 per cent of breast cancer patients are still alive five years after diagnosis, compared with 77 per cent in Britain and an OECD average (comprising 14 developed nations) of 81 per cent.
But cancer survival rates are spurious statistics which flatter countries with high levels of screening and scanning. In the US, where MRI and CT scans are twice as common as in other OECD countries, you are more likely to have your cancer diagnosed at an earlier stage of the disease, before symptoms become clear. Therefore, you have a better chance of surviving for five years ‘after first diagnosis’ — regardless of whether the treatment is effective or not.
If US healthcare were really so superior, then you might think life expectancy would be higher. But it isn’t. The average American lives for 78.9 years. Britons, in spite of the best efforts of Stafford Hospital, whose lousy standards were recently blamed for between 400 and 1,200 excess deaths over a three-year period, managed to survive for an average of 79.1 years. On several important health indicators the US performs demonstrably badly compared with other developed countries. Its infant mortality rate — at 6.4 per 1,000 live births — is a national disgrace, compared with 5.0 in Britain, 4.2 in France and 4.1 in Germany.
In a timely paper published the day after Obama’s vote, the OECD examined why the US spends so much on healthcare. It concluded that patients in the US tend to be prescribed more expensive drugs, that US doctors earn more and that hospital stays are more expensive. In addition, healthcare administration costs twice as much — 7 per cent — as the OECD average (yes, if you thought the NHS has too many managers and too few doctors, the US healthcare system is worse in this respect). But the biggest difference lies in the cost of outpatient care, which is twice as much per head as the OECD average. Yet it achieves worse results: asthma and diabetes sufferers are more than twice as likely to end up requiring hospital admissions than in other OECD countries.
There will be plenty, no doubt, who would include the entire staff of the OECD in the memorable description by one Fox News presenter: ‘California hippie, Marxist, communist, socialist progressives with flowers in the barrels of guns, sitting around smoking dope and talking about how they can destroy the American empire.’ But I favour the OECD’s analysis. It doesn’t surprise me — and it shouldn’t surprise anyone who has experience of dealing with insurance companies — that insurance policies are an extremely expensive, and often ultimately disappointing, way of funding anything.
The trouble with insurance is that the consumer never gets to test the quality of the product until it is too late: by the time it comes to making a claim they may well have paid years’ worth of premiums and cannot switch provider. It has taken the Obama reforms to outlaw the shocking practice of many US health insurers — of including in the small print clauses to terminate cover when the insured, er, gets ill. The reforms also prohibit insurers from declining to offer insurance to people with pre-existing medical conditions. But you can be sure they will find some way around the ban. The winners in the market will be those who most successfully prevent bad risks from applying for cover — such as by being careful where they target advertising and by making it difficult for callers from poor neighbourhoods from getting through to the switchboard to obtain a quote.
Health insurance is fine for healthy Americans aged up to 65 with good jobs which come with subsidised — and tax-deductible — cover. But then they tend not to be the people who require the most healthcare. As for the rest, they end up relying on the state.
With most goods and services I favour private provision. But the funding of healthcare is different. There is such a huge variation in the amount of healthcare which will be required by the neediest and the least needy in their lifetimes that a tax-funded, universal insurance scheme is really the only effective option — unless we are happy to see poor kids die of preventable diseases. That is where the Obama reforms fall down: they are still based around private insurance schemes — which will require Americans to pay through their noses for healthcare for decades to come.
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