Healthcare is an expense which occurs unpredictably, but is
universal and unavoidable; everyone will need healthcare at some point
in their lives, of some variety. The unpredictable nature of healthcare
costs militates for an insurance-like mechanism for managing payments.
Additionally, ill-health incurs harm to humans, often without human
agency, and thus falls into the same category of events as natural
disasters, and is a threat to others, like an out of control fire.
Furthermore, ill-health has social costs beyond the individual, as they
will be unable to do some or all of their normal tasks, adding the
burden of those tasks or the consequences of their going unfilled to
the load that others carry.
The present system of healthcare in the U.S. is a complete shambles,
which leaves over 1 person in 6 with no health coverage at all1,
left to suffer or die from any illness they cannot pay out of pocket
for. This will commonly have knock-on economic effects, as money going
to these expenses will not be spent elsewhere, and the costs will be
higher as people wait until the need for care is acute. This is the
cause of almost half of the personal bankruptcies in the U.S.2
, bankruptcies which disrupt the housing and financial markets in
addition to those whose lives are broken by them.
Those who do have some coverage get it through their employers,
which has a number of deletorious effects. It reduces job mobility and
impairs the ability of smaller firms to compete due to the costs of
providing such insurance. This coverage is provided by a network of
private insurers, which add to the cost in a number of ways. First off,
there is the requirement that care providers such has hospitals and
clinics, must maintain staff who have no medical duties, but spend all
of their time sorting through the billing processes of dozens of
insurers and meeting their arcane requirements. This adds to the costs
of operating such a program. Duke Medical Center, for instance, has 900
billing clerks on staff, for a 900-bed hospital 3.
Secondly, the private insurers are primarily for-profit entities, and
seek to rake off a percentage for executives and shareholders. This
profit accounts for approximately 15% of insurance company income3
(Employers which cover their own insurance have 6-7% overhead,
for-profit insurance companies have around 20%). Even leaving the
profits aside, overhead in the private system is high compared to the
public sector: Medicare overhead is about 2% of expenditures.4.
Finally, there is the intrinsic inefficiency of subdividing the
population into relatively small risk pools. The nature of insurance is
such that larger risk pools means lower costs, and the largest feasible
risk pool is everyone in the country.
Recently, the U.S. Congress passed the Affordable Care Act,
ostensibly in an effort to improve the healthcare system in the U.S.
While it did do so to a certain extent by outlawing certain
particularly egregious practice by insurers (such as refusing to insure
those with ‘pre-existing conditions’ and dropping customers as soon as
they made claims), it also increased their customer pool by mandating a
tax reduction for those who purchased health insurance. This has many
problems, not least of which is that the recent Supreme Court decision
allowed states to opt out of the expanded Medicaid coverage originally
mandated and the fact that the tax breaks involved are small compared
to the cost of useful health insurance. Unlike the systems of France
and Switzerland, which achieve universal health service with required
purchases of private insurance, the ‘Affordable’ Care Act places no
upper limit on the cost of a basic insurance plan, and the recent
Supreme Court decision allowed states to opt out of the medicaid
expansion which was touted as the equivalent of the subsidies offered
to the poorest citizens of France and Switzerland. Even if we had
entirely modeled our system on one of those countries, it would still
be suboptimal compared to a single-payer system, however. France spends
11.6% of its GDP on health care, while Sweden, for example, spends only
9.6% of their GDP on their single payer system. Of course, either
system would be better then the one we have now, in which we spend
17.6% of our GDP on health care, and still haven’t got universal