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Good Health – but at what price?


By Michael Carberry


In last month’s edition of Only Connect (13 July, 2022) I took issue with Stoker’s article lauding the merits of capitalism, not because of any philosophical objection - as I acknowledged, capitalism has many positive aspects - but because most of the article seemed to be unsubstantiated assertions which were demonstrably untrue. In particular I was shocked by the statement that “Private enterprise does the job of (health) provision much better in the USA and in Germany, and the present collapse of the NHS ought to finally bring about change to a private medical system and universal health insurance.” This statement is so manifestly untrue that it needs to be called out.


We have all heard horror stories about US health care, or rather the lack of it: accident victims being refused treatment until they can produce evidence of insurance cover; patients with potentially terminal conditions putting off treatment until it is too late because of fear of the cost; families bankrupted because of the serious illness of a family member etc. But there is no need to rely on such anecdotal evidence. An OECD survey of health care costs among member states revealed that in 2019 * the US spent some $11,945 per capita or 16.77% of GDP on health care, far and away the most in the world. This compares with an average for other OECD countries of $5,268, i.e. less than half of that spent in the US.


One would therefore expect US health care to be far better than in other developed countries but in fact the opposite is true. A study by the Commonwealth Fund (an independent US foundation and nothing to do with the formerly-labelled British Commonwealth), which compared health care in eleven of the world’s wealthiest countries, ranked the US “last overall” and “last specifically” on access to care, administrative efficiency, equity, and health care outcomes. The reasons are attributed to the fact that much of the money spent on health care goes on administrative costs related to the private insurance system. According to the Peter G Peterson foundation, a non-partisan body which looks at US fiscal policy, the United States spends $940 per person on health-care administrative costs — four times more than the average of other wealthy countries and significantly more than is spent on preventive or long-term healthcare.


In other words, as many US Americans themselves acknowledge, the US health system is not just the most expensive in the world, it is also the most inefficient and, much more seriously, it is grossly inequitable. While high quality health-care is available to those who can afford the high cost of insurance premiums, the majority of Americans have to make do with a system which is prohibitively expensive. Moreover, many of the poorest US citizens, who are predominantly black or Hispanic, receive a level of health care inferior to that of many much poorer countries. For example, in the treatment of some chronic diseases such as asthma, the US was ranked well below Mexico.


In 2018 the number of US citizens without health insurance of any kind was 30.7million. The result is that the USA is a sick society – literally. According to the US National Center for Chronic Disease Prevention and Health Promotion, an astonishing 60% of US citizens suffer from chronic illness. But it is not just the old and chronically sick who suffer from poor health care in the United States. In a paper published in 2017 on the risks to children’s health in the US, Linda C Fentiman noted that: “when compared with other economically developed countries, today the United States falls short, especially in measures of infant mortality, preterm birth, and childhood injury and death. “The idea that this is a model to be emulated, as Stoker suggests, would be laughable were it not such a sick joke.


But it is not just about the United States that Stoker is so wrong. By stating that “Private enterprise does the job of provision much better in the USA and in Germany" he clearly implies that the systems are comparable and based almost exclusively on private health insurance. In fact, nothing could be further from the truth. As in many other European countries, including France and, to some extent, the UK, the German system is based, on a statutory health insurance system with premiums collected through payroll taxes. All workers contribute about 7.5% of their salary into a public health insurance pool. Employers match that 7.5% contribution. Everyone covered by statutory insurance has an equal right to medical care. As one doctor explained, “The ones who are able to pay more, pay more. And the ones who aren’t able to pay, don’t pay that much.” No one pays more than 2% of their family income for out-of-pocket health care costs. If they are poor or chronically ill, it’s 1% and there is a cap on the total amount one would have to pay. No one goes bankrupt in Germany because of medical care costs.


So why is health care so good in Germany? In 2019 Germany spent some 403 billion€ on health care – a whopping 11.7 % of GDP- the highest in the EU. Still substantially less in percentage terms than the 16.77% in the United States but – and herein lies the difference - being a mainly state-sponsored system (approximately 85% in 2019) the expenditure was both much more efficient and much more equitable.


So, how does the UK compare? According to Stoker (although he provides no evidence), the NHS is “expensive, highly inefficient, underpays its key staff, employs far too many overpaid managers, is grossly resistant to change, and is unable to cope, as the Covid outbreak has shown, with surges in demand or indeed anything unexpected”. There is no doubt that the NHS has been under severe strain for some time and the demands of the Covid pandemic have stretched it almost to breaking point. And yet the US based Commonwealth Fund identified the UK as one of the most “administratively efficient” health care systems - indeed in 2017 it rated it the best in the world. In fact, the current problems with the NHS stem very largely from lack of adequate resources.


In 2019 UK healthcare expenditure was £225.2 billion - 10.2% of GDP - the lowest but one of all the OECD countries. That amounts to £3,371($4,653) per person. That is less than half (42%) of expenditure in the US and 30% less per capita than in Germany. So much for Stoker’s claim that the NHS is “expensive”.


But even the most efficient system cannot function without adequate funding. We should not forget that the British Conservative Party fought tooth and nail against the introduction of the National Health Service in 1948 and in recent years, successive Conservative governments have starved the Service of the funding needed to do what is required of it. Years of austerity under David Cameron and George Osborne had so hollowed out the system that it was already not in good shape to deal with the effects of the pandemic.


But the cuts continued under the Johnson government. As recently as 10 July, Sajid Javid, the former UK Health Secretary and initially a contender to replace Boris Johnson as Prime Minister, was boasting on television about how he had made “efficiency savings” by cutting thousands of jobs in the NHS. Few of the hard-pressed NHS staff would see lit like that.


And another early contender for PM, current Chancellor of the Exchequer, Nadhim Zahawi – one of the richest men in the UK parliament – promised to slash 20% of all Government Department budgets – including the Department of Health – in order to fund tax cuts.

But there are additional reasons for the current problems: desperate shortages of staff exacerbated by the effects of Brexit; bed blocking by elderly patients who cannot be moved out because of inadequate provision to accommodate them in the care system; the departure of large numbers of health care professionals tired of lack of resources, long hours and poor remuneration, putting even greater strain on those who remain etc. These are problems which only government can address – not the hard-pressed NHS managers whom Stoker so maligns.


Stoker argues that “the present collapse of the NHS ought to finally bring about change to a private medical system” blithely ignoring the fact that the UK already has one. As in other European countries like Germany or France, those with the necessary means are free to pay for private health insurance. Some 10% of UK residents do so, mainly people in managerial or senior executive jobs who receive this as part of their remuneration.


So, if the system is so efficient why do not more people use it? The reason, of course, is that it is prohibitively expensive. My mother-in-law, who had a private income as well as a job, paid private insurance at her own expense all her working life. When she finally retired with a reduced income and increased health care needs, she found that the private insurance premiums were hiked up to a level she could no longer afford. Not surprisingly, she felt angry and bitter. Moreover, in the UK such insurance tends to cover things like preferential treatment to avoid waiting lists, private rooms or extra physio-therapy with the basic, and more expensive costs, still being met by the NHS. That is obviously not a model which could be extended to the whole country. In any case most private policies in the UK specifically exclude mental health, maternity services, emergency care, and general practice.


And as for coping with the Covid outbreak, the latest OECD figures show that while spending by governments and compulsory schemes in all OECD countries rose sharply in response to the COVID pandemic, private spending actually fell by an average of 3%.


Other countries do a rather better job integrating public and private health care provision. In France, where I live, nearly everyone belongs to a ‘mutuelle’ - a top-up private health insurance scheme, usually provided for employees and their dependents as part of their employment terms. On retirement, members can continue to contribute at the same rate with their increased health-care costs being cross-subsidized by younger and fitter employees who are still working. The schemes are run by not-for-profit mutual societies. These are most certainly not capitalist enterprises. The result is what many regard as the best health care service in the world in terms of patient care.


Funding health care costs is complex and comparisons are difficult as no two systems are alike. The Peterson foundation found that it made little difference whether health care was funded by compulsory insurance contributions as in Germany or France or primarily from direct taxation as in Sweden or the UK. What mattered was the level of resources committed and the administrative efficiency in the way they were used. What does appear to be indisputable from all the evidence is that state-sponsored systems are both more efficient and, in particular, much more equitable, than purely private insurance schemes as in the US. If Stoker really wants to argue otherwise he will need to provide some better evidence.



* Figures since 2019 have been distorted by the varying response to the Covid pandemic and are atypical.

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