With the coming of another U.S. presidential election, we are faced once again with a barrage of over-simplified explanations about increasingly complex problems. And with the choice of Paul Ryan as the vice presidential candidate for the Republican Party, it seems that healthcare will be front-and-center in the ads and speeches. He obviously didn’t create the issues. His budget proposals have just pushed the subject to the fore, primarily in reaction to the Patient Protection and Affordable Care Act (or PPACA), or what critics refer to as “Obamacare.”
The problems are very real. The federal deficit has reached record levels and is rising. Medicare and Medicaid are two of the three primary components of the federal budget, along with Social Security, and are parts of the mandatory spending in the budget, meaning that costs are obligated to be covered. In 2010, Medicare spent $516 billion on services for about 48 million people. By 2050, the U.S. is projected to have more than 88 million citizens over the age of 65, and the fastest growing age cohort around the world is now those over 80.
Medicare alone, though, only covers about the same number of Americans as those who have no health insurance—another 48 million people. The vast majority—about 170 million—are covered through employment-based insurance plans. Employers began trying to limit their costs in the 1980s through self-funded insurance programs and the implementation of managed care. In 2007, General Motors reportedly spent $4.6 billion on healthcare; more than it spent that year on steel. Recently, many large corporations, including the automakers, have been getting out from under the liabilities for retirees, sending them into separate plans, along with pensions. As of 2011, though, the United Auto Workers benefits fund was underfunded by $20 billion compared to expected expenses.
Looking at healthcare in the U.S. more broadly, we spent an estimated $2.6 trillion in 2010—almost 18 percent of the total gross domestic product of the country, and a higher percentage by far than any other country in the world. Healthcare costs continue to escalate faster than other costs and may reach 20 percent of GDP by 2021.
There might be a debate about justifying such costs if they were producing spectacular outcomes. On the contrary:
Despite such spending, U.S. health indicators are among the worst of high-income countries. Since 1960, the U.S. dropped from 12th to 46th in infant mortality rankings (below Cuba and Slovenia), and from 16th to 36th in life expectancy (below Cyprus and Chile), according to the CIA’s World Factbook. In certain neighborhoods in Baltimore, Chicago, and Los Angeles—and other communities across the country—life expectancy for subsets of the population is lower than in Bangladesh.
T.R. Reid’s 2009 book, The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care, described four basic models which cover the health care systems across 200 countries around the world:
- Under the Beveridge Model, “health care is provided and financed by the government through tax payments, just like the police force or the public library.” It is found in the U.K. and many Scandinavian countries as well as others.
- The Bismark Model uses an insurance system typically funded jointly by employers and employees through payroll deductions. Unlike most U.S. plans, though, these systems cover everyone in the country and are non-profit. It is typical of German, France, and Japan.
- The National Health Insurance Model uses a government-run insurance plan, like the Beveridge Model, but private sector medical providers. It is used in both Canada and South Korea.
- The Out-of-Pocket Model is a direct, pay-as-you-go system. People who can afford medical care receive it and those that have no money get none. Since only about 40 of the nations of the world have formal healthcare systems, this latter model is typical of most of the world, including rural areas of Africa, India, China, and South America.
These four models should be fairly easy for Americans to understand because we have elements of all of them in our fragmented national health care apparatus. When it comes to treating veterans, we’re Britain or Cuba. For Americans over the age of 65 on Medicare, we’re Canada. For working Americans who get insurance on the job, we’re Germany.
For the 15 percent of the population who have no health insurance, the United States is Cambodia or Burkina Faso or rural India, with access to a doctor available if you can pay the bill out-of-pocket at the time of treatment or if you’re sick enough to be admitted to the emergency ward at the public hospital.
So if you accept Reid’s analysis, the first problem in reconciling the U.S. healthcare system is that we have no system. We have only a fragmented array of plans and arrangements to which people have access according to timing and circumstances—whether they are employed, disabled, or over 65 years of age.
Many will remember that U.S. President Bill Clinton tried to address healthcare reform at the national level in 1993. In the end, it appears that a combination of vested interested and fears about centralized government programs stopped those efforts. Not much has changed since then, except the level of problems and the costs.
From the perspective of individual citizens, a healthcare system is like many other large, complex systems of services. They don’t need to know how everything works, they just need to know how to use it. They want it to be available and affordable. They feel very little control over any part of the system and therefore very little responsibility for how it works.
From a political standpoint, it is another enormous set of programs which have to be funded, maintained, and governed. Everyone feels entitled to the services on some level, often based on past promises and relatively small financial contributions in the scheme of the total costs. Policies are set and decisions made by committees and subcommittees, influenced heavily by lobbyists representing all of the major, vested interests: medical practioners, healthcare networks, insurance companies, pharmaceutical companies, medical equipment manufacturers and suppliers, etcetera, etcetera.
From a systems perspective, once a successful pattern is set it tends to perpetuate itself. In this case, pattern refers to the sets of human interactions which form organizations, industries, and practices. Each is governed by its own rules which guides its actions. Even though the systems are interrelated, and in many ways interdependent, they also remain essentially independent and self-organized. This can evolve into larger patterns of competition, or of cooperation.
Recent work in large organizational systems has led to the development of a concept of service systems, and even a science of service systems. A key principle is the co-production of value between participants, such as suppliers and consumers or providers and patients. Rethinking the entire healthcare system as a process of collaborative co-production of health is one way of reframing the current issues. Mara Zabari, a current current student in the organizational systems program at Saybrook, has begun incorporating this concept into her work with healthcare systems.
Read other posts by Gary Metcalf
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