In the wake of the Republicans’ catastrophic inability to repeal Obamacare, many people have begun to accept that the Patient Protection and Affordable Care Act is the new basis on which the US health system will be built. This means that for the foreseeable future, assuming the Republicans are not able to suddenly develop a competent and coherent health financing agenda, progress towards universal health coverage (UHC) in the USA will depend upon improvements of and reform to the free market system as it is regulated by Obamacare. Obamacare is unusual among developing nation health financing systems for its heavy reliance on private insurers as the fundamental providers of risk pooling, as opposed to most other health financing systems where some form of government insurer provides the overwhelming majority of national health financing. For a lot of critics of Obama and Clinton from the left this is seen as a failure, and a sign that they are neoliberal sellouts: under this view of health financing reform, no market-based system will work and Obama sold out his own supporters when he put forward a plan that did not include single payer or a public option. For conservative policy makers in non-crazy countries – for example the UK or Canada – and also in developing countries moving towards UHC, this offers an opportunity to see whether a free market approach to health financing can deliver the key goals of universal coverage and financial risk protection. The problem for conservative thinkers on health care is that there seems to be very little evidence that free market systems work, and the problem for left wing critics of Obamacare is that there is no evidence single payer could have been delivered in the modern US political environment. So for both far left critics and moderate right wing admirers of Obamacare the obvious question is: can UHC be achieved without a single payer system?
This week’s issue of the Journal of the American Medical Association has published an opinion piece addressing this issue. Entitled Achieving universal health coverage without a single payer: Lessons from 3 countries, it gives a brief overview of how Singapore, Germany and Switzerland have achieved UHC with at least nominally non single-payer systems. It attempts to address some of the key differences between these systems and the USA, and some ways in which the health market in those countries is different. Since JAMA is behind a pay wall, I thought I would give a brief summary of a few of these points.
First the article opens with a clanger, asserting that “Universal coverage is a top priority not only for Democrats but also for President Trump,” which does lead one to wonder how critical the authors are. It then goes on to dismiss summarily one of the key ideas raised by Republicans for making private health coverage more affordable in the US: high risk pools. The intention of a high risk pool is that patients with high cost or pre-existing conditions be offered insurance from a special fund financed by the government, thus removing them from the main private insurance risk pool and enabling insurance companies to reduce the cost of mainstream health insurance products. The problem with this model is that it is enormously expensive and there is no evidence that it works. The article points out that no US government will be able to justify the amount of money required to properly finance high risk pools, and that it probably costs upwards of 8 billion US$ a year to do this. It also notes that – contra Paul Ryan’s assertion that pre-ACA high risk pools worked great – most of the state-based high risk pools in the pre-ACA era were hideously expensive and did not work. The article also points out that a preferred strategy of some left-wing critics of Obamacare – shifting high risk patients onto Medicare – may also not work, since Medicare is already a high risk pool and expanding it by dumping in the highest cost patients will be impossible without increased funding (the article uses the language of sustainability, about which I’m suspicious because of its origins, but it cites well-respected sources on the challenges of continuing to finance Medicare if it is treated as a high risk pool).
So given this, the only way that a private system will be able to achieve universal coverage is if everyone is enrolled in insurance, and insurance is properly financed. The article describes the systems in Singapore, Germany and Switzerland, and how each of them force all their citizens into insurance coverage. For example, about Singapore it says:
Singapore institutes compulsory contributions from employers on behalf of their employees to create medical savings accounts. Employees maintain these accounts for health care expenses such as health and disability insurance premiums, hospitalization, surgery, rehabilitation, end-of-life care, and outpatient services. Those failing to pay their premiums are subject to garnished wages and other legal actions that can force payment of back premiums, penalties, and interest. Unemployed or low-income individuals are eligible for government subsidies that enable them to pay for the premiums.
and it points out that Germans are enrolled automatically in “private” funds that take a guaranteed 7.3% of their income. It’s hard to imagine any such plan being popular in the modern US, where the individual mandate has been subjected to years of withering don’t-tread-on-me type criticism and the idea of paying an income-based premium is terrifying to the GOP’s donors. In Switzerland and Singapore, where the systems do not use tax-based payments, they have government subsidies for (according to the article) up to a quarter of their population. So these systems – which by all accounts are functioning, affordable and tolerated by their citizens – share Obamacare’s key tactics of means-tested subsidies and individual mandates.
The article also makes the point that these systems have a very healthy free market structure, with much more vibrant private markets than the USA:
Germany in 2015, for example, had 124 sickness funds and 42 private health insurance companies, and the average resident of Switzerland in 2011 could choose from 59 health insurers offering coverage, with the 5 largest insurers covering 43% of the population. By comparison, in California, a state with approximately half Germany’s population, only 7 firms covered more than 95% of privately insured individuals in 2011, with the 3 largest firms covering 75%. In Massachusetts, with a population slightly smaller than Switzerland’s, 3 insurance companies enrolled 79% of individuals with private insurance.
I think this might be pushing the comparison a little bit, because many of the “sickness funds” in Germany are likely union-run or industry-based mutual associations with very strict management criteria, non-profit structures and guaranteed membership, and they may be regionally based so not actually directly competing with each other. Also, I’m very confident that all three countries studied have rigorous price regulation and strict government oversight of providers (hospitals and clinics), so that they cannot for example price gouge the insurance provider for an infamous $500 band aid as they can in the USA. It’s much easier for private insurers to compete with each other for market share when they know what the cost of the insurance payout is likely to be, and can be confident that the provider won’t charge them arbitrary amounts, and I suspect that this certainty also removes a whole layer of administrative staff at both provider and insurer, for which the US system is infamous.
Having given an overview of these systems the article draws a simple conclusion and gives a firm recommendation: Obamacare needs tougher enforcement of a more punishing individual mandate. I think this conclusion is only partially correct, missing the role of price regulation and cross-subsidization from general taxation that protects these private markets. So I think that the article is a little strong in concluding that the USA can definitely achieve universal health coverage without at least, for example, introducing a public option to every market place (or at least the rural areas). But it does make the point that a better regulated insurance market with better subsidies and a much tougher mandate would likely encourage competition, and achieve universal health coverage (or close to it) without driving up costs. It certainly seems that the architects of Obamacare knew this and had a long term plan for its expansion and improvement, and assuming the world survives Kim Jong Il’s birthday this weekend, hopefully the Democrats will be back in power in the USA soon enough to begin taking the next steps along that road. I’m not convinced yet, but it is still possible that Obamacare could show the way to a genuinely private, free market alternative to achieving UHC without single payer. In my view, however, if Obamacare (and human civilization!) does survive the Trump presidency, it is likely to become an increasingly state-regulated and state run system, rather than a robust private market place, because introducing a public option, slowly squeezing out private provides, and then making health insurance premiums fully means-tested and tax-based, is a much more reliable way to make everyone happy.
Still, for genuinely interested conservative policy-makers outside of America (whose “conservatives” have no interest in anything resembling policy), the next few years of Obamacare offers an exciting opportunity to develop new pathways to UHC. Given the complexity of movement towards UHC in some low income countries, and the very limited government finances in many of them, it would be interesting to see whether Obamacare’s roll out, expansion and improvement offers a new and more viable pathway to UHC than those currently on offer. I’m not holding my breath, but it will be interesting to see what lessons we can learn from this new and quite unique approach to one of America’s (and the developing world’s) big remaining problems.
First we have to survive the Trump presidency, though.
fn1: Caveats on the use of “non-crazy” should be inserted here, especially after Brexit
fn2: Interestingly, these sickness funds sound a lot like the non-profit mutuals that Obamacare was supposed to encourage, and which US “conservative” critics of Obamacare constantly sneer at and declare completely unviable.