Just don’t call it socialized medicine
The U.S. spends 16% of gross domestic product on health care, Germany 10.7%. They like their system much better than we like ours. But here is the banner headline, given our gridlock on health care reform: the German system is not socialized. The Germans do not use a single-payer, Medicare-type plan.
Our vested interests seem to prefer gridlock to meaningful reform. Advocates of the American way of health care seem determined to scare you to death about the alternatives. Opponents of health care reform like to point to the dreaded specter of health care rationing. Speaking of rationing, Uwe E. Reinhardt, professor of political economy at Princeton University, pointed out a decade ago out in his paper, Germany’s Health Care System: It’s Not The American Way, “…the [American] system now rations health care by income and ability to pay.” That is, health care is rationed for the 45 million Americans who do not have health insurance. Keep this point handy in the coming debate.
Here are some attributes of the German system:
- Coverage is portable
- Premiums based on ability to pay
- No deductibles
- Co-payments for service
- Free choice of provider
- Administrative simplicity
- Little or no wait for surgery or diagnostic tests
- After-hours care (by a physician) a phone call away
- 85% of the population covered by supervised semi-private plans
- 15% covered by fully private insurance plans offering more amenities
- Opt-in parallel private insurance available to the wealthy
- Workers and employers each pay about 8% of salary to a health fund of their choice
- Non-working spouse covered by employee contribution
- Self-employed purchase relatively affordable insurance from private providers
- Uses few tax dollars
- No significant rationing
The reason Germans achieve the results they enjoy is that they effectively regulate the semi-private plans offering health insurance. These providers cannot refuse coverage to anybody. And they cannot charge differential pricing based on age or health status. This mandate makes the playing field level for all of the plans, with no competitive disadvantage to any provider. The Germans call these funds sickness funds—not a very sexy name, but these are the Germans, after all. We could call them health funds. In Germany, there are about 200 of them.
In exchange for tightening the social compact, causing the wealthy to pay more by virtue of percentage-of-income pricing, which has long been standard progressive taxation practice, everybody gets access to insurance they can afford. Nobody is denied health coverage based on a pre-existing condition. If you live in the same world I do, everybody has a family member or a loved one with a pre-existing condition. Wouldn’t that peace of mind alone be worth ending our gridlock?
Understand that if we do nothing, in just a few short years the cost of our system will be off the charts. We are on a theoretical trajectory to health care consuming 100% of our gross national product by the end of the century. Of course, that cannot happen. Our economic system would collapse first.
About that 8% worker contribution to the health fund: it seems like a lot, but according to NPR, “It's about the same proportion of income that American workers pay, on average, if they get their health insurance through their job.”
Does the German model work well enough for us to consider it? Germans experience relative greater satisfaction with their health care system than we do, according to Lou Harris polls. And consider this: though Germans are allowed to opt out of the sickness funds to go exclusively with private insurance, most don’t, even among the most affluent consumers.
It’s NOT Socialized Medicine—It’s Socialized Risk Management
Our health care insurers don’t want you to like this model because it means much tighter regulation for them. But everyone is going to take a hit in the reform scenario. Tacit understanding of this reality has been demonstrated with the recent symbolic cost containment offers made by the consortium of doctors, hospitals, pharmaceutical companies and insurers. Word is that hospital associations will announce similar planned measures today. These measures are mostly window dressing and get us nowhere near where we need to go. Still, it is a good thing that the parties are at least at the table.
Were we to adopt a system similar to that of the Germans, physicians and hospitals would have to accept a little less in compensation, and to be compensated more for keeping people healthy. Consumers would have to have to accept mandatory participation, and slightly higher costs for some. Business would have to offer insurance benefits to all workers, with some allowance made for part time workers. Insurers would lose much of their autonomy and ability to generate huge revenues based on making the customer fund the risk.
In this system, marginal employers and insurers might take the biggest hit. And that is as it should be. Employers who do not offer health care are merely betting on the margin—that their employees, once sick, will either go away or find care through our meager public care offerings. Or they are betting that another family member of the worker receives health care benefits. So they are merely foisting their burden onto the back of someone else. Sure, very small businesses will scream about this, and allowances may need to be made, but you get the picture.
Though insurers are mostly categorized as not-for-profit entities in the U.S., they are so in name only. You only have to look at the revenues they generate to know something is out of whack. I have worked my whole life in the nonprofit sector—take it from me—these are not nonprofits. So I guess, on one level, we are talking about some form of income redistribution here. A very small cadre of the executive class will take a big hit as these providers are forced to care for those they can now legally exclude by virtue of price. Granted, this is a vastly simplified explanation, but generally, no one cares to stick around for the details.
The upside for everyone, in addition to health care for all, is that once the system devours a smaller percentage of our GDP, that money is available to all for productive uses. And 1% of our GDP at present is about $33 billion—or enough to bail out an automobile maker for a while. What if we were able to follow the German example and shave five percentage points off our cost of health care?
If we are to break the gridlock, the new paradigm that we must accept no matter what system we chose is that health care is not a market commodity, but a public resource. It is something we must have in a civil society—access to health care for all. Just as we need electricity for all. The government does not need to provide it all. The government needs to regulate its provision as it does through our system of regulated private utilities. That is not socialism. It is a regulated economy. And—to stick with the energy analogy—when that regulation is undermined, breaks down, or is scammed, we end up with an Enron scandal, a manipulation of the market to benefit the few. A manipulation of the market to benefit the few…Hmmm… 45 million Americans uninsured…I wonder…
The Ugly Secret: We Already Have a Tiered Health Care System
The German health care system enjoys one of the best international reputations in the world. It costs a lot less than ours. The rate of increase in its costs is less than half our rate of increase over the last 15 years, even though their population is statistically older than ours. Why do we insist on ignoring their example? Is it chauvinism? The sense that no viable solution ever arises from beyond our shores—especially from socialist Europe? Is it that the wealthiest of our citizens enjoy a fantastic health care system, devoid of interference on any level? And for that unfettered marketplace appeal, we are willing to sacrifice the bottom 15% of our population, who get, in all practical terms, nothing? This is the status quo we cling to with the ferocity of NRA members? This is our example to the world? I hope not. I hope we are too evolved for that to be our future as well as our past.
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Comments
"not a market commodity, but a public resource." - thanks for that, a helpful argument to bring to the table.
Spreading the risk pool to the whole population will help people who have trouble getting insurance. But it doesn't deal with the high cost of gold-plated health care.
I think having doctors on a salary might help a lot and some public support for medical education. The average doctor graduates with a mountain of debt and 'just accepting a little less in compensation' means longer until they've paid off their med school debts.
In terms of the lowered physician salary, that needs to be offset in some way for the physicians, otherwise, it's a losing situation for them, and they will never support it.
A recent New York Times article talked about doctors opting out of the reimbursement system entirely, regaining control of their practices in exchange for reduced income in some cases. You can find it here.
the german system is close to the american 'system', which would make the transition less painful, but why not design a rational system and enjoy real efficiency?
Best,
SK
No joke--they like the system as a whole. They just didn't want to work in it, because the pay is crap. Go figure.
You wrote "I'm thinking that a single payer system won't pass Congress."
You are correct. It won't even be considered. See my posts on the topic.
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Thank you thank you for this intelligent article. I hope it makes a difference in the debate. Time Magazine had a good article making the same point Malusinka did above - doctors get paid by the service. Thus my father in law has had four operations on his knees despite being a a poor candidate for the procedures.
Again, from one exhausted by a relatives illness and by the insurance battles this week, thank you.
I too do not believe that a single-payer system will be implemented anytime soon.
As I discussed here, a system similar to France may be more feasible (private/public system in which everyone is covered). Unfortunately, I still believe this will not happened either.
Malusinka: since you were discussing the concept about spreading the risk, you may be interested in the following article: Let’s Spread the Risk (I Mean Health Care; Not Flu).
Jocoserious: you sound like you know what you are talking about, like you work in medicine. I guess my response is, "Yes, but..." Specialty medicine is not rationed in Germany. And even if West Germany was never communist, they do have a stronger social democratic tradition--with notable lapses—I see your point there.
University professors in this country must pay big bucks to attain their PhD's, and never come close to the pay scales of M.D.s. Wall Street titans will hopefully make less going forward in a more regulated environment, and I don't expect any shortage of them in the future.
Doctors in many specialties perform what many see as assembly line medicine. Perhaps the nature of the medical interaction itself can be improved along with compensation based on outcomes as well as procedures.
If you are saying that everyone: hospitals, government, business, individuals and insurance companies must pay more or cut rates in order to have a system under which all are covered, but doctors will enjoy the status quo in terms of compensation, you would have to show that medical outcomes in underperforming markets can be brought up to the standards of higher performing areas—that pay per procedure actually works. Higher pay for doctors does not correspond to better outcomes. That will be scrutinized--is being scrutinized--in the context of the current debate.
I thank you for your comments even if I cannot see it as you do.
One clarification, though--PhDs do not, by and large, pay anything for their graduate educations. While some departures occur, the standard practice is for PhD students to receive a tuition waiver and a small stipend, contingent upon participation in the teaching of undergraduates. At the end of that, many PhDs earn six-figure incomes. MDs, though, undertake VASTLY (I can't highlight that word enough) more debt than any other profession in this country--and if they stay in academic medicine (the best direct comparison to PhDs in academia), they frequently make LESS than their counterparts in the economics, engineering, etc. departments. Yes, you read that right, LESS. Many starting MDs earn under $75K for their first job in academia; some neurosurgeons, even, start as low as $125K. Frankly, that sucks--think about four years of undergrad, four years of med school, then seven years of hellish training + a year of fellowship, at the end of which you have barely the monthly income to pay the interest and start chipping away at the principal of the average MD's student loan.
And I don't see why any sort of 'burden of proof' needs to be on the physicians if they expect to see their salaries remain relatively constant. They're the ones in the trenches, taking care of patients. Sure, make some rules so that docs aren't milking cash cows that make the whole system more expensive, but for the love of god don't squeeze them so much that nobody wants to be a doctor anymore.
I guess I'm just sick of doctors being vilified. Honestly, after working as much as I do to take care of patients, training as hard as I've been training to become a neurosurgeon, it really f*%@ing pisses me off to hear all this talk about physicians making too much money and being the cause of the health care crisis. When are we going to talk about the legal crisis in this country? What percentage of GDP goes towards the legal system? Nobody cares--let's hang some doctors in effigy.
As for Germany rationing care--I don't know, maybe they don't. I know for a fact that it's rationed in several other nations, but perhaps Germany is the exception.
A side note: rationing comes in many forms. In some countries with universal health care, it's a situation of "All men are created equal, only some are more equal than others" (my apologies to Orwell). That is to say, if you are above a certain age or suffer from certain comorbidities, or are severely ill enough, you don't qualify to receive care. For example, in a particular European country with a vaunted health care system, an 85 year old with a subdural hematoma after a fall does not receive surgery. Period. Doesn't matter if he still runs marathons--he gets no surgery. Too old. But it's not rationing--he just didn't qualify for care. It was never even an option for him, so nothing was withheld, nothing was rationed.
I guess it's all a matter of how you look at it.
Anyhow, sorry if I've been a bit peevish in my comments. A lot of folks with real skin in the game get that way. I appreciate your discourse.
Kanuk -- My apologies if I received incorrect information about Richardson. I understood that she was still awake and talking--though suffering from a terrible headache--when they finally cajoled her into boarding an ambulance, and that 40 minutes later she arrived at the hospital. In this country, she would have had an immediate scan and proceeded straight to the OR (that is, if she had gone to a medical center in a region of the country in which the malpractice climate has not forced the neurosurgeons out of practice). Would she then have survived, or had a decent quality of life? Hard to say--but she would have had a shot. That's what our current health care system affords you: a shot.
What's most saddening is that people who would benefit the most from a health care overhaul are the ones who are buying into the fear tactics by those who gain the most by keeping them ill and poor. Throw in the word "socialized" and people somehow assume it's the worst of communism and fascism combined. It defies all reason. Meanwhile, some of us are dying for this change
What happened with Natasha Richardson was that she refused medical help following her fall, although the staff at the ski station asked her to see a medical doctor. Apparently, she was even joking with the staff shortly after the incident. She then asked to be driven back to her hotel. Since her personal ski instructor was paid for the whole day and this person stayed with Ms. Richardson in her hotel room to make sure she was alright (I believe there was another staff member from the ski resort in the room). Later on in the day (late afternoon -- a few hours after the fall), Ms. Richardson complained about major headaches and showed important signs of confusion/sickness. An ambulance was brought in and she was sent to the local hospital.
From what I read in the Quebec media, at that point, it was already too late to help her. Given her conditions, she was sent to a trauma center in Montreal (an hour and a half away by ambulance), where she was already brain dead or in a coma (in critical condition) when she arrived. The family decided to sent her to the US in order to be close to relatives when came the time pull her from life support. This is obviously very unfortunate and tragic incident.
Of course your comment about "vested interests" sums it up nicely.
If there isn't something in it for somebody our politicians are against it. They don't like to see doctors or others get rich based on their work but they sure do like to get rich themselves taking bribes from lobbyists.
Of course we are not. Obama promised hope. But change we are not going to get.
PS: It must, much of mine has said goodbye recently...
"We are overpaying for the health care we are not getting."
All of this, of course, contributes to the present gridlock. As long as health care is a commodity, greed will be a driver.
In the early 1990s the German government, in a move designed to cut health-care costs, limited – and in some cases completely blocked – access to new drugs and medical technology. Since 1993 the German government has set separate budgets for each segment of the health-care market, with provisions of heavy sanctions if these budgets are exceeded. The 1993 pharmaceutical budget was set at $15 billion – a 9.1% cut from 1992. The government ruled that money spent over the budget would be taken out of doctors’ incomes. This caused a 25% drop in spending on medicine. Similarly, the sale of the seven largest research-intensive drug manufacturers fell by 16.5%, while the sales of generics (copycat drugs which are cheap because they were developped at least 15 years ago and hence no longer protected by patents) rose by 36%.
While these measures were successful in the field of cost control, they had devastating consequences for the pharmaceutical industry. The German pharmaceutical companies, no longer keen on developing new drugs, saw their world-wide share of drug patents drop to 8% from 16%. Doctors, afraid that they would have to pay the pharmaceutical bills out of their own pockets, started to refer their patients to specialists and hospitals. Patients with minor illnesses, requiring common and cheaper medicines were helped, but the doctors would “dump” their more serious cases instead of treating them in more costly ways. As a result, in 1993 Germany saw an increase of 10% in hospital patients and 9% in referrals to specialists.
The next year a similar phenomenon occurred at the level of the hospitals. They, too, were assigned budgets that they were not allowed to exceed. Consequently German hospitals, faced with patients who might cost too much, referred them to university clinics, which by law are not allowed to refuse patients. “Patients are being turned away, acutely ill patients are wandering from clinic to clinic, and expensive drugs are being withheld from cancer sufferers,” the German weekly Der Spiegel wrote in 1994 (April 11). “Money is being saved – even if it costs lives to do so. Whenever possible many hospitals are turning away expensive patients covered by the sickness funds. The only good patient is a cheap patient.”
Unfortunately, the German system has become the European model. Politicians in neighbouring welfare states, noticing the drop in German health expenditure, started to follow the German example. The only thing that mattered in their eyes was cost control. Many adopted the policy of adding drug volume control to price control and finally to prescription control. France introduced so-called negative recommendations, telling doctors what they are allowed to prescribe and what not. These recommendations have been made compulsory and doctors risk heavy financial penalties if they go against them.
At the root of these decisions is the understandable desire of governments to control health-care costs. But rationing is clearly not the answer. What many governments in Western Europe have overlooked is that there is nothing wrong with a society devoting more of its resources to health care. This even appears to be an indication of prosperity. The higher and the more developed a society becomes, the more its citizens are willing to spend on keeping healthy. Modern technology makes everything cheaper except the highest quality of medical care, which is constantly improving. To try to limit access to this technology in the name of “cost-control” is irresponsible.
Meanwhile, the larger and more fundamental problem of how to finance the health-care systems is not addressed. Instead of funding the provisions of today’s sick with taxes from today’s healthy and young, people should be building up reserves for their own future liabilities. What Europe needs is to replace its pay-as-you-go systems by privatized and capitalized health-care systems. This, however, would imply that the governments relinquish control over the system, which is the very last thing they are willing to do.
You present case studies that are 16 years old. That would be my first caveat. A foremost American expert, Uwe Reinhardt, writing at that time, makes no reference to the imbalances you site in some references she makes to German cost-containment efforts of the 90s. In recent years the Germans have reformed their drug classification practices to ameliorate certain imbalances in the system. At the same time, promoting generics is important in a market where physicians are bombarded with perks to promote pricey new drugs, the use of which may or may not be warranted in any given case.
A drop in German companies’ worldwide share of the pharmaceutical market is based on international considerations rather than the domestic market alone. And the argument about disincentives to pharmaceutical research is at least 20 years old, and is present worldwide.
Patient dumping (even in quotes) in Germany? More evidence please.
Cost containment is a nasty business. You have to squeeze somewhere. Everyone has horror stories. You write: “there is nothing wrong with a society devoting more of its resources to health care.” My point is that costs must be contained or we will go bankrupt. The Germans will not. So that pretty well sums up the difference in our points of view. What would you propose? My point is to cut costs by moving away from pay-per-procedure. That is radical. Radical reform is desperately needed.
You summarize: “The only thing that mattered in their eyes was cost control.” At this moment, critics of health care reform in this country are reminding anyone who will listen that unless we address cost, all the rest is useless. So, again, what would you cut?
Because once you do, someone will howl. And they will howl about rationing. And insensitivity to patient care.
Yet, I don’t deny that some rationing may occur now in Germany, and may well be documented. My primary point is that it is already rationed in the U.S. The overall intent in Germany is that it not be rationed.
As I said in the post, compromises abound. A recent paper on the German system from the Max Planck Institute states that in considering the course of treatment for some cases, and I presume this would include cancer, the age of the patient is taken into account. That can be construed as rationing. It is also done everywhere. Find out more on that here.
You write: “people should be building up reserves for their own future liabilities.” By this I presume you mean something like a medical savings account. I cannot see the logic in this. A single, intensive surgery could wipe out the life savings of even an upper middle class family. Which the whole point behind insurance.
If you want to research the German system as profiled by writer who has done far more research than me, I recommend, Health of Nations: An International Perspective on U.S. Health Care Reform, 3d edition, by Laurene A. Graig.
We absolutely should be kicking the tires of any proposed system, but I don’t think we can throw out the German model based on the (legitimate) concerns you raise here.