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.