Before he takes us to France, T.R. Reid explores all of the things that might increase medical care costs for Americans as opposed to their counterparts in other countries. He disabuses us of two notions right away: that it’s doctors salaries and malpractice insurance. Doctors do get paid more in the U.S. than they do in other countries, but Reid tells us the economists who study the issue calculate that lower doctors’ fees and drug prices wouldn’t save us that much money.
Malpractice costs are a long-time issue for advocates of tort reform that President Barack Obama addressed when he laid out his health care reform proposals. But Reid points to a study from a health care management professor at the Wharton School of Business, Patricia Danzon, to tell us that the more expensive malpractice insurance costs American doctors face add only about 1 percent to our total health care costs.
So what is it? Mainly high administrative costs. Private insurance companies in the U.S. spend about 20 percent of their budgets on non-health care related expenditures. Health insurance companies will tell you that not a lot of that goes to profit, but rather that they spend money mitigating against the free-market problems private companies face. As an undergraduate who was one class shy of an economics minor, I can tell you that I learned that health care markets are special, but I’ll spare you the wonkish details here. You can, if you’re interested, look here and here. Also, you can listen to NPR’S Planet Money podcasts, which document the kinds of information problems health insurance markets face.
So one of the ways countries that rank better both in controlling costs and improving outcomes is by getting rid of the overhead. In countries like France, Germany and Japan, everyone is required to get health insurance and health insurance companies are required to provide it. That gets rid of the people American companies employ to deny claims and investigate patient histories. It forces everyone to pay into the system, so it mitigates against the problem of adverse selection. And doctors don’t have to maintain patient records either. In France, everyone is issued a card to maintain their histories. (Computerizing health care is part of what the stimulus package wanted to accomplish.)
In all of these countries, which use a system started by Otto von Bismarck in Germany, health care providers are private doctors who work for themselves or for officers and hospitals that make a profit. What’s different is that non-profit insurance companies provide the funding, employers help employees pay, governments kick in to help out for people who can’t quite afford their premiums or are self-employed, and the countries control costs by controlling the reimbursement fees paid to doctors and hospitals. So it’s not to say that everything’s perfectly affordable. The doctors in France, Germany and Japan Reid meets are unhappy with the amount of money they receive. But no one Reid meets would change the system they work in entirely.
So how did his shoulder injury fare? In France, the doctor told him he would not recommend surgery because his injury was not that extreme, but if he didn’t like that diagnosis he could go to a doctor, get a new one and probably get the surgery with relatively no waiting time. In Germany, the system ok’ed the surgery, but the doctor told him she wouldn’t necessarily recommend it and told him to talk to a physical therapist before plunging in. In Japan, the doctor said health insurance would pay for Traditional Chinese Medicine, physical therapy, a monthly steroid injection and for the expensive total shoulder surgery, but like every other doctor but the American, he didn’t think the shoulder surgery was the best way to go. All of these doctors told him the surgery was usually reserved for people in pain, and his problem was stiffness. Surgery, too, would cause pain and require time and energy to rehabilitate afterward.
After this, Reid left the systems that are closest to what the American plan will likely end up looking like to visit the system Americans probably fear most, the U.K.’s NHS.