At the high end, the U.S. has the best health care system in the world, leading the way in terms of innovation and quality of care. The problem with the system is that the distribution of quality, and of care itself, is uneven. There are many problems that emerge when the system is subject to closer inspection. The U.S. ranks poorly with respect to health outcomes among industrialized nations. Millions of Americans have no, or inadequate, health care coverage. The costs associated with the U.S. health care system are much higher than in comparable nations. If the quality of care was that much better, higher costs would be acceptable, but with poor health outcomes, overprescription of antibiotics, and an emphasis on costs and bill collection rather than on patient care, the U.S. health care system has more than its fair share of shortcomings. If an optimal health care system provides a high standard of care for everyone, and delivers value for money for the payers, then on that measure the U.S. system is inefficient and ineffective. This paper will highlight some of the key issues.
A good health care system should be efficient, delivering results at a reasonable cost. One of the biggest issues in the U.S. health care system is its cost, which is significantly higher than the cost in comparable countries. In some ways, this is intuitive, because building profit into every step is going to deliver a higher total cost to the payer. The theory is that a business will be run more efficiently than a government-run system. The problem is that many government-run systems are trying to be efficient because of funding crunches, and when they are trying, the incremental efficiency of the U.S. system is not enough to counteract the incremental costs associated with profit-taking.
Profits in the U.S. health care are predictable to a student of economics. Economists argue that government intervention in an economy will lead to market failure, but the same can be said for information asymmetry. Most people know next to nothing about their bodies, in particular their health. They know even less about the actuarial science used by the insurance industry. Because of that, and the fact that payers typically have low price elasticity of demand where their health is concerned (the alternative being to suffer and die), industry players leverage these information asymmetries for profit-taking. This is a cause of market failure in health care (Bloom, Standing & Lloyd, 2008). The Affordable Care Act has some provisions that take baby steps towards improving knowledge. Insurance exchanges, for example, use the marketplace structure to educate consumers about the different healthcare plans, something that should increase their information, if only a little bit.
Further complicating the cost issue is the fact that some payers -- the government through Medicare and Medicaid -- do have more information, and bargaining power, and use this to constrain payments to practitioners. As a result, healthcare providers typically have to earn their profits on a small portion of their user base -- privately-insured individuals and cash payers. As a result, Americans pay far more for health care, on average, than do citizens of any other country. Annual U.S. healthcare spending is at $8,362 per capita. This is double the level of Canada, and substantially higher than the second-highest spender in the world, Luxembourg, at $6,743 (Rogers, 2012).
The U.S. outspends other countries in just about every category as well. Drug costs are a major driver of healthcare spending, and are a good comparable of costs because the drug is the same in every country, something you cannot necessarily say about procedures. In a survey of six drugs, the U.S. was found to have the highest prices of any country on all six, and it was not close (Klein, 2013). There is an explanation for the high drug prices. The cost of developing new drugs is very high. It is a process that takes years, and can cost billions (Mullin, 2014). In order to make up for that cost, regulators give the developing...
In response, most countries with public health care systems place caps on how much drug companies can charge for their drugs, because government is both the payer and the regulatory authority. Indeed, this is how it works in the U.S. with Medicare as well. So was with medical procedures, the industry is left to recoup most of its profits from a small portion of its payers -- government payers allow for some profit, but not much. And the same is as before -- there are information asymmetries and low price elasticity of demand, which are two factors that give sellers a high level of bargaining power at the worst of times, but under monopoly conditions are wide open for abuse.
The high cost of health care in the U.S. might be tolerable if the quality of care was actually better, or if everybody received it. The reality is that neither is the case for most Americans. Prior to the rollout of the Affordable Care Act, the U.S. Census Bureau estimated that there were 42 million Americans without health insurance at all (Smith & Medalia, 2014). Approximately one-quarter of these were able to get health insurance as the result of the APA, but that still leaves a gap of around 30 million Americans without health insurance (Wayne, 2014).
Then there is the matter of health outcomes. The outcome of the U.S. health care system have been declining since the 1970s, to the point where in 2006 it ranked 39th in infant mortality in the world, 43rd for adult female mortality, 42nd for adult male mortality, and 36th for life expectancy. There remained a high number of preventable deaths from such causes as obesity, hypertension, smoking, physical inactivity and high blood glucose. The U.S. rankings are among the bottom for industrialized nations (Murray & Frenk, 2010). Even where the U.S. has improved some of its health rankings, that has only represented a shift away from mortality to morbidity -- from death to chronic illness (Grush, 2013).
Thus, the U.S. healthcare system is delivering very poor value for money. Some of the poor performance can be attributed directly to health policies. The uninsured surely will face worse health outcomes than those who have insurance, for example. They are more likely to delay visits to the doctor, and as a consequence will face worse outcomes. Furthermore there is the risk of being turned away for treatment. In addition, the healthcare system suffers because uninsured people, instead of receiving proactive treatment, will turn to emergency rooms. This not only is going to lower their outcomes, but will increase their costs as emergency medicine is more expensive than preventative medicine. But in emergency rooms, the government is often the payer, so that is the choice that many uninsured Americans must make, if they even seek out health care at all for their ailments.
One of the drivers of performance in U.S. health care is perverse incentives, which mean that there is incentive to do the wrong thing. The uninsured being forced to rely on emergency care is an example of this, because failing to provide people with basic health coverage raises the costs for everybody. Another good example is with prescription drugs. One of the reasons American spend so much more on prescription drugs is not just because they cost more, but also because Americans consume more. There is emphasis on patient satisfaction, in part because in a competitive system patients are customers. Furthermore, dissatisfied patients are more likely to sue a provider, which in turn will increase insurance rates.
Thus, providers focus on patient satisfaction as a means of addressing these issues This manifests itself in overprescription of drugs. For example, there is a mandate within healthcare never to deny a request for a painkiller, and pain will almost always negatively reflect on customer satisfaction (Sorinenberg, 2014). This drives up costs without improving effectiveness. Where overprescription of antibiotics is concerned, there is also the risk of antibiotic resistance, which poses a long-run health hazard.
There remain many problems in the U.S. health care system. The Affordable Care Act is little more than a starting point for addressing those issues. For one, it has not addressed the issue of the uninsured. There are still around 30 million uninsured Americans. Some will be people who cannot afford health coverage under the plans. The premiums for even a bronze plan, which gives pretty terrible coverage with high deductibles, are high for people who barely have any extra money left over after paying for their food and rent. The reality is that punishing people with fines for not signing onto a health care plan will not address the gaps that exist between the threshold…
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