How to improve the US health system without killing Grandma

Lateline presenter Leigh Sales asks economics correspondent Stephen Long about the state of health care in the US:

In economic or social terms it’s a disaster... America’s got the most expensive healthcare system in the world. They’re the only rich nation in the world that doesn’t have universal healthcare coverage.

The healthcare in the US costs about 17 per cent of GDP... That is roughly double the cost here, and yet it doesn’t reflect in the health outcomes, which are poor.

For example, adult mortality rates in the US are about twice the rate here where we have half the health costs. And the US is one of the few advanced nations that actually registers a very significant, relatively high child mortality rate, and I could go on.

And Stephen does go on...

The fact that employers provide the healthcare undermines the mobility of labour because people stick in a firm and a region rather than moving on to areas where it might be more personally and broader economically useful, and it’s just a very, very flawed, ineffective system.

Will Obama’s health reforms be an improvement — even if it kills the occasional Grandma?

I’m highly sceptical that it will make much difference at all and I question the strategy. If you look at what they’re doing over there, the basic core of the healthcare reform being put up by President Obama is to subsidise people to take up private health insurance, to subsidise poor people and middle income earners to take up private health insurance.

And private health insurance is at the core of the problem. They’ve got private health insurers who have been gobbling up a whole lot of healthcare expenses in profits and administration so I don’t see that it’s necessarily going to lower costs by subsidising them to seek rents. And you’ve got a very concentrated industry amongst the big players.

So that’s the major structural design problem and it doesn’t deal with the fact that it’s still largely provided by employers and not a situation you want when you’ve got double digit unemployment rates. And more than that, it doesn’t really — although it tries to tackle it at the margins — deal with the lifestyle issues and demographic factors. I mean, you’ve got huge disparities by race and socio-economic status with healthcare outcomes.

Plus you’ve got terrible diet, high rates of smoking and the disease that goes with those sorts of problems.

Gee, that sounds something like the third-world health outcomes which beset the indigenous aboriginal population here in Australia, for which our Government is attempting wide-ranging initiatives to close the gap.

Is there an alternative to Obama’s reforms? Or, in other words, how can they effectively close the gap between health outcomes in mainstream Australia and that in the US?

Well, an alternative which is probably completely politically unrealistic in America but makes more sense is to have something more akin to what we have here with a socialised core system that provides for basic healthcare costs for everybody and allow insurance as a top up on top of that, and it would actually economically make a whole lot of sense to get the insurers out of the system in America and put the money that you’d save on the massive administration costs and profits to which the healthcare budget is diverted to into preventative medicine and try and put the $350 billion that you’d save on estimates I’ve seen into programs to actually prevent rather than try and cure after the event’s happened.

Yep, makes a whole lot more sense, but as Leigh Sales sums up...

I’m glad we’re sitting here talking about it rather than trying to do it.