Costs of Political Intermediation and Sustainability of the European Social Model in Health Care: the Dutch Example

3. The American Private-enterprise Model before and after the Obama Reform

On the other hand, the only model for a non political management of health care taken into consideration in the current stereotyped public debate has been the American one, which is deemed by most Europeans, Italians included not unreasonably, a remedy worse than the evil. Michael Moore’s amusing film, “Sicko”, released in 2006, may have been mistaken in not even addressing the problem of the costs of the European health care services (and even in taking seriously the presumed efficiency of the Cuban health care system), but it portrayed well the failure of the American model, based on “free” individual bargaining between single customers and private insurance companies.
The American system is capable of ensuring America’s success in achieving excellence and an uncontested primacy in research. It does not however address the objective of guaranteeing adequate health care to all the citizens of the most powerful nation on this planet. This is a goal that was not even achieved with the recently passed health care reform through the initiative of president Obama, the first of its kind since the days of Lyndon Johnson, and the umpteenth and eventually, in large part, successful attempt to establish a true health welfare system. after almost seventy years of previous attempts, starting with Truman it was an attempt that succeeded after a crushing political defeat was suffered on the same subject by the previous Democratic administration, that of Bill Clinton.
Despite the fact that the president staked all his weight, prestige and political destiny, although this time the Democrats had the largest majority in both Houses ever enjoyed by any administration in nearly forty years, even after the troubled passage of the Obama reform, between 15 and 22 million individuals (the estimate is surprisingly the subject of bitter dispute), out of a population of about 305 million, will still not be able to afford any health care coverage. In this sense, even after the reform, the American system is bound to remain even less economically efficient than that of all the countries in Western Europe in terms of the cost-benefit ratio, at least as far as the protection of its people’s health is concerned. In other words, the efficiency of the American system cannot be assessed in terms of results achieved in relation to the protection of the people’s right to health care.
According to OECD 2009 data on 2007, Americans spend 16 % of their GDP on health care, the highest percentage in the world, much more than all Western Europeans. And costs are growing uncontrollably. in absolute terms in 2007, they tripled compared to 1990 and were eight times higher than in 1980. By comparison, in the EU, the highest expenditure is that of France, with 11 % of GDP, followed by Germany with 10.4. Italy spends 8.7 % of its GDP on health care. the Eurozone average is 9.6, which is less than two-thirds of what Americans spend. The average in OECD countries is 8.97.
Many of the most advanced medical research centres in the world are American. But today, before the implementation of the reform, between 45 and 54 million Americans (a number that was growing before the reform, but this estimate too is far from precise and unanimous) has no health insurance coverage whatsoever. Although this includes a small number of wealthy people who are not insured because they can cope with any eventuality in case of need, and a larger number of younger and healthy people who, while theoretically able to afford, with some effort, to pay the cost of insurance, prefer to run the risk and give priority to other expenses, most of these people simply cannot afford the cost of insurance. At best they take advantage of what is offered by charitable organisations in case of need. This will still be the case for those bound to remain excluded from any cover even after the implementation of the reform.
Thus, according to the latest data available, which obviously cannot yet take into account the effects of the reform, that will be fully operational only in 2014, the US ranks 41st in terms of life expectancy. The citizens of all the major countries of Western Europe (including Italy, ranking 13th) live longer than the Americans. It may be objected that this result, like similar ones that could be mentioned, is not only a consequence of the organisation of the health care system. There are many other relevant factors that could be mentioned concerning lifestyles, eating habits, social and cultural inequalities, average propensity to risk, crime rate, transport security and so on8. Many of these factors actually penalise America, whereas, incidentally, they mostly enhance the corresponding statistical scores of Italy. Yet, according to WHO data, even infant mortality in the US is 0.63 % in the first year of life and 0.78 within the first five years (in Italy, the worst country in the Eurozone, it is 0.5 and 0.61 respectively; the best in the EU are the Swedes, with 0.32 and 0.4)9.
The reasons for this result, unacceptable from a European perspective, are well known. A system based on individual bargaining between private individuals and insurance companies is ruled by the mechanism of “adverse selection”. The insurance company is most of all interested in acquiring as customers only those young and healthy individuals who are statistically less costly, but for this very reason also need health insurance cover less than others. In the event of unexpected accidents, these insured parties will often be guaranteed the most excellent standard of care (as often also happens to foreigners who stipulate a temporary health insurance policy with travel agencies when travelling to the US) — provided contracts do not include unconscionable binding clauses. It is precisely those in greater need of health insurance — those suffering from chronic or recurrent illnesses or the elderly or those at risk — who are instead the customers private insurance companies wish to do without.
Hence not only the refusal or the unsustainability of insurance costs for individuals belonging to these categories — the refusal was possible without limitation until the Obama reform — but also the inevitability of real reciprocal swindles. On the one hand insurance companies entice people into signing standard form contracts filled with unconscionable clauses, often impossible to understand for those without expertise in this field and bound to leave the innocent customers with no cover for many serious and even disabling illnesses. On the other hand, it is equally obvious that this sort of system also encourages those wishing to take out a policy to act in an equally dishonest manner. Generally speaking, customers tend to hide their conditions or lie on risk factors when they take out an insurance policy. Hence the need for a large number of preliminary medical tests before signing a contract, many of them often useless and possibly even potentially harmful to the would-be customer’s health, but necessary in the exclusive interest of the insurance companies. These tests are entirely paid for by customers and that has resulted in sky-high overall costs of health care in the US.
To these additional costs to the system, useless for the protection of the health of individuals, one must add the enormous cost of litigation due to the inclination of insurance companies, in the absence, or virtual absence so far, of effective public regulators, to pay for as few services as possible At times competition is frozen by means of cartel agreements that are obviously difficult to uncover for both consumers and regulatory agencies, and that increases costs even more. Similar waste of money is caused by the largely useless or potentially harmful further clinical tests that are often prescribed for the sole purpose of preparing a legal defence in the event of litigation following possible fatal or undesired outcomes of medical or surgical procedures.
Further huge costs result from the propaganda and lobbying campaigns that for decades have been used to induce the majority of Americans and their political representatives to preserve as it was, and partially still is, such an irrational, iniquitous and inefficient system.
These costs too have to be covered by the customers of insurance companies. Seen from Europe, the violent reactions of many American citizens against any meaningful health care reform project in recent months, that are likely to cost the Democratic Party dear, could seem incomprehensible. But the cost of American health care is also so high because with their policies Americans are also paying for a huge propaganda machine aimed at preserving the current system as much as possible, for the sole benefit of insurance companies.
Lobbyists working in this area are among the best in the world, and are paid, and pay, a lot. But it is quite striking to watch good and active citizens so determined to defend the indefensible against their own interests. This should suggest some reflections on the poor health of contemporary democracy and on the rationality of the making of public choice.
Since the Sixties, the American health care system includes federal programs benefiting the elderly and the poor (Medicare and Medicaid) as well as war veterans. Together, these public programs cover — before the reform implementation — about half of the total US health care expenditure. This is no surprise, given the tendency of the costs of all health care systems to concentrate always in a similar proportion on covering the needs of about 5 % of the population most at risk because of age or condition. To this large public contribution to the total health care expenditure one should also add the cost of tax allowances granted for the payment of insurance policies. But even this remarkable share of public spending does not offset the disadvantages described above nor does it spare the American health care system its enormous costs, so much higher than the European ones, or its social iniquity. A telling example is that of young children of disadvantaged families with no health insurance that cannot be excused with the typical argument of extreme social Darwinism, according to which all individuals should always be considered responsible for their own lot, regardless of the different opportunities they were offered. And yet the immense economic and lobbying influence of insurance companies over American politics had even managed to prevent the extension of federal insurance programs to disadvantaged minors until the Obama reform. An attempt by Congress to achieve this was in fact vetoed by former President George Bush, Jr.
The Obama reform has now largely expanded the number of beneficiaries of health care services and limited the arbitrary power of insurance companies in some key points, beginning with the prohibition on refusing to contract with customers who already suffer from pre-existing conditions and setting fixed ceilings of reimbursement thus limiting treatments for patients suffering from particularly costly diseases. The reform has imposed the inclusion of university students, even when no longer minors, in family policies, has widened the social strata covered by the Medicaid program and extended the obligation to provide health insurance to employers with more than fifty employees. It has introduced an obligation to take out insurance, albeit limited to some, however wide, income brackets, for those not covered by employment contracts. It has introduced federal subsidies for small businesses willing to provide cover for their employees even when they are not obliged to do so and for lower income families.
In the end the Obama reform has indeed deeply reformed the system, but failed to reshape it at the root. And it is even less likely that the reform, when fully implemented, will lead to a containment of the total costs of the American health care system capable of bringing them down to Western European levels. Nor has it attempted to achieve a standardisation of the evaluation systems of the different policies offered on the market, which would have allowed consumers to make clearer and more informed choices. The most controversial and most “Old Europe-style” proposal was dropped: it aimed at introducing a “public option”, i.e. a public federal insurance scheme, competing with the private ones, a move that was considered at the beginning the only appropriate instrument for pegging down policy prices in a market structured, firmly settled and layered such as that in the US today.
Last but not least, every system based on individual bargaining between the insured party and private insurance companies is bound to become increasingly unfair as a consequence of predictive medicine. If in the future mapping the individual genome provides an increasingly precise individualisation of risks, the very mutualistic character of the insurance principle will disappear. Those at risk of developing expensive diseases, or maybe incurable ones, not only would be almost unable to obtain insurance to at least alleviate the consequences, but would also unnecessarily and inevitably be placed in the anxious condition of fearing for their unhappy fate years or decades in advance, without being able to do anything at all to prevent those events.
It should be remarked that within European health care systems too, Italy included, the public health service is only obliged to provide a basic package of health care (hence not stating the aforementioned non-acknowledged creeping cuts to due services) — levels that, as mentioned above, are bound, rebus sic stantibus, to suffer significant reductions in the future. This fact will inevitably lead to a rise in the number of those resorting to taking out supplementary private insurance, to be negotiated separately from the basic insurance package, for all that is not guaranteed by the public service, but not for this reason less necessary for guaranteeing tolerable life conditions. Consequently, in the near future these systems risk suffering the disadvantages typical of both systems. Without timely reforms, the cost of the “adverse selection” mechanism will increasingly be added to those caused by patronage, waste, corruption and the weight of politics and bureaucracy.

7 Mark Pearson, Head, Health Division OECD, Disparities in health expenditure across OECD countries: Why does the United States spend so much more than other countries?, Written Statement to Senate Special Committee on Aging, 30th September 2009, OECD, 2009. Gavino Maciocco, La spesa sanitaria americana,, 30/11/2009.
8 The overwhelming influence of social factors in public health results is highlighted in Public Health, Ethics and Equity, ed. by Sudhir Anand, Fabienne Peter and Amartya Sen, Oxford University Press, 2004.

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