Trumping Obamacare . . . How a Market Based Approach to Universal Healthcare can Work

US Medical care illustrated by flag and stethoscope

There is no issue more important to the future of America than it’s long-term fiscal sustainability. And the long-term fiscal sustainability of the United States has been placed in jeopardy primarily by the structure and expense of America’s healthcare system. According to the Congressional Budget Office, nearly the entirety of the growth in federal spending as a share of the economy—excluding interest—can be explained by government health programs: Medicare, Medicaid, the Medicaid-related Children’s Health Insurance Program, and the Affordable Care Act. In addition, one of the principal economic challenges faced by middle- and lower-income Americans is the expense and instability of American health insurance. Health insurance keeps getting more and more expensive, forcing many families to choose between paying health care bills and buying other essential goods and services. These problems, rightly, remain at the center of our public policy debate. Our political system has, thus far, failed to solve them. They require our urgent attention.

One of the root causes of this failure has been the historical left-right divide on healthcare. Progressives view healthcare as a basic human right and seek to build a comprehensive, government sponsored system of national health insurance that would guarantee health coverage for every resident of the United States. Conservatives on the other hand view healthcare as a tradeable good that should be subjected to normal market forces, and the subsidization or provision thereof is not an appropriate, constitutionally enumerated role for the federal government.

There is, however, a way to adopt a market based approach to universal healthcare. We do have real-world models for market oriented, universal cost effective health systems. Notably, two wealthy nations—Switzerland and Singapore—spend a fraction of what the U.S. does on health care subsidies, and yet have achieved universal coverage with high levels of access and quality. Neither the Swiss nor the Singaporean health care systems could be described as libertarian. Nor are they single payer, government-dominated systems.

In 2011, the Singaporean government spent $851 per capita on health care: one-fifth of what the U.S. spent, on a purchasing power parity–adjusted basis. Singapore has achieved this using a universal system of consumer-driven health care. The government funds catastrophic coverage for every Singaporean, and reroutes a portion of workers’ payroll taxes into health savings accounts that can be used for routine expenses. This shows us the economic power of returning health coverage to the insurance model used in other parts of the economy: catastrophic coverage that protects against large financial loss, with health savings accounts that give consumers control over their own health care dollars.

Switzerland subsidizes, on a sliding scale, the premiums its citizens pay for private health insurance: a system known in the U.S. as “premium support.” There are no “public option” government insurers in Switzerland, unlike in the United States, where nearly one-third of the population is enrolled in single-payer health care (Medicare and Medicaid) . In Switzerland, low-income individual s are fully subsidized; middle-income individuals are modestly subsidized; and upper income individuals are not subsidized. The sliding subsidy scale mitigates one of the key challenges with traditional welfare programs, in which recipients are no longer eligible for a defined benefit once their income exceeds a specified threshold. These “benefit cliffs” discourage welfare recipients from seeking additional work, because by increasing their wage income, they are decreasing their overall income, once the value of the rescinded welfare benefits is taken into account. Because Switzerland focuses its public resources solely on lower-income individuals, the federation’s universal coverage system is far more efficient than America’s. Only one-fifth of Swiss citizens receive federal health insurance subsidies, whereas nearly four fifths of Americans do. In 2012, Switzerland public entities spent approximately $1,879 per capita on health care: 45 percent of U.S. public spending.

Put another way, if U.S. government health spending were proportional to Switzerland’s, the United States would be able to eliminate its budget deficit. While Switzerland spends more on health coverage than Singapore does, a modified version of the Swiss system is a more realistic—and more attractive—path for U.S. reform.

Some might contend that Switzerland is not a useful model for U.S. health reform because the Alpine federation is demographically dissimilar to the United States. But Harvard’s Regina Herzlinger conducted a study comparing Switzerland’s performance with that of certain U.S. states, such as Massachusetts and Connecticut, whose demographics and population densities are similar to Switzerland’s. Concluded Herzlinger, “Swiss health care expenses are considerably lower than those of the United States and comparable states, while outcomes for cerebrovascular disease and diabetes, which are linked to the socioeconomic characteristics we selected, are roughly equal or better.”

An irony of the polarized health care debate in the United States is that there are some common elements between Democratic and Republican health-reform proposals. The ACA deploys Swiss-style insurance exchanges for the low-income population. And the model of Medicare reform most widely espoused by Republicans involves adapting the Swiss model to Medicare: migrating future retirees into a system under which seniors would be given premium support subsidies, tied to a benchmark plan, to shop for private health insurance.

Hence, it is possible to conceive of a new path for health care and entitlement reform—one that learns from Switzerland’s experience with premium support, and Singapore’s experience with health savings accounts—to place America’s health care system permanently on a stable footing.



FEATURED BLOGGER Dr. Rubin Pillay is a medical futurist and international expert in health leadership with a global reputation in innovation and 28-year career clinician & academic leader.  Follow him on Twitter@PillayRubin and Facebook         INVITE Dr. Pillay to keynote your next event!