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The Cost of Not Having Single Payer: $1.4 Trillion Per Year

You could not devise a worse health care system than that of the United States if you tried. By far the most expensive, with among the worst results.

Perhaps saying “among” the worst results is being too kind. That is an accurate statement if we are simply measuring metrics such as mortality rates and other medical outcomes. But if we consider that tens of millions of United Statesians go without health insurance while none do in any advanced capitalist country (or most any other) — and that tens of thousands annually die because of that lack — then we must reasonably assess the U.S. health care system as the worst.

This is the high cost of private profit in health care. How much? The United States spends more than $1.4 trillion per year than it would otherwise if it had a single-payer system. Such is what happens when a service is left in the hands of the private sector, and allowed to be bent toward profit rather than human need.

To calculate that figure, I took the average per capita health care spending of the three largest EU countries — France, Germany and the United Kingdom — and the neighbor of the U.S., Canada, and compared that average to U.S. per capita spending. The composite average for Britain, Canada, France and Germany for the years 2011 to 2016 is $4,392 per capita per year, converted to U.S. dollars adjusted to create purchasing power parity as reported by the Organisation for Economic Cooperation and Development (OECD). Per capital health care spending in the U.S. for 2011 to 2016 averaged $8,924 — more than twice as much! Taking that difference and multiplying by 317 million, the average U.S. population for the five-year period, and the total annual excess comes to $1.44 trillion.

That excess has been steadily increasing. Doing these same calculations for earlier periods found that for the period of 2001 to 2010, the annual average of excess spending was $1.15 trillion. The annual average for the period of 1990 to 2000 was $685 billion.

For 2016, the OECD reports that only nine of the 35 countries surveyed spent more than half of what the U.S. spent on health care, and the second highest spender, Switzerland, spent $2,000 less per capita than did the United States.

Can this astounding amount of spending be accounted for by more health care? Nope. The average length of a hospital stay in U.S. in 2014 was 5.5 days, seventh shortest of 35 countries surveyed by the OECD. The average hospital stay in each of the four core comparison countries (Britain, Canada, France and Germany) was longer — a composite average of 7.6 days.

Paying more for less

So it really comes down to inferior results. The U.S. does well in combating cancer, but poorly in almost every other category of health care measurement. And people in the U.S. pay dearly for the privilege of health care, if they are lucky enough to have access to it. The cost of health insurance continues to rise, and the amount a patient must pay out of pocket before insurance kicks in (the “deductible” in U.S. lingo) is also steadily rising as employers push more of the cost of health insurance on to their employees.

Phillip Longman, discussing this issue for Popular Resistance, wrote:

“Indeed, the inflating cost of health care is the overwhelming reason why most Americans haven’t received a raise in years, and why employers increasingly make use of contract workers rather than taking on new employees that would receive benefits. This year, the total annual cost of health care for a typical family of four covered by a typical employer-sponsored plan surpassed $25,000, according to the actuarial research firm Milliman. Such a family will typically pay more than $11,000 of this cost directly out of its own pockets, through payroll deductions, copayments, and deductibles. They will also pay much more indirectly in foregone wages and other forms of compensation, and quite possibly more yet in the form of unemployment, as employers seek to escape their share of the mounting cost of providing health care for their employees.”

And because health care is dependent on maintaining a full-time job, bosses have more leverage over their employees, who will lose their insurance should they quit their job. Women with lower-paying work or staying at home to raise a family are also put at greater risk as health insurance for themselves and children are tied to their husband’s job, making it more difficult to leave a bad marriage. This dynamic could also apply to any one person in a non-traditional family or within a gay or lesbian household.

Thus it comes as little surprise that the United States is one of two countries in the world that do not provide paid maternity leave for women workers. Hope to get it at work? Good luck with that — only 9 percent of companies offered fully paid maternity-leave benefits to workers in 2014, down from 16 percent in 2008. By contrast, at least two-thirds of countries have mandatory maternity pay for at least 14 weeks, according to an International Labour Organization report.

You might not have it so good, but that is the price to be paid for high profits. An analysis by Forbes magazine found that health technology had the highest profit margin of any of 19 broadly defined industrial sectors, at 20.9 percent, topping even finance, the second highest. Three of the biggest companies — Pfizer, Merck & Co. and Johnson & Johnson — had profit margins of 25 percent or higher. When a separate study broke down profit margins by smaller, more specific industry categories, health care-related industries were three of the six most profitable. Generic pharmaceuticals topped the list, with a margin of 30 percent. Major pharmaceuticals and biotechnology were also among the top six.

Keeping people sick as a business model

The piles of money vacuumed into pharmaceutical pockets do not sit entirely idle. Big Pharma lavishes vast sums on doctors, state Medicaid officials and regulators to promote their products. Studies have shown that doctors who have received payments from pharmaceutical companies are more likely to prescribe those companies’ medications. But pharmaceutical companies go far beyond wining and dining doctors, or paying them speaking fees. They organize “patient advocacy” groups that pretend to be grassroots organizations. An investigative health reporter, Martha Rosenberg, writes that these front groups fly in “patients” to hearings to ask for expensive drugs to be fast-tracked for approval.

Expensive drugs that have to be taken for years, or even a lifetime, create a business model that “actually wants people sick,” Ms. Rosenberg writes. She says:

“ ‘Mental illness’ is a category deliberately ‘grown’ by Pharma with aggressive and unethical million-dollar campaigns. These campaigns, often unbranded to look like a public service, convince people with real life challenges they are ‘depressed’ or ‘bipolar’ and that their children have ADHD. Despite the Pharma marketing, the New England Journal of Medicine recently reported that the rate of severe mental illness among children and adolescents has actually dropped dramatically in the past generation.”

All this adds up to a 2011 study in the journal Health Policy that ranked the U.S. last in preventing early deaths. Attributing this result to “the lack of universal coverage and high costs of care,” the Commonwealth Fund noted:

“The United States placed last among 16 high-income, industrialized nations when it comes to deaths that could potentially have been prevented by timely access to effective health care. … [O]ther nations lowered their preventable death rates an average of 31 percent between 1997–98 and 2006–07, while the U.S. rate declined by only 20 percent, from 120 to 96 per 100,000. At the end of the decade, the preventable mortality rate in the U.S. was almost twice that in France, which had the lowest rate—55 per 100,000.”

An OECD report found that life expectancy in the U.S. is two years less than the average of OECD countries, a gap that is growing. That statistic isn’t improving at either end of life, as U.S. infant mortality rates are considerably higher than in peer countries. A report prepared by the Peterson Center on Healthcare and the Kaiser Family Foundation explicated this poor performance:

“The U.S. has been slower to improve its infant mortality rate than comparable countries, which we define as countries whose gross domestic products (GDP) and per capita GDP were above average in at least one of the past 10 years. While the infant mortality rate in the U.S. improved by about 13 percent from 2000-2013, the comparable country average improved about 26 percent, according to data from the Organization for Economic Cooperation and Development.

U.S. infant mortality rates appear to be about 42 percent higher than the comparable country average. Looking into specific measures of infant mortality, it also appears that the U.S. has about 66 percent more neonatal deaths (deaths which occur less than 28 days after birth) than the comparable country average. From 2000 to 2013, neonatal deaths decreased by 13 percent in the U.S. and by 23 percent in comparable OECD countries.”

What’s good for big business is good for big business

With such dismal results, why does such a furious campaign continue to insist on privatized health care? Ideology, of course. Ideology no different than that propagated to insist that government is always bad and private enterprise always better. But government doesn’t have to earn a profit; private enterprise expects to and will pack its bags if it doesn’t. Just as privatization invariably results in higher costs and often poorer quality than when the service was provided by a government agency as a public good, health care is provided far more efficiently when in public hands.

Noting that “high administrative costs and lower quality have also characterized for-profit HMOs” (health maintenance organizations funded by insurance premiums that supervise health care), a Journal of the Canadian Medical Association article provides the following figures for the percentage of revenue that is diverted to overhead:

* For-profit HMOs: 19 percent

* Non-profit plans: 13 percent

* U.S. Medicare program: 3 percent

* Canadian Medicare: 1 percent

Ideology drives the Trump administration and the Republican-controlled Congress to have no problem with adding more than 20 million people to the ranks of the uninsured by attempting to reverse the weak-tea, incremental improvement of Barack Obama’s Affordable Care Act. This is not different from Donald Trump’s chimeric $1 trillion infrastructure program, which is a scam that commits his administration to zero dollars while showering corporations with massive subsidies that would supposedly magically induce private infrastructure investment.

That extra $1.4 trillion paid for health care in the United States is the result of a system designed to deliver corporate profits rather than health care. It’s the “magic of the market” at work. It just isn’t magic for you. In a concise explanation on the Real-World Economics Review BlogPeter Radford explains:

“Markets, you see, are wonderlands that always and inevitably lead to efficient outcomes. And it is no good any starry eyed liberal tinkering with those outcomes. They are magically correct. By correct we mean that they cannot be improved upon. Economists have this vice like attachment to certain core beliefs. One of those is that, if left unfettered, markets will zero in on an allocation of stuff that can never be improved, especially by meddlesome governments.

The way you get to this particular promised land is by letting the great forces of supply and demand batter away at individual preferences and budgets until all the trading and so on ends with no one able to make another trade without such a trade making someone else worse off. It sounds wonderful. Now to make this all work we have to believe in magic. We have to suspend our intelligence and imagine a world where everyone knows exactly what everyone else is doing, where no one cheats, where everyone is marvelously rational, where they don’t suddenly change their minds, where they can calculate at the speed of light, absorb vast amounts of data, and always — yes always — arrive at precisely that combination of stuff they wanted. Within the constraints of their budget of course.”

Sarcastic, yes, but that is a summation of what passes for economic orthodoxy nowadays. Markets always magically result in fair and just results for all, and any actions by government automatically damage this miraculous machine. And therefore health care should be left in the hands of corporations with as little regulation as possible. And therefore the U.S. is a country in which 22,000 people die and 700,000 go bankrupt per year as a result of inadequate, or no, health insurance in the United States. That’s one of the prices of capitalism.

More articles by:

Pete Dolack writes the Systemic Disorder blog and has been an activist with several groups. His book, It’s Not Over: Learning From the Socialist Experiment, is available from Zero Books.

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