US health care is literally killing people

9th August, 2019

It is astonishing how far the debate on healthcare has moved in the US, at least for the Democrats. Not long ago offering universal, government-funded healthcare was viewed as tantamount to communism; now, it’s a touchstone of many presidential hopefuls.

Not before time. The US healthcare system is a monument to perverse incentives, unintended consequences and political inertia. It is astonishingly bad — indeed, it’s so astonishingly bad that even people who believe it’s bad don’t appreciate quite how bad it is.

I don’t say this out of any great devotion to the UK alternative. The National Health Service works well enough for a vast tax-funded bureaucracy, but it might work better if we didn’t view any attempt at reform as the desecration of a holy institution. Nor do I have bad experiences of US healthcare. My daughter was born in America, where my family had sensitive and expert medical care. But that’s what you’d expect with a good health insurance plan — something that many Americans don’t have.

Around 27m people — 10 per cent of the non-elderly US population — have no insurance at all. That is precarious, given that a serious illness or accident could incur bankruptcy-inducing costs. Yet the astonishingly large number of people living on the edge is still progress: before the passage of the Affordable Care Act under President Barack Obama, the figure was closer to 45m people.

It’s this lack of anything resembling universal access that seems most grotesque to observers from other rich nations. But it’s just the beginning of the costs that the US health system imposes on Americans.

The financial costs are most obvious, and they are truly extraordinary. For a family of four, the US system costs about $13,000 a year more than that of Switzerland, which itself is substantially more expensive than any other. The US system costs more than twice as much, per person, as the universal coverage provided by the UK’s NHS. Even the government-funded part of the US system costs more per capita than the NHS.

Why so expensive? It’s because US doctors prescribe more treatments, and those treatments cost much more than they do elsewhere. Most governments limit the price of treatments, freeriding on the US market to stimulate investment in medicine. American hospitals and drug companies have enormous leeway to raise prices — insurers have limited bargaining power, and uninsured patients even less.

Nor is all this money bringing any obvious reward. Compared with other rich countries, the US ranks at or near the bottom on life expectancy, infant mortality, adolescent pregnancy, sexually transmitted infections, drug-related mortality, obesity, diabetes, heart disease, lung disease and arthritis. No, the healthcare system can’t be blamed for all that — but it is hardly covering itself with glory.

One of the striking tragedies of modern America, brought to light by the research of the economists Anne Case and Angus Deaton, has been the phenomenon of “deaths of despair”, from suicide, alcohol abuse and overdoses. Such deaths go a long way to explaining why mortality rates for middle-aged white Americans have stagnated or perhaps even risen in the US, while falling fast in other rich countries.

I recently had the opportunity to ask Prof Case and Sir Angus to what extent the US healthcare system was to blame. Their answer, in a nutshell: it would be an exaggeration to blame the system entirely but not a gross exaggeration.

The most obvious connection is that the opioids that have played such a role in these deaths of despair were supplied by the healthcare system. Opioids are a simple and profitable palliative for a widespread condition (“I’m in pain”) rather than a cure for anything. Doctors and drug companies made more money if they prescribed more opioids, and human nature being human nature, found ways to justify that decision to themselves.

The dysfunction of the US healthcare system has also eaten away at American wellbeing in other ways. Those extraordinary costs — more than $10,000 per person — must be paid by someone. When they are paid by employers, through workplace health plans, rising healthcare spending becomes a substitute for the rising wages that workers so desperately want.

And those extortionate costs also give employers a powerful reason to jettison staff at every opportunity, employing freelancers and subcontractors in the hope of cutting the cost of employer-sponsored health insurance. As a result, people feel disconnected from the workplace. Jobs become insecure ways to scrape a living, rather than sources of identity and pride. For many, despair follows.

Such problems are easier to diagnose than to cure. Reforming American healthcare will require an almighty effort. With politics gridlocked and soaking in lobbyist money, it’s not obvious that the US government is capable of running the kind of healthcare system that works elsewhere — even if Congress decides to try. But try it must, because the status quo is a tragedy.



Written for and first published in the Financial Times on 12 July 2019.

My book “Fifty Things That Made the Modern Economy” (UK) / “Fifty Inventions That Shaped The Modern Economy” (US) is out now in paperback – feel free to order online or through your local bookshop.

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