Tuesday, July 3, 2012

(No.205) "Obamacare & the Canadian comparison"

"Obamacare, insurance companies and the Canadian comparison"

by Alastair Rickard

Last Thursday (June 28) the U.S. Supreme Court issued its decision on the constitutionality of President Obama's major first term initiative the Affordable Care Act dubbed 'Obamacare' by his poltical opponents.

The Court's decision itself was yet another example of the danger of paying attention to the predictions of 'experts'. The preponderance of the talking heads so beloved by the cable news networks had declared that the Court would disallow all or most of the health legislation's core elements. Indeed an online betting site with a superior record for predicting events gave the odds of Obamacare being overturned at about 80%.

During the political and public debate over the proposed reform of the American health care system I wrote several columns on the subject for RickardsRead.com as well as an article for the Toronto Star (see references at the end of this column).

Like most Canadians I could only shake my head in puzzlement during the debate in the U.S. not only over the routine misrepresentation of the Canadian single payer health care system by opponents of the President's proposal but by the strength and vehemence of the opposition to improving and expanding the American health care system's coverage. It is a system that is dysfunctional, an awkward hybrid of public and private insurance that, for example, sees more than 50 million people with no health insurance and tens of millions more who are under-insured.

Because American insured health care for those under 65 is rooted in employer-provided plans that originated in the 1940s, the total of uninsured Americans continues to increase following the onset of the 2008 recession: lose your job, lose your health insurance. Annual premiums of $10,000 and more for a decent level of non-employer related private health insurance family coverage are unrealistic if not financially impossible for many Americans.

However the decline in the number of Americans covered by employer health insurance plans began before the recession. By 2000 65% of workers had employer plans; by 2010 this proportion had declined further, to 55%.

Governor Mitt Romney of Massachusetts understood when he brought in a health insurance system in 2006 for the residents of his state (a plan on which Obamacare was modelled) that employer-provided health insurance plans are a bad approach to the provision of health care. Romney, as the Republican nominee for president this year, is trying rather unconvincingly to be the arch-critic of Obamacare, i.e., of a plan whose genetic inheritance is his own creation.

In the 5 to 4 Supreme Court decision last week the conservative Chief Justice John Roberts not only voted with the Court's 4 liberal justices but wrote the majority opinion. It surprised the media and nearly all of its expert 'talking heads'. Cable news coverage for several embarrassing minutes following the decision's release breathlessly reported that the Supreme Court had held the Affordable Care Act to be unconstitutional.

Lost in the 'political horse race' mentality of much, too much of the American media (e.g., "what does this decision mean to the presidential race?") are a variety of serious questions central to the whole debate about the American health care system.

For example: over the next decade what will be the actual additional net cost of the Affordable Care Act? How will the rising cost of the American health care system be paid for? How will the system address health care for the 20 million out of the 50 million not brought into the system by Obamacare? What will happen to health care for the very poor Americans eligible for Medicaid when a majority of the U.S. Supreme Court also ruled that the states cannot be required to participate in the revised program?

Indeed, it must be said that there are detailed proposed alternatives -- not merely rhetoric -- from the Republican side of the debate that have, perhaps because of the mindless shouting from the Tea Party elements, received less attention than they deserve. [See, for example, in the Spring 2012 issue (No.11) of the American publication National Affairs the article "How To Replace Obamacare" by James C Capretta and Robert S. Moffit. The authors work for two conservative 'think tanks'.]

But no significant politicians care to propose what Barack Obama himself once formerly publicly supported and what is needed in order to help make economic sense of the American health care system: a universal, single payer system in which insurance companies are present only on the margins.

There is one point about the future costs of the American health care system I have not yet seen addressed. It was the subject of a letter I wrote recently to the National Post. The letter appears below.


July 1, 2012

To the editor,

The National Post,

Toronto, Ontario

After the U.S. Supreme Court's decision upholding as constitutional President Obama's health care legislation I have read the views of several Canadian columnists, including the National Post's Jonathan Kay, about the American vs. Canadian health care systems.

The comparative cost of the the two systems ca. 2010/11 is: in the U.S., nearly 18% of GDP, 11.7% in Canada, yet with overall health outcomes significantly inferior in the U.S. plus 50 million people uninsured.

The President managed to get as much as he could in improvements to the American health care system given political realities. The fact is that much of the improved coverage will not be implemented until 2014 and beyond and the results evident even further into the future. However the likely reality is that while health outcomes overall  will be improved for Americans the cost of the U.S. system vis-a-vis those of Canada and other developed countries will not improve by much comparatively.

Why? Because the cost efficiency of the American system for people under 65 [i.e., the age Medicare starts] will be seriously handicapped by the absence of a single payer system. Instead the revised system (with even a proposed "public option" excluded) continues to embrace many insurance companies dealing with premiums and claims involving tens of millions of insureds, hundreds of thousands of employer firms, and countless hospitals and medical professionals.

This will mean a continuing and increasing level of health care cost that will keep greater efficiency much lower that it would otherwise be even under a flawed and incomplete single payer system like Canada's.

Preserving a key role as intermediaries in the American health care system for private insurance companies (each with its own underwriting, claims, countless forms, processes and employees) is not only unnecessary but foolish and ultimately counter-productive and expensive.

My views are those of a former executive in the Canadian insurance business.

Other views on this subject by Alastair Rickard:

In the Toronto Star, Sept.9, 2009: "A puzzled Canadian ponders surreal healthcare debate".

On www.RickardsRead.com:

No. 44, posted Aug.8, 2009: "Pt.1 -- Insurance companies and U.S. health care " &
No. 45, posted Aug. 13, 2009: "Pt.2 -- Ins. Companies and U.S. health care."

No. 51, posted Sept. 9, 2009: "American reaction to my Toronto Star op-ed on health care reform".

No. 55, posted  Sept. 28, 2009: "Fear and loathing in U.S. health insurance reform".



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