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How the US Got Inferior Health Care

By Ivan Light

At its April 2005 meeting the Club had as its speaker the Chair of the Los Angeles County Task Force on Health Care Access, Dr. Robert E. Tranquada. Dr. Tranquada described the process whereby the United States locked itself into an inferior health care system that wastes billions of dollars annually and unnecessarily deprives an eighth of the American population of health care. Dr. Tranquada has chaired the Los Angeles County Task Force on Health Care Access since 1992. He has been Associate Dean of the UCLA School of Medicine as well as Chancellor and Dean of the University of Massachusetts Mexican Center, and Dean of the School of Medicine at USC. He is the author of over 50 scientific and education papers and book chapters, and is a member of the Institute of Medicine of the National Academy of Sciences.

The Club meeting was held at Pilgrim Place in Claremont. It was free and open to all voters. Sixty people were in attendance.

Summary of Dr. Tranquada's Presentation

By Ivan Light

Introducing his topic, Dr. Tranquada explained that the United States expends about 13 percent of its gross domestic product on health care, but obtains coverage for only 84 percent of the American population. In Los Angeles County, the situation is worse: one third of the population under 65 years of age lacks medical insurance. In contrast, Canada and European countries pay only nine percent of their gross domestic product for health care, but they obtain universal coverage for the lesser amount. As a result, the United States pays more for its health care coverage than any other nation, but ranks only 23d in average life expectation of the American population and 17th in infant mortality.

The current health care system of the United States is ineffective and wasteful mainly because of high administrative costs for insurance payments, said Dr. Tranquada. A single-payer system like Canada's reduces the cost of medical care by approximately one half thanks to reduced administrative costs. Evidence of the administrative waste can be found in what Dr. Tranquada called the "medical loss ratio." The medical loss ratio is an insurance industry term which refers to the percentage of insurance premiums that actually pay for health care. Medicare has a medical loss ratio of 97 percent. That is, administration absorbs only three percent of Medicare's income; the rest buys health care. In contrast, America's foremost private insurer, Blue Cross, has a medical loss ratio of 70 to 80 percent. That is, the costs of administration consume between one-third and one-quarter of the premium payments which Blue Cross receives. Medicare delivers health care more efficiently than does Blue Cross.

Asked why such an inefficient and wasteful health care system persists, Dr. Tranquada indicated that insurance companies and pharmaceutical companies profit from the waste, which they protect and defend. When the Clinton administration proposed moderate health care reform back in 1994, the insurance industry raised $30 million to oppose it. They were joined by the American Hospital Association, which raised $20 million, and by pharmaceutical companies, which raised comparable sums. Their money bought deceptive media advertising that mislead and confused the American public.

Dr. Tranquada also offered a capsule history of the evolution of health care in the United States after 1945. Since that year, the real costs of medical care have indeed risen because of the aging of the American population and the discovery of new and remarkable medical technologies that save lives but are quite costly. However, these trends do not explain why the costs of health care in the United States in real dollars have increased so much faster than inflation.

A series of pragmatic attempts to curb health costs, starting with those of President Nixon in 1973, have had beneficial effects, said Dr. Tranquada. Currently, the insurance industry's imposition of "experience ratings" has most adversely affected small business whose employees are disproportionately represented among the uninsured.

The insured have a stake in the delivery of health care to the uninsured, said Dr. Tranquada. First, there is the obvious moral claim on the insured to extend health care coverage to the uninsured, especially when there is no money cost in doing so. Second, the uninsured carry contagious diseases that can infect the insured. Third, the uninsured turn to public emergency rooms for free care. However, their "free care" costs the taxpayers of California $1,000 per visit instead of the $80 that an office visit would cost. Fourth, hospitals are closing their public emergency rooms because the service is overused and under-funded.

Dr. Tranquada endorsed SB 840, which is now under legislative consideration in Sacramento. If passed, the bill, sponsored by State Senator Sheila Kuehl, would save California $8 billion a year in health care costs while permitting the State of California to extend quality health care to all Californians.

US Pays More, Gets Less Health Care than Other Countries

by Ivan Light

Dr. Nigel Boyle, Professor of Political Studies at Pitzer College, an expert on health care systems around the world, was the speaker at the club's June 2005 meeting.

Summary of Dr. Boyle's Presentation

by Ivan Light

The United States health care system is “a grotesque failure” by comparison with the health care systems already in place in other OECD countries, said Dr. Boyle. The reason for his judgment, said Boyle, is that the United States spends so much for health care, and has "so little to show for it."

Of the world's industrial democracies, France has the best health care system according to the World Health Organization, but France pays more for health care than other OECD countries, except Germany, Canada, and the United States. Unfortunately, the United States pays $5,635 per inhabitant for health care, and ranks 37th in the world in respect to health care whereas France pays only $2,903 per inhabitant but ranks first. Germany pays $2,996 per inhabitant, and ranks 25th in the world; Canada pays $3,003 per inhabitant, and ranks 30th in the world. Paying so much more than all the other industrialized countries for health care, the United States nonetheless has 15.5 percent of its population who have no health coverage whereas all the other OECD countries extend health care coverage to their entire populations.

Professor Boyle went on to examine the causes of the United States' health care fiasco. These are multiple. First, the United States does not make effective use of general practitioners as medical gatekeepers, who screen patients before referral to high-priced specialists. As one result, he said, patients in the United States are ten times more likely to be referred for heart surgery than in Canada, but Canadians are no less likely than Americans to survive heart disease.

Dr. Boyle also indicated that health care costs in the United States are high because drug companies are allowed to gouge the public here, but are controlled elsewhere. Additionally, medical doctors earn 5.5 times average wages in the United States whereas in other OECD countries they earn only 1.5 to 2.5 times average wages. Administrative costs are extraordinarily high in the United States compared with those in other OECD countries, most of which have efficient "single payer" plans in operation. Finally, the United States practices what Dr. Boyle termed "sports utility medicine" that routinely selects the most expensive possible treatment plan rather than cost-effective alternatives.

"The American public is more dissatisfied with its health care system than is true in any other OECD country, except Italy", Dr. Boyle said. Forty percent of Americans indicate satisfaction with their health care, but 46 percent of Canadians, 65 percent of the French, 58 percent of Germans, and 57 percent of the British express equivalent satisfaction even though their countries spend much less on health care than does the United States.

The high health costs in the United States undermine the United States economy. Dr. Boyle mentioned that General Motors pays more for employees' health care than for steel. GM adds the extravagant cost of employee health care to the cost of its vehicles. Thus, high health care costs reduce foreign and domestic demand for GM cars, and reduce the number of workers GM hires. The same high costs adversely affect other American industries, raising their prices vis a vis competitors located in other countries.

Dr. Boyle criticized what he called "Wal-Mart style" health care now prevalent in the United States. This style permits employers to evade responsibility for employee health care, then pass the bill to the tax payer. This method of providing health care is expensive, inefficient, and unfair, he said. It is expensive because public emergency rooms are high-cost treatment sites. It is inefficient because the quality of medical care obtained from public emergency rooms is sub-optimal. And, he said, it is unfair because responsible parties pass the bill to the taxpayers.

Comparing consumer dissatisfaction in the United States and Canada, Dr. Boyle agreed that Canadian consumers tend to be dissatisfied because Canada spends too little on health care, "under-funding the systems." However, Canadian consumers are satisfied with the single-payer universal system that delivers their health care. In the United States, by contrast, said Boyle, consumers are satisfied with the vast amount of money spent on their health care, but dissatisfied with the wasteful and inefficient delivery system.

The United States could deliver better health care, reduce its cost, and enhance consumer satisfaction if flaws in the existing health care system were addressed, he said. Spain and Italy show the way. Both these countries reformed their medical systems in the 1980s, and now operate efficient single-payer plans. However, since reform of the national health care system seems unlikely, at least in the short term, Dr. Boyle thought the best chance for reform in the United States now lies with state single-payer systems. Currently, Hawaii's plan comes closest to this successful model, Boyle said.