US Health Care: Why Privatization Is Inefficient - Part 1

Part 1 | Part 2 | Part 3 | Part 4
As I write this, the US Senate is debating a major overhaul to the American health care system — one that the US  House of Representatives has already passed (albeit by a close margin).  While it's not firm enough to call it history in the making, it's certainly closer to becoming reality than anyone expected, and something I never thought I would witness in my lifetime.

Having lived and worked in the United States for some time, I consider myself fortunate to have experienced health care from both a public and a "private" delivery system.  I'm placing that term in quotes because a truly privatized system doesn't exist in America.  As Maggie Mahar discusses in her 2006 book Money-driven medicine: The real reason health care costs so much, America has a privately managed, publicly funded health care system which she describes as 'the worst of both worlds'.

Characterized by high cost, poor (and misplaced) control, inefficient delivery, and extreme competition, it fails to fulfil the promise of a free-enterprise solution that is often discussed in Canada, as we ponder the future of our public but increasingly privatizing system. While the relative merit and costliness of the two systems will no doubt continue to be debated into the future, decades of studies continue to point to the fact that the American health care system is inefficient. Its market approach to delivering services to people inadequately serves those fortunate enough to have benefits, and fails to service many others at all. The most troubling aspect of this is that Americans recognized this fact about 40 years ago.

In a statement on July 10, 1969, President Richard Nixon stated:
“We face a massive crisis in this area [health care] and unless action is taken, both administratively and legislatively, to meet that crisis within the next 2 to 3 years, we will have a breakdown in our medical care system which could have consequences affecting millions of people throughout this country” (in Wolkstein, 1970, p. 702).
Regrettably, Nixon's vision of a national health plan never materialized, and spiralling costs and increasing commercialization have continued to perpetuate what today still represents a massive crisis in American health care.

Rising Costs

In 1970, American spending on health care amounted to 7.1% of the U.S. GDP. By 2005 it had risen to 16%, and it is predicted to reach 20-21% by the year 2020 (Mahar, 2006; National Coalition on Health Care [NCHC], 2007). By comparison, Canada's spending in 2003 was 65% of the United States' allocation — 9.9% vs. 15.2% (World Health Organization [WHO], 2006).

At the present time, approximately 48 million U.S. residents have no health insurance, and at least half that number again who are either under-insured or insecurely insured, with potentially fatal outcomes — more than 18,000 Americans die each year because they lack health insurance (Conyers, 2003; Mahar, 2006). Among the ranks of uninsured are about a third of households earning over $50,000 a year. With the average premium for a family at $10,880 in 2005 and growing yearly, health care is out of reach of more people than we think (Mahar, 2006).

Who Pays?

The attribution of the United States as a “privately financed” health care system is a popular misnomer. While private enterprise is largely responsible for the provision of services, business actually pays less than 20 percent of the American health bill. Another 60 percent is paid for by taxes, while the remaining 20 percent comes from directly from users by out-of-pocket payments (Carrasquillo, Himmelstein, Woolhandler, & Bor, 1999). But while the majority of the privatized system is publicly funded, the public does not benefit from it equitably. Many Americans are one serious illness or hospitalization away from bankruptcy. In fact, half of all U.S. personal bankruptcies come as a result of medical bills (Himmelstein, Warren, Thorne & Woolhandler, 2005; NCHC, 2007).

In 2005, nearly two-thirds of families struggling to pay medical bills already had insurance (Mahar, 2006). Three-quarters of Americans that eventually had to declare bankruptcy had health insurance at the time they became ill or injured (Himmelstein et al., 2005).

As a means of coping with lack of health insurance, or co-payments they cannot afford, Americans are paying with their health by either rationing their use of needed treatment or simply going without. Compared to Canadian residents, Americans are are 33% less likely to have a regular doctor, 25% more likely to have unmet health care needs, and are more than twice as likely to forgo needed medicines, despite the fact that Canadians also lack universal prescription coverage (Lasser, Himmelstein & Woolhandler, 2006).

Part 1 | Part 2 | Part 3 | Part 4

  • Carrasquillo, O., Himmelstein, D. U., Woolhandler, S., & Bor, D. H. (1999). A reappraisal of private employers’ role in providing health insurance. The New England Journal of Medicine, 340, 109-114
  • Conyers, J. (2003). A fresh approach to health care in the United States: Improved and expanded Medicare for all [Editorial]. American Journal of Public Health, 93(2), 193.
  • Himmelstein, D. U., Warren, E., Thorne, D., & Woolhandler, S. (2005). Illness and injury as contributors to bankruptcy. Health Affairs, W5, 63-73.
  • Lasser, K. E., Himmelstein, D. U. & Woolhandler, S. (2006). Access to care, health status, and health disparities in the United States and Canada: Results of a cross-national population-based survey. American Journal of Public Health, 96(7), 1-7.
  • Mahar, M. (2006). Money-driven medicine: The real reason health care costs so much. New York: Collins.
  • National Coalition On Health Care. (2007). Facts on health care costs. Washington, DC: Author.
  • World Health Organization. (2006). Core Health Indicators.