Justin Webb, writing in Unherd, a BBC Today presenter and its former US correspondent, vividly illustrated why the private insurance-led US health system is so inefficient, is so wasteful of public and private resources, and is so non-transparent. Relaying his own experience after his son, Sam, was dignosed with Type- I diabetes -an incurable and potentially fatal condition – he showing how its operation adds to the stress and ill-health of the families who need to use it.
Essentially the opacity of the funding and pricing – largely through employer insurance contributions, annually averaging over $12,000 in 2015, subsidised by $260bn worth of tax deductions (a fiscal private welfare subsidy), complemented by individual user payments, and by direct public means-tested subsidy to poor households covered by Medicare – of complex treatments and drugs, prescribed by health providers whose knowledge of their relative efficacy to alternatives, which while greater than the patient and their family, are still subject to uncertainty and risk, means that none of provider, funder, and patient understand, or has a direct incentive to contain, the costs involved.
It echoes this writer’s personal experience of the Indian health service , which is dependent on a similar private-insurance, provider-led, medical care provision model. It excludes the majority of its poor population from access to accessible and quality coverage, greatly adding to avoidable mortality and morbidity outcomes, while putting even many non-poor households into penury.
The ruling Indian BJP party, led by Narendra Modi, announced earlier this year did announce significant extension to publicly-financed insurance programmes to poor households, outlined in, http://www.asocialdemocraticfuture.org/indian-budget-2018/ . If, and when, it is implemented, this National Health Protection Scheme (NHPS) – the Ayushman Bharat in Hindi – will become the world’s largest health insurance scheme. Central and state governments (with a 60% central, 40% state apportionment) are expected to pay the insurance premiums of an additional 100m households, or 500million people, that it is expected to cover.
But, even if fully implemented, the NHPS will cover only around 40% of the 1.3bn-plus Indian population, still leaving many households with low to moderate incomes, as well as poor people, uncovered, and exposed to an associated higher risk of morbidity and/or of catastrophic health costs. It has thus attracted the epithet ‘ModiCare’, derivative of the US insurance support MediAid scheme for the poor and uninsured.
It will need to overcome similar problems to those that beset the US system, as illuminated in Webb’s piece, related to its reliance on a predominately privately provided hospital sector funded by insurance to provide secondary and tertiary health care to the population in general. It is unlikely that resulting costs will be contained within the available or future public budgetary funding envelope.
The renowned American Nobel Prize winner, Kenneth Arrow, who demonstrated the self-correcting nature of perfectly competitive markets in his ground-breaking price-clearing general equilibrium model, in a seminal 1963 article, Kenneth Arrow’s 1963 article, also clearly explained why the inherent imbalance of information that exists between the providers and consumers of medical care, interacting with the risk and uncertainty connected to disease and the efficacy of its treatment, is inimical to the development of an efficient market in medical care provision, tending instead towards the over-consumption of treatments and drugs, to their monopolistic pricing, and to sub-optimal outcomes. Icentives for providers, patients, and public-funders to shop-around in order to effectively contain costs, is reduced by the moral hazard connected with health insurance and the institutional arrangements that need to put in place to regulate and manage that uncertainty and risk and its asymmetrical distribution.
His analysis remains topically relevant to the future health prospects of millions of people across the globe.
Depressingly, it could be a long waitbefore economic rationality trumps entrenched private interest across the American health sphere and its imitators, thus removing an unnecessary drag on national and global GDP, and saving countless people their lives and health.