Healing American Healthcare
Evolution of American Healthcare
The United States healthcare system is a unique, and arguably extremely unhealthy, system. There is not another country in the world whose healthcare is like ours. Even more, the system we have today developed by accident. Before 1940, there were town doctors throughout the country. Because they knew everyone personally, they could adjust pricing for their services based on their knowledge of that person’s ability to pay. Doctors also worked under a barter system and accepted payment other than cash. It was a ‘cash and carry’ system that kept costs lower overall. This healthcare was personal, and the system was decentralized.
The shift happened in 1940 as World War II was approaching. The United States government redirected almost all companies and resources in the country to produce supplies for the war. This caused a large decrease in the supply of consumer goods, which naturally led to shortages of these items and increased prices. In response, the government approved a policy to freeze prices, along with wages, so that workers could afford consumer goods; however, this policy also accidentally created the healthcare system we have today.
As large, industrial companies in the United States needed more workers to complete government contracts, they could not recruit by offering a higher wage. In response, these large companies began to offer free healthcare as a strategy to recruit the employees needed. This idea quickly caught on and by the end of World War II, all large, industrial companies in the United Staes offered free healthcare to their employees. In 1945, the price and wage controls were lifted, but companies continued to offer free healthcare to their workers because the costs were low enough. In 1952, this healthcare system was locked into place with a new tax deduction. The government agreed to allow businesses to deduct the payments they made for employees’ insurance. Under this tax policy, it is cheaper for both the employee and the employer if the employer is the one paying for insurance. The United States is the only country with a third-party payer system like this. The issues surrounding this system are complex, and there would not be an easy solution. However, Dr. Flynn argues that Singapore’s healthcare system could provide a model for us to follow while pursuing healthcare reform.
Singapore: The Three M’s
Singapore has three systems in place to help its citizens pay for healthcare- MediSave, MediShield, and MediFund. MediSave is similar to a Health Savings Account in the United States, but employers automatically contribute 7% of gross income into the account, it grows tax free, and the government guarantees 4% interest. This forces people to save for health expenses, because in most cases, people cannot be trusted to save on their own. MediShield is a high deductible health insurance plan. They pay their own premium (rather than their employer), the deductible is $2,000, and medical expenses above that have a 10% copay. This means they are always confronted with costs, giving them incentive to always shop for their medical services. Finally, MediFund is an endowment fund established by the government that provides a safety net for those who cannot afford their medical expenses. There is a grant-writing process to confirm the medical bills cannot be paid, and almost 90% of the applications are approved. MediSave, MediShield, and MediFund allow Singapore to see all the benefits of free market and competition in its healthcare system. The prices for healthcare services are transparent, and citizens can know and choose the price they prefer. Competition keeps prices low, and the government can pay these lower prices when needed. MediShield keeps skin in the game for citizens to find the best services for them at the price they are willing to pay. If citizens still cannot pay, they have the safety net of MediFund to make sure they are taken care of.
American Deficiencies
The United States does not have these benefits of free market and competition. Generally, Americans do not know what they will have to pay after what insurance will cover. Americans also worry about losing healthcare if they lose their job, which is very unusual. We are not confronted with costs as they are in Singapore, so we have no incentive to choose services with lower costs. Dr. Flynn mentioned that we most likely could not establish a system like MediSave, but there are examples of how parts of the Singaporean system have worked in the United States. Whole Foods and the state of Indiana have both implemented systems in their healthcare coverage that have resulted in 35% less spending on healthcare for those who have been involved.
Conclusion
Our healthcare system was extremely confusing to me before listening to Dr. Flynn’s lecture, but now I understand the full picture better. Many Americans are aware there is a problem with our healthcare system, especially when they are faced with high expenses. Awareness has also increased since United Healthcare’s CEO was shot last year. The suspect was found with writings that expressed grievances regarding our healthcare system, and many people have written to him to show support. However, I wonder how many Americans understand why our system is the way it is and what options are truly out there. Many are aware of countries who offer socialized healthcare or free healthcare, but Singapore’s system is a different option. Insurance companies have no incentive to change our system, since they are the ones benefiting the most. As such a large country, many people will be required for any change to be accomplished. Is there a chance that the costs of such a substantial change would outweigh the benefits? I also wonder how changes would affect our doctors. Would their income increase, decrease, or stay the same? Could all three happen if it becomes a free market with competition? Would it make it easier or harder for doctors to make a living? In the end, any changes will have to come from citizens and their efforts to educate themselves and others.