Could a German-style approach to health insurance get the US out of the conundrum of paying more and receiving uneven results for health care?
Obamacare – or more accurately, the U.S. health insurance system, as it currently stands and regulated by the Patient Protection and Affordable Care Act – is becoming a nightmare.
U.S. health insurance premiums will jump an average of 22% in 2017. Federal spending to assist moderate income families is spinning out of control.
It almost certainly need not have gone this way. If we Americans were prepared to look beyond our own borders for solutions on health insurance, there are very effective and cost-containing alternatives available.
Where to now?
Cost-conscious as we Americans think we are, we ought to be pained by the fact that Japan, Germany and other northern European countries spend about 11% of GDP on health care, whereas we in the United States spends 17%.
For a viable alternative, and importantly one that both sides of the U.S. political divide ought to be able to live with, we need not look any further than Germany.
In Europe’s largest economy, the system of private insurance, like Obamacare, requires virtually everyone to have coverage, but costs are more tightly controlled.
For Democrats, the answers to the impending cost explosion are simple – either raise taxes on the wealthy in order to further subsidize a failing system or force a single payer system, which can dictate prices to service providers and compel reluctant Americans to participate.
For conservative Republicans, the issue is more vexing, if they are being honest about facts on the ground. Merely repealing the law is not enough, because that would hardly return the United States America to the “free” market they claim to aspire to.
Even before the Affordable Care Act, federal and state governments were paying nearly half of the nation’s health care bills.
Medicare pricing problems
At one extreme, Medicare and Medicaid reimbursement rates for doctors are tightly controlled and too low to sustain their practices.
As a result, many doctors limit the number of patients they take from these programs, and the elderly and poor often face difficulty finding a primary care physician.
Well off retirees can join so-called concierge services. Under this concept, doctors charge high annual fees for access to primary care. The less affluent are left to scramble.
Concierge services have generalized from the elderly to the entire adult care marketplace and created a two-tier system of access to physicians, while Medicare reimbursements are setting drug prices arbitrarily high for everyone.
At the other extreme, the U.S. legislation establishing Medicare prescription coverage does not permit the government to negotiate prices.
Pharmaceutical companies can set whatever prices they like knowing the elderly will simply send the bill to Uncle Sam.
Bad plans, steep prices
The basic premise of the ACA was to enroll nearly every working age American in large employer-sponsored insurance or policies sold on government run websites to create competition that would lower costs. Sounds good — but it has not worked out as advertised.
At HealthCare.gov, families often pay $500, $1,000 or more a month for policies that impose high deductibles and co-pays and are based on quite limited provider networks.
As a result, many Americans have lost access to family doctors, encountered limited out-of-state-coverage when they travel and are generally excluded from using higher cost providers where they live.
The latter can be life-threatening. As of the end of 2015, for example, none of the policies in New York offered access to the Memorial Sloan Kettering Cancer Center.
Problems are particularly acute in areas where the number of specialists are limited, and hospitals and group practices are monopolized enough to resist negotiating much on price with insurance companies.
The industry opts out
Insurance companies are taking big losses, resulting in the large premium increases noted above – or leaving the website markets across the country. At least 650 of counties nationwide will have only one company offering policies next year.
Many folks won’t feel the full brunt of rate increases, as the federal government is obligated to subsidize premiums for low and middle income families, but the Congressional Budget Office estimates the ACA will cost $8.9 trillion over ten years.
No going back now – only forward
We simply cannot go back to what existed before. Private plans lost in the upheaval cannot be easily reestablished.
Simple electoral calculus requires that millions of Americans now receiving subsidies continue to receive assistance purchasing health insurance.
However, two overriding principles of heath insurance should be indisputable:
- Americans should not be coerced into buying substandard policies at a government store
- Costs must be lowered
In the end, if the Republicans want to avoid a single payer system, then they will have to explore with the new president regulating prices inside a private marketplace, à la Germany.
There, for example, regulators price new drugs according to how much they improve treatment over existing medicines.
Such government interference in pricing is an anathema to conservative Republicans like U.S. House Speaker Paul Ryan.
But the practice of Medicare paying whatever prices U.S. drug companies choose to set is wholly unrealistic. Not to mention quite a few other obvious problems with the status quo.
Effective leaders work with the world as they find it, not as they think it should be.
A direct U.S.-German comparison
A German friend who recently left Washington after three decades, and who had faced years of 15% health insurance premium increases annually, just told me this: The plan for himself and his wife with Blue Cross Blue Shield in the U.S. capital had cost him over $1,400 a month.
A like-for-like standard health insurance plan in the German capital now costs him less than $800 a month. And that’s the top rate, since Germans don’t issue health insurance as a “head tax,” but income-based, with a cap.
In addition, he and his wife, he very happily reports, don’t face any of the deep frustration of having to contend with all sorts of extra charges with which U.S. health insurers like to burden their customers.
That is not only a very costly practice for the insured, but borders on the absurd, since the race is on to extract ever more special charges from the insures, on top of the already steep monthly premiums. Never mind the time it takes to dispute increasingly ludicrous and artfully shrouded billing charges.
Just the peace of mind of not having to deal with these absurdities, my German friend tells me, is worth at least a couple of hundred bucks a month in lessened aggravation.