Highlights From The Comments On Health Care Systems
I’m experimenting with making this more structured this time, so:
Section I: Collection of comments on US health care
Section II: Drug pricing, and does the US subsidize the rest of the world?
Section III: Why are health economics so unlike other economics?
Section IV: Giant pile of comments by readers who live in different countries explaining their own countries’ health systems, and their experiences with them.
I want to push back on the assertion Scott made that "Certainly rich people in America get good health care." After he published this book in June 2020, Ezekiel Emmanuel published an article in JAMA IM (link: https://bit.ly/3nGRHL8) called "Comparing Health Outcomes of Privileged US Citizens With Those of Average Residents of Other Developed Countries." He wanted to test the commonly stated trope that a feature of the US healthcare system is that the rich here get the very best care in the world. To do that, he looked at outcomes across six benchmark diseases (heart attack, colon cancer, breast cancer, infant mortality, maternal mortality, and pediatric acute lymphocytic leukemia). He compared outcomes for white people in the 1% of richest counties in the US, 5% richest counties in the US, and average outcomes in 12 rich countries (i'm not going to type them all out but they're places like Australia, Canada, and Germany). The results were...not so great for rich Americans!
While rich people in the US do better than average people in other rich countries with breast cancer, RICH children in the US have outcomes worse than AVERAGE citizens in 11/12 of this group of rich countries. Rich people in America have about the same outcomes after heart attack that average people in other rich countries have. In other words, in most cases, you're about as well off having a heart attack being the average bozo in France (for example) as you are having one in one of the wealthiest counties in the US. I was pretty shocked when I read this paper.
The reason I think this is important is because I think it's extremely politically useful sometimes to be able to claim that rich people in the US get great healthcare! People like to imagine themselves as more privileged than they are, and think that, if and when they get sick, they'll have access to this incredible care. So we should reframe from "average care in the US is shitty but care for the upper echelons is the envy of the world" to "average care in the US is shitty, and also in the upper echelons we are about the same as the average person in America's peer countries."
This is interesting, but I’m a bit concerned that he chose only 6 outcomes to measure https://xkcd.com/882/. This, with the results being absurd, makes me skeptical of the results.
Related to this, I don’t think he ran any statistical tests. This may not matter because of the large number of people, but it may also matter because he only used n=152 counties.
Also, why use counties? This should bias you downwards of the true number in your estimate, since counties do not hold all the same income-level people.
Hey! Good points. Let me try to address them best I can. Obviously you should be more skeptical about surprising results, especially if you don't have subject matter expertise! But I don't think the study is poorly done. I am a doctor and a researcher (not that this makes me any more qualified to judge a good argument form a bad one!) but let me make the best possible case that I can that the results presented in this study are interesting and compelling.
First, the 6 illnesses seem, a priori, pretty relevant. Will the exception of pediatric ALL (which is useful because it is a non-adult condition that relies on specialists for delivery), these are all extremely common conditions. While the xkcd comic is very funny (they always are), I don't know that it's relevant here? They're not cherry picking a small feature of a bigger phenomena and then claiming that that cherry picked thing is driving the whole phenomenon; rather they're using some representative conditions to try to understand ways in which healthcare in the US may be surprising.
Second, I think any of the results individually are surprising! Remember, this isn't an association; it's a comparison. If I asked you, based on priors, who has better outcomes after a heart attack, white people in the richest counties in America (average income ~$100k), to people in Denmark (average income ~$51k) (see the supplement for some of this data: https://bit.ly/3KsUP71), I think most people would say America? But Americans die about 12% of the time when admitted for a heart attack compared to 10% in Denmark. In other words, the design of the study is HEAVILY biased in the direction opposite of the results we see.
Why use counties? I think it's because that's the data that was available, which is a limit to a lot of epidemiological research. You draw conclusions as best you can from the evidence you have. That said, any bias within counties should also apply as much to entire countries. Furthermore only considering whites (demographically wealthier), also again biases in the opposite direction of the study findings.
Finally re: statistics, I'm not sure what you mean? Maybe you mean he didn't publish P values? There are 95% confidence intervals for many of the measurements. Furthermore, because of the design of the analysis, a lack of difference IS a surprising finding; if there are statistical tests that are relevant that you think should have been included but weren't, I'm eager to hear your thoughts!
So I agree, the results are absurd! It is absurd that, despite spending much more than any other country in the world on healthcare, the richest Americans don't even have access to what would be average outcomes in any of a number of our peer counties. But I don't think there is anything misleading here.
DoTheMath now says he is “tentatively convinced” of GummyBearDoc’s claim (good for both of you! Julia Galef gives you shiny gold stars!)
But Merlot says:
I don't really think this is a question that could even be answered usefully in a statistically rigorous way, but I'll add that Peter Attia- a Canadian physician who currently runs a highly specialized clinic for the ultrawealthy in the US- has said something somewhat similar based on his experience (it was in a podcast episode, I don't remember which one, so you're going to have to take my word on it).
His take was basically that if you're wealthy enough to get care parallel to the formal healthcare system rather than within it, you can get the best care in the world in the US. But if you're "merely" a millionaire with a Cadillac insurance plan, you'll get worse care than what the average person in Canada gets.
The take might be incorrect, and it might also be out of date- even pre-pandemic, the last few years have not been kind to Canada's healthcare system. He specifically gave the example of having a heart attack and showing up to an emergency room as a case where its better to be Canadian, which DEFINITELY feels out of date. But it broadly fits with what I've heard a lot of providers who have practiced in both the US and another developed country say.
No one has mentioned the regressive nature of US healthcare financing. Scott is right that what we call "premiums" are effectively just payroll taxes. For the typical American worker, healthcare-related premiums/taxes aren’t just “big.” They’re bigger than all non-healthcare-related income/payroll taxes combined. Healthcare is THE thing impacting take-home pay.
-- If we call employer-sponsored health insurance what it is - a tax - then about 70% of taxes taken from the paychecks of a typical American worker with family coverage go to healthcare. If the worker has individual coverage, that number is about 51%.
-- In hard dollars, the healthcare industry takes about $26,000 from the total compensation of a worker with family coverage whose salary is $50,000 (whose total compensation is actually about $70,000).
-- The structure and branding of healthcare financing (having the employer pay the bulk of it, and calling it a "premium" instead of a "tax”) leads the typical American to grossly underestimate 1) their healthcare costs and 2) their total taxes.
-- Because the US healthcare system is structured to overpay by 2x, this typical worker is overtaxed by about $13,000.
More details here: thebottomlineinhealthcare.substack.com/p/health-premiums-vs-incomepayroll
I’m not sure it makes sense to call this “regressive” or “an underestimation of total taxes” unless you think of government-sponsored health care as normal. If government-sponsored housing was considered normal, Americans would be “underestimating their total taxes” by not thinking of rent as a tax! Still, I see what he means.
Erik on US cost inflation:
Since the ACA, health insurers in America are limited to making 20% profit on insurance premiums. If they want to make more profits, the only way they can do this is by spending more on healthcare. Not sure why anyone thought this was a good idea. See the 80/20 rule here: https://www.healthcare.gov/health-care-law-protections/rate-review/
I see the problem, but I’m not convinced this matters. First of all, I think insurances mostly make less profit than that, so the cap probably doesn’t matter much in real life. Second, cost inflation seems to have decreased (or at least not worsened) since the ACA. Third, no matter what your profit margin is, you’re still always incentivized to spend more money, right? If your profit margin is 10%, you can make $1 by selling $10 of care; if it’s 20%, you can make $2 by selling $10 of care, and so on. You always want to sell more care!
One of the other major differences between the US healthcare system and the EU systems is that the European Commission does drug approvals for all of the EU (and there are other EU-wide paths to getting drugs approved, with approval by any regulatory body being sufficient for the drug to be approved); whereas, the FDA does approvals for just the US (and it doesn't compete with any other US regulators to do the approvals). This gives individual European countries much more leverage than the US would have for negotiating with drug manufacturers. Since most of the cost of drug manufacturing is the research, trials, and approval process, Norway (technically a non-EU member of the EEA, but they still accept approvals given by the European Commission) can offer drugmakers relatively low prices and still have them sell their drugs there because they're already going through the European Commission approval process to sell their drugs in the rest of Europe. If the USA starts setting drug prices particularly low, it will have a much bigger impact on the incentive to fund drug trials through the FDA approval process. This also changes the optics dramatically. There's not going to be a scandal over a drugmaker failing to push their drugs through the approval process the same way there would be over it refusing to sell drugs to a particular country where those drugs are approved. (And I think it's generally accepted that the FDA's process is slower, more stringent, and more expensive than Europe's.)
Relatedly, another thing that is always missing from discussions of healthcare spending is the extent to which Europe and Canada freeload on the rest of the world for medical research. Below are the total medical R&D expenses by country for years for which I could easily find data. The key takeaway is that even though US GDP is only 13x Canada's in 2018, US medical research spending was approximately 45x theirs. US GDP is only about 20% bigger than Europe's, but the US spent significantly more than 2x on medical research than they do; (and as far as I can tell from less complete data sources the disparity is growing).
United States (GDP $21T): 2007: $131B 2012: $119B 2013:$143B, 2014: $154B, 2015: $163B, 2016: $173B,2017: $182B, 2018: $194B
Japan (GDP $5T): 2007: $21B, 2012: $28B
All of Europe (GDP $17T): 2007: $56B, 2012: $54B
Canada (GDP $1.6T): $3B in 2009 and 2010, and $4B every other years since 2007 (rounded to the nearest billion) -- all of the other values are in USD; whereas the Canada numbers are in CAD.
I think the overall picture looks something like this:
The incremental cost of manufacturing a pill tends to be pretty cheap. A drug company has to make back its investment in R&D with returns to justify the investment somewhere (which is necessarily a high risk investment with a long time window between the investment and when it starts giving returns which standard economic theory says makes the required returns higher). But once it makes back its research investment anywhere, it has a pretty big incentive to just sell its drugs everywhere even if it is selling them heavily discounted in some markets relative to others. (The regulations around drugs are a particularly effective form of geofencing that eliminate the incentives that might otherwise exist to charge similar prices in different markets.)
So we have a drug industry that basically works by researching drugs to sell them in the United States; but then also pushing the drugs through the relatively easier regulatory regimes in the rest of the world to also sell the drugs everywhere else possible where the only investment that those additional sells need to justify recouping is the cost of getting the approvals since all of the research is already done.
And we end up with a system where drug development is worthwhile if and only if those drugs end up being sold in the United States, and where the FDA has the most stringent approval process, and nobody really has an incentive to change this. American regulators and politicians get disproportionately more power out of this arrangement. Drug companies make their profits. American insurers are able to pass along and distribute the costs across the population so they make their profits too. European countries get their drugs relatively inexpensively, and are existing in a legal context where that is their only real incentives since they really can't increase their ability to regulate drugs because the power that exists there is distributed throughout the EU rather than possessed by the governments of the member states. And the members of the EC probably are a bit unhappy and trying to increase their own ability to regulate things, but they're sufficiently disconnected from the powers of the member states that what they want doesn't really matter. (So Europe has somehow found a way to make the people who have the most incentive to increase the price of drug R&D there from having their voices heard.)
Several people brought up this idea of US drug prices subsidizing the world. There’s some evidence in support: the US contributes 58% of the OECD’s total pharmaceutical spending despite only having 24% of the OECD’s total population and 38% of its total GDP. This study has some slightly different data and doesn’t think that US drug companies innovate much more than foreign drug companies, but since most companies sells their drugs in most countries regardless of where they’re based, I don’t know if that proves anything.
Some very quick math: the US spends 2.5x more on medications than OECD average, but its medication use is exactly average for its population. So total OECD drug spending is 2.5*0.24 + 1*0.76 = 1.36x what it would be if the US spent an exactly average amount. So if the US spent an average amount, the total pool of pharmaceutical funding would go down to 74% of current totals - or other countries would have to increase their spending by 36% to even things out. I don’t know if this is the right way to look at things.
(one part of Austin’s comment I’m not sure about is that I think I remember from the book - can’t find the exact quote right now - that it was claiming the FDA was faster and laxer than the corresponding European regulatory body)
But Peak Oil’s Tail writes:
One huge difference between healthcare in the US and elsewhere is advertising. The US has a whole industry dedicated to marketing drugs and medical services directly to patients, which just doesn't exist in most other countries.
I think this explains a big part of the cost disease. Ads for drugs are particularly common on daytime TV or cable news, I guess because they're watched by elderly people who tend to be sick and have Medicare. Most pharmaceutical companies actually spend more on marketing than on r&d, so high drug prices aren't really subsidizing new meds. They're subsidizing Fox and CNN waging the culture war.
And it's not just drugs. The are law firms, insurance companies, even hospitals promoting their emergency rooms. The whole purpose of these ads is to increase demand for healthcare, so as well as pushing up costs directly they probably lead to a lot of unnecessary doctors' visits and prescriptions.
This claim (drug companies spend more on marketing than research) also seems to be true. But we also know Americans don’t buy more drugs than people in other countries, and we are actually unusually good at using generics rather than brand-name. So what is all that research buying? Maybe convincing us to still buy as many drugs as other countries even though it costs more here (but isn’t this kind of circular)? Or maybe it’s zero-sum spending convincing us to buy Company X’s drug instead of Company Y’s?
If that’s true, it seems like you could potentially lower US drug costs without having a negative effect on other countries just by cutting out marketing expenses, with no downside.
The US does a really poor job of keeping (advertised) drug prices low because we a) have like 1M different purchasers of drugs, and b) those purchasers use a variety of different middlemen to actually purchase the drugs. We pay the middlemen a percentage of the drug costs.
For clarity, the dollar value chain is like this: Purchaser -> Insurer -> PBM -> Pharmacy -> Wholesaler -> Manufacturer.
All of the steps other than Purchaser (and small pharmacies now) make more money the higher drug prices go. Insurers can keep 15-20% of total premiums for their internal administrative costs and their profit margin under the Affordable Care Act's "Medical Loss Ratio" rule. That means that the only way for Aetna's profits to increase from 2021 to 2022 is for total "medical losses" to increase. They can keep 20% of $70B in 2021, and 20% of $80B in 2022, implying that drug+hospital+doctor costs HAVE to increase by $8B during the year, or else premiums can't go up and Aetna can't make more money.
The PBM step generally keeps an administrative cost per prescription plus a % of the cost of branded drugs. These companies are: CVS/Caremark, Express Scripts, OptumRx, Prime Therapeutics and a lot of minors. They negotiate "rebates" with manufacturers. This basically works like this: Humalog and Novolog are effectively equivalent drugs. They cost ~$300/month without insurance. The PBM will say to Lilly "That's a nice humalog you've got there. I'm going to need $150/month as a check back to me or else every patient on my plan gets Novolog unless the doctor fills out 500 pages of paperwork to get Humalog AND the patients pay $200 of the cost." Lilly says "ok fine." According to the PBM lobbying organization, PCMA, most of the rebate money goes back to purchasers, but IMO that just makes the problem worse because it makes purchasers complicit in the game by sending them checks that they use to reduce their premiums instead of reducing the cost of drugs to their plan members.
Consider for a moment that CVS/Caremark by themselves is the PBM for ~112M people in the USA. That's more than the entire population of Germany. If you think that Germany pays less for drugs that CVS/Caremark.........
Pharmacies generally get paid ~1-2% of the cost of branded drugs as their total compensation. On generic drugs, a typical pharmacy will get ~$10 per prescription on average as their compensation (to pay staff and rent etc).
Wholesalers like Cardinal, McKesson and AmeriSource Bergen (together controlling 95% of drug distribution) generally make their money by marking up generic drugs to pharmacies, and by taking a ~2% cut of the price of branded drugs.
Manufacturers make money by selling drugs for more than it costs to make them, including paying off all of the folks in the middle out of their revenues.
The actual prices realized in the US for branded drugs ARE likely higher than in other countries, but the differential is almost certainly not as large as it appears. grosstonetbubble.com is a site that talks about the size of the wedge between prices paid to manufacturers by wholesalers for drugs, and prices actually realized by manufacturers after accounting for rebates and other discounts paid to the PBMs and insurers.
Also... consider for a moment that NET drug prices (after rebates and other discounts) have DECLINED in the US for the past 3 years. Anyone that talks about "skyrocketing drug prices" and doesn't pay attention to the middlemen is just lying.
If I ran the zoo, I would say that drug companies must set prices in other countries as a ration of their per-capita GDP to America's.
Bram Cohen writes:
The business about health care being a bizarro world where normal economics rules don't apply is true, but it's true in that it's inherently broken. To have efficient markets you need good consumer information, the ability to easily comparison shop and change vendors, easy entry and exit of vendors from the market. If you wind up in a coma and are brought to an emergency room you can't open your eyes, discuss what the treatment will be and how much it's going to cost, do appropriate research and decide for yourself whether the doctors's recommendations for treatment are appropriate, decide that the amount being asked for is outrageous, find a potential competitor, have them open up a competing ER next door, and check in there. Every step of that can't happen. The seemingly weird and artificial things like government negotiated prices are compensating for the normal mechanisms of efficient markets not functioning. In the US I've had the experience of getting quoted a price for a drug at a pharmacy, commenting that it was completely outrageous, getting argued with that the insurance company was paying most of it, asking what it would be out of pocket, getting quoted a price lower than the copay, then glaring at the pharmacist who suggested swiping a magical card she had through the machine which got a price even lower. Under such circumstance the government putting their foot down and declaring that there can only be one price and they're negotiating it on behalf of consumers is completely reasonable.
The fundamental reason why the United States is so bad is because health care breaks the iron law of capitalism, which is that the person who uses a good or service should be the person who chooses it, and who pays the bill. Doctors & patients together choose a medical treatment, but insurance pays the bill. Individuals use insurance, but don't actually choose or pay for it; that's done by their employers, and the plans are so complicated that individual consumers can't make heads or tails of it anyway. Hospitals offer treatments, but just try asking a hospital how much it costs or shopping around; they flat out won't tell you. It truly is upside-down bizzarro world. Plus, the bureaucracy is impenetrable. Have you ever noticed how long it takes a pharmacist to fill a prescription? Taking the pills off the shelf takes 30 seconds. Calling the insurance company and waiting on hold -- that takes 15 minutes or more.
Wrt. to other countries, there's not a lot of difference between regulation and socialism. Sure, in Germany and the Netherlands insurance is provided by private companies (my wife is Dutch). But if all companies are required by law to charge the same rates, and offer the same coverage, then it doesn't really matter whether a private company or the government pays for it. A really easy way to lower costs in the U.S. would be to require all insurance companies to offer the same coverage and costs as Medicare. All hospitals would be forced to accept that, because otherwise they'd have no customers.
I lived in the UK for many years, and used the NHS. It was great. No paperwork, no insurance cards, and no weird bills for ludicrously high amounts when you leave. As a patient, I loved the simplicity of it. But there is a catch.
The NHS hospitals get a fixed amount of money per year, and they have to treat every patient that walks through their doors. Hospitals are non-profit, and success is measured by how many people they can treat given a limited budget, not by how much profit they can make by doing lots of expensive treatments. That's the main difference between "capitalism" and "socialism" in this case -- it's the metric you use to measure success. NHS hospitals do a cost/benefit analysis on every treatment, and focus their efforts on the low-cost, high-benefit treatments. If you want the hospital to do an MRI, or something fancy, then they will not agree unless your condition is life-threatening. But if you just want basic every-day care, they're pretty good at that. I think the life-expectancy numbers bear that out; high-cost low-efficacy treatments do not improve outcomes all that much at the aggregate level.
And the NHS is really good at pinching pennies in smart ways. When my wife needed to go to the hospital, I called the NHS hotline, and they asked if she was able to walk. Not far, but yes, she could. So they sent a taxi-cab to my door, who dropped us off at the hospital front entrance. It was totally free -- his fare was paid for by the NHS. In the United States, they'd send an ambulance, for 10X or 100X the price, then bill it to insurance, who would then send a co-pay to me for some hundreds of dollars. That doesn't help anybody.
In a way, the NHS actually satisfies the iron law of capitalism better than the US system does. It works because the hospitals/doctors both make the medical decisions, and they foot the bill.
But Arnold Kling thinks market-based health care is salvageable:
My 2006 book, Crisis of Abundance, has real health care economics. On the 23rd on my substack, I'll try to summarize the main points.
He kept his promise, so here’s his Substack summary.
And now, a giant pile of comments about specific countries!
Germany, starting with Mark:
The "secret" [of our German way of healthcare] seems to be to have the insurances compete on low administration cost. (Some smaller insurers who run into troubles here are regularly "integrated"/"bought" by bigger ones - and some "new" ones try their luck growing on streamlined procedures). - Those funny extras they throw at us to lure us into swapping are very secondary.
The docs have much less hassle cuz it is all one price (or two: "insured" vs. "privately insured"). Imagine a doc had to deal with dozens of prices, some insurances not covering certain stuff others do! Nightmare! And hell of extra-costs).
The docs love private (insured) patients, as they can charge them around 75% more plus for some less cost-efficient stuff. (Dermatolgists loved looking all over my skin when I was young and private. Nowadays ...
Thanks for letting me know I enjoy the best health care in the world. Fun fact: many Germans with private insurance (self-employed or high salary) stay unmarried. As their partner+kids would be forced into their contract and make it much more expensive.
I'm privately insured in Germany and it's GREAT (for me, that is. although I do subsidise the publicly insured people to a small extent, so not exclusively for me).
And I had [trouble with healthcare] in the UK - I didn't want to wait as long as I would've had to for a specialist while living in the UK, so I looked for private options (which my German insurance, under certain circumstances, like those I was in, would cover).
It was possible, but there was little choice, and it was a lot more expensive than in Germany.
And Thomas Kehrenberg:
Germany has two parallel systems. One is the single-payer-through-private-companies that you described. In that system (called something like "mandatory insurance" in Germany) you pay a certain percentage of your salary and get health care. The other is a "private" system but there are still lots of rules, I think. Doctors get more money when they treat these private patients but this is also capped at, I think, 2.5x the money they would get from a mandatorily insured patient. Also, doctors are only paid for a certain number of mandatorily insured patients per quarter – they can treat more, but they won't get paid for it – whereas they always get money for the privately insured patients. The result is obviously that doctors give preferential treatment to those with private insurance. But also that privately insured patients are subsidizing those with mandatory insurance in a way.
You are allowed to get private insurance if you earn more than a certain amount or if you are self-employed. The system is either-or: either you have the mandatory (single payer) insurance or you have the private one. Though, if you have the mandatory insurance, nothing stops you from telling your doctor you are privately insured so that they send you an invoice which you then have to pay for by yourself. It's just that most people can't afford that (or rather that it's risky).
(As a side note, if you look at this from the Hansonian perspective on healthcare, then it doesn't necessarily result in better outcomes for those with private insurance. It's true that those patients get _more treatment_ but a lot of it is useless and only happens so that the doctor can earn more money. As someone with only mandatory insurance, you will likely get less treatment but you should always be able to get the really life-saving care, so you might come out basically the same. My mother has private insurance because she is a teacher – who always have private insurance for historical reasons – and every time she goes to the doctor they find some treatment they could do, whereas my father who has mandatory insurance gets told to drink water and rest.)
As a data point, here's my experience in Germany. I've been living in Berlin for 1.5 years.
As an employee, I pay 8% of my gross salary on health insurance. This is just 50% of the total cost, with my employer paying the other half. As long as you make less than 64.350 euros gross a year (and the threshold grows every year) you are compulsorily insured with public insurance. If you make more, you can switch to private. If you're young and fit, it will cost you much less than public insurance. But if you get in trouble and want to switch back to public, it can be very difficult. However, if your income falls back under the ever-growing threshold, you are forcibly switched back to public.
Even with public insurance, you must choose a provider, but like Scott said, they are all very similar, so the choice is easy. I chose my provider because they speak English. I can call them or write them at any time and they are very helpful.
I don't have health problems, but I've been doing a lot of medical exams. The system is smooth and efficient. I always come out very impressed. Like most people, I book my appointments on a popular online platform. I am not tied to a specific family doctor: I can go to anyone who has a free spot, so there's always a way to get an appointment within a few days. I can also directly book visits with specialists without going through a family doctor.
The clinics ooze a sense of wealth and high quality healthcare. Wait times are short and the doctors all speak English. Processes are streamlined as needed: in one case, a doctor wanted to send me to a specialist, so he just gave me a piece of paper and told me to see his friend downstairs. Ten minutes later I was done. In another case, a family doctor spared me a visit to a specialist and accelerated the waiting time for some physicals so I could get a vaccine sooner.
I am very prudent and careful about my health. I find that doctors here are understanding and willing to conduct exams. They have time to listen and engage and don't seem overworked.
There are almost no added costs. This includes dental work: I've had two or three cavities removed. Oh, and mental health: you can get at least 80 hours of therapy on the public scheme, with a therapist of your choice.
The drawbacks: the health scheme is extremely expensive, both for the individual and for the state. And the system was mostly designed with employees in mind, so it can be extremely burdensome for freelancers and the self-employed. As self-employed, you need to pay 14.6% of your gross income! And this on top of all the other taxes, which are very high in Germany!
Having lived in both Germany and Switzerland, it is a red herring to put them into different categories, just because of the formal status of their insurance companies.
The main point is: In both systems, all insurance companies must offer exactly the same product, called basic insurance. It is not up to the company to decide which cases they cover or when they pay. This is regulated, and border case are resolved otherwise. (Some very minor variations are allowed in Germany, almost none in Switzerland). And they can't reject any costumer. In such a situation, the price will not depend on the type of company.
What actually makes a difference are very different things. In Germany, if I have disease X, then the doctor/hospital will be paid a fixed amount to treat X. But they have to treat it ("Behandlungspflicht"), they can't reject a difficult case, even though they lose money with it. In Switzerland, the doctor is paid proportional to the amount of time/effort treating X. In both cases, there are long and detailed price tables, all of which are independent of the insurance. I think this is the main reason why the Swiss system is more expensive than the German one. (It doesn't show in the table, but I suspect that it would show if you only consider basic insurance. Also, drugs are probably cheaper in Switzerland, relative to income.) For better or worse, Swiss doctors are not optimizing so hard for efficiency. I like the Swiss system better. Swiss doctors don't keep cutting me short. But it's expensive.
Of course, companies can offer things that go beyond basic insurance, but this is a completely different market, and probably much closer to US system. But those are luxuries, not necessities. For details on the two countries (I was referring to public insurances in Germany, which is only part of the system), there are excellent description of those systems by Lars (on Germany) and Er Matto (comparison between Germany and Switzerland) in the comments.
The Netherlands, starting with Majuscule:
I’m an American and lived in the Netherlands for several years (2012-2018). The Dutch and also the expats loved to complain about it, but I thought the Dutch system was pretty great. By far the best part of it was the transparency. My health insurance actually covered my needs- I never saw a bill. No copays, no surprise mystery bills of the kind I’ve always received in the US, even with “Cadillac” level insurance.
It’s hard to measure expenses and satisfaction across systems because you’re dealing with such different expectations. One common complaint by my fellow American expats was that doctors didn’t “do anything”. This is what the non-interventionist default of Dutch doctors feels like to an American.
But “go home, take some Tylenol and come back if you don’t feel better” is actually quite an effective strategy in this GP-as-gatekeeper model. Most of your patients feel better and don’t come back, as you couldn’t have done anything for them anyway. This keeps costs down and keeps the emergency room just for actual emergencies.
Dutch people’s complaints seemed largely rooted in the perception that Germany and France had better healthcare. I’ve never lived in either place, so I can’t say. But the handful of people I met in the Netherlands who had been seriously sick, e.g. childhood cancer or a major injury, had much nicer things to say.
See also: the guy I know in the Netherlands who was able to get his severely autistic son into a residential program for children where he could receive 24-hour care. Almost nothing like that exists anywhere else, and I believe it was covered at least partially by insurance. I wonder how many of the satisfaction survey participants even considered the existence of such programs as part of their healthcare system.
Dutchman here. It might be good to know that the *only* thing for which there is a meaningful market is additional insurance. The basic insurance is completely regulated, with premiums set annually by the government (and discussed in parliament) and regulated deductibles (basically around €350,- per year but you can get a slight discount on your premium if you max out at around 800).
Moreover, it is forbidden by law for healthcare insurers to make any profit. Any profit made has to be returned to the policy holders. It can also not be used to grant bonuses, buy back shares or any such shenanigans. The idea of the Liberal-Conservative (which is right-wing for Europe) government which abolished the Patient Fund (a government health insurance) was, originally, for profits to be introduced at a later point. But since the current system went into effect in 2006, this introduction has been postponed, and probably will be indefinitely, even though we've had several right-wing governments for the last decade. It's just kind of taken as a given by everyone that introducing profits for insurance companies would drive up cost and it's kind of gross to profit off of a basic human right.
Having said that, the only real bargaining power that insurance companies have, as far as I can see, is contracting hospitals to take their policy holders. There has been some push by both government and insurance companies to use this as a tool to force hospitals to specialize, but I'm not knowledgeable enough to know if this has helped any more than the regular tools of government funding and decision-making to achieve this goal.
The biggest problem Dutch people and doctors have with this system is that there is sometimes a bunch of unnecessary bureaucracy involved. For instance, some medications that are quite permanent (like type 1 diabetes medication) need to be re-approved every year by that patients insurance company, for which the doctor or their assistant needs to send a form.
(As an aside: there is a campaign among medical staff to stamp these documents with a picture of a purple crocodile. Why a purple crocodile? Because a famous Dutch advertisement (ironically by an insurance company) features a purple crocodile lost by a little girl in the swimming pool, which an obstinate pool employee refuses to hand over even though it's right behind him, until the mother of the girl has filled out several forms in capitals. Eventually he tells her they can pick it up in the morning between 9 and 10. You can watch it here, it works quite well even if you don't understand Dutch.)
UK, starting with Chris Allen:
Just to be clear, the UK has a private medical system including hospitals totally separate from the NHS where you can buy top up medical insurance to the NHS, which allows you to see specialists and get treatment quickly. Emergency cases though are usually treated on NHS. About 10% of the population pay into this or get it through work. It doesn’t seem to cause much resentment. There is little regulation on the cost and content of these plans, though of course the medical care can’t deviate from UK standards. For a family of 4 annual costs are around £2,000. To me the UK system is a good compromise between looking after the less fortunate with some pretty good health care at a low cost for the country but allowing those who want a higher standard of care without too much regulation.
Australia, via Patrick:
I think it's worth noting that in Australia the private system only offers some services, with the most specialised procedures (transplants, major trauma, most paediatric specialties etc) only offered through the public system.
The private system we have, imo having worked as a doctor on both sides, is great for bulk surgical procedures like knee replacements but not very good at looking after people who are acutely unwell or have multisystem long term illnesses. Private medicine has very little oversight (you are treated by one attending/consultant who can basically do whatever they want) compared to the public system where departments and the presence of trainees act as a kind of peer review which I think leads to better medical care. If I was seriously sick I would rather be looked after in the public system.
I think there's a fair argument to be made that the private system skims off the healthiest and most straightforward cases and dumps the rest on the public system. I don't know whether this is cost effective or not - obviously there are efficiencies which come with higher throughput, but there is definitely overservicing and waste in the private system. It's a source of resentment.
Switzerland, starting with Spruce:
As I understand the Swiss system, basic healthcare is mandatory, rates are more or less fixed by the government, and providers must accept any citizen who applies. This avoids any bias in who does or does not get insured. Insurers can offer extra products at their discretion on top of that, from rebates if you use a fitness app to private rooms in hospital if you pay more.
In Switzerland, you receive your income before both income tax and healthcare technically-not-a-tax, but you still have to pay both of them.
I don’t see why Scott groups Switzerland with the US rather than Germany/Netherlands.
The Swiss model prohibits health insurance companies from making a profit on basic plans, the government defines basic health insurance benefits and deductibles/copayments (which are more generous than basic plans in the US), and provider payment rates are set centrally (through negotiations between the government and insurer/provider associations, rather than between individual insurance companies and providers). The main difference seems to be that Germany’s premiums are percentage payroll deduction while Swiss premiums are flat with redistributive subsidies for low-income people.
In contrast, the main US private market, which covers about 50% of the population, has employers negotiate with for-profit insurance companies on premiums and benefits for their employees, and the insurance companies then negotiate separately with individual providers for payments. Additionally, a tiny 5% of people buy coverage directly from insurance companies, but this market is largely an afterthought in the overall scheme. Outside of the private market, 35% of the US is covered by single payer-style systems under Medicare (old and disabled people) and Medicaid (low income people). The remaining 10% are uninsured.
The US health care industry would oppose moving to the Swiss model just as strongly as moving to a single-payer system, since it would eliminate profits and the ability to privately negotiate provider payments. These are the two main features which set the US apart, and which are cash cows for the winners of the system. Both of these reforms would effectively socialize the financing of the system, while just outsourcing administration to private entities.
Edit:A more American approach could be "Medicare Advantage for All". Medicare Advantage is an alternative people can opt into instead of the single-payer Original Medicare. The government pays a private insurance company to cover you based on the projected cost that Original Medicare would pay for your health care. Those private insurance companies then negotiate with individual providers for payments. Basically the same concept as charter schools. About 40% of Medicare beneficiaries use this option. To the extent the private insurance companies have lower costs, they can keep those as profits or provide additional benefits. Private insurance companies have an incentive to offer additional benefits to entice people to sign up. This would keep the healthcare industry happy, as they could keep their profits and privately negotiate provider payments. However, for the same reasons, it would not work to rein in health care spending.
I would like to know more about Medicare Advantage.
Other countries, starting with David Roman:
I've lived in the US, China, Australia, Singapore and Spain. I'm really surprised that the book didn't even consider Spain, which has a pretty cheap system, the world's highest life expectancy at birth and, by far, the best health system of all those I've had a first-hand experience with. No need to tell you much about the US, and Australa's system is, in my limited experience, marginally better. Singapore is hyper-expensive and hyper-effective and anyone who includes China in such a comparison must be doing it for the laughs. Very expensive and second-rate at best in big cities, third-worldist for hundreds of millions in the countryside.
IMO, the most interesting model I've heard of is Israel's – consumers choose one of 4 non-profit HMO's to belong to, who are paid by the government per person who subscribes. HMO's offer much better incentive models for overall quality of care, and the competition keeps services consumer-oriented (compared to fully-socialized systems like the NHS).
I found out that Singapore has one of the more reasonable healthcare systems out there, with only 4% of GDP spent on world-class service. Basically, it requires the citizens to pay a small part of the healthcare costs out of pocket, and the rest is financed by taxes. There's a lot of interesting intricacies that make it work well, all detailed in this 16-minute video by a good economics youtube channel:
I'm very far from being an expert in health care systems, but I'd like to offer a bit of insight into the Brazilian system since Scott demanded to know what developing countries do and Brazil is my home country. Brazil is in a very curious position regarding health care, since the current Constitution established in 1988 provides that we will have universal health care provided by the State (Sistema Único de Saúde, or SUS to keep with the three letters) but at the same there is an abundant proliferation of private medicine practice - hospitals, clinics, insurance companies, doctors can work outside the universal public system in for profit systems and not get paid by the state. This basically means we have at the same time a system with a lot of state-run hospitals and clinics, as well as state-employed doctors, other facilities run by private operators but funded by the State (considered part of the universal system) and also 100% private enterprises. This creates a situation in which a very large portion of the middle, upper-middle and upper class all have private insurance - provided by their employers or paid by the user - and the poor have universal coverage under the public system. However, the universal public system ranges enormously in quality: for example, we have simultaneously one of the best vaccination systems in the world for free but months of waiting time to get a simple doctor's appointment or years of waiting to get a surgery. Some types of surgical procedures provided by the state are good and others are not, same with exams, and the state-run hospitals also vary enormously on quality. The users of most private insurance companies also have a lot of low quality services, albeit with shorter waiting times and more options. A few of the really expensive ones provide quality services for the richer individuals. Also it's worth noting that a lot of the best doctors don't accept insurance payment at all and charge a fee for each appointment.
So basically poor people get screwed regarding surgeries, appointments, laboratorial exams and so due to poor quality and waiting times but at least can count on some basic quality services for free such as vaccination, ambulances, and urgent first care. Middle class people fare slightly better with considerably shorter waiting times, marginally better services and can also use the public system in which it does well. And rich people get very good health care for a reasonably pricey amount.
Brazil also has a very commended drug price system involving patent breaking but I don't really know much about it, only that it really makes most drug prices really low.
The political side of things is also very complicated especially because the left-wing blocks any productive discussion on reform since it considers the public system untouchable and refuses to acknowledge its shortcomings most of the time - or blame them on underfunding and "neoliberal policies". A lot of upper class left-wing people haven't used the public system once in their life but still consider it perfect. Brazilian things.