Countries such as the UK, France and Cuba provide universal free healthcare for all. Worse, according to Moore:
"The US population in late middle age is less healthy than the equivalent British population for diabetes, hypertension, heart disease, myocardial infarction, stroke, lung disease, and cancer. Within each country, there exists a pronounced negative socioeconomic status (SES) gradient with self-reported disease so that health disparities are largest at the bottom of the education or income variants of the SES hierarchy. This conclusion is generally robust to control for a standard set of behavioral risk factors, including smoking, overweight, obesity, and alcohol drinking, which explain very little of these health differences… Level differences between countries are sufficiently large that individuals in the top of the education and income strata in the United States have comparable rates of diabetes and heart disease as those in the bottom of the income and education strata in England." (See also Table 1 - for example, prevalence of diabetes among high-income Americans is 8.2 per thousand, while it's 7.3 among low-income Brits.) Banks, Marmot et al., "Disease and Disadvantage in the United States and in England," Journal of the American Medical Association, 2006;295:2037-2045.
For someone used to the American healthcare system, the question that immediately comes to mind is what sacrifices in the quality of healthcare are necessary to afford that. Yet the film shows doctors saying they never have to forego medically necessary procedures. Which begs the question, how can countries immensely poorer than the US afford that?
I posited four principal answers to that:
1. More progressive taxation systems. The very richest in other countries are not as rich as in the USA.
2. Less waste in overhead. By eliminating the need to put a system to second-guess doctors' decision about what is medically necessary and no need to figure out if a procedure is covered, millions and millions in medical overhead are eliminated.
3. Less waste in lawsuits and lawsuit prevention.
4. More waste in military expenditures.
So I set out to find out the magnitude of the impact of each of the above 4 factors. This is what I found out:
1. A 50% tax on the wealth of only the 400 richest Americans would more than suffice to pay the average annual family health insurance premium (with a $10k deductible) for every American household. It would be enough to pay half of the average no-deductible plan's premium even in the current pre-healhcare reform high-overhead America. But that's not sustainable, as the next year the richest 400 would be significantly poorer. So let's try a different tack: the richest 1% of Americans earned 22% of US adjusted gross income in 2006. That's $2.9 trillion. Every year. Divided by the # of households in the US, that's $27,000. In other words, the average US household contributes $27,000 to the richest 1% of Americans every year. The average healthcare spending per household in the US is $17.3k. A 50% tax on the income of the top 1% of Americans would be enough to pay for 79% of the total healthcare cost of the US. A 64% tax would pay it all. But the richest 1% of Americans are already taxed at a 35% rate by the Federal Government, and already paid 39.9% of all income taxes in 2006, and Hauser's "Law" says that US tax revenue in a globalized economy is constant regardless of the top tax bracket, so there are complications around this way of solving the problem.
2. A 2003 study on Costs of Health Care Administration in the United States and Canada published in the New England Journal of Medicine by Steffie Woolhandler, M.D., M.P.H., Terry Campbell, M.H.A., and David U. Himmelstein, M.D sheds some light on the magnitude of this issue. According to the study, in 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada, which has universal free healthcare. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. Canada's national health insurance program had overhead of 1.3 percent; the overhead among Canada's private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent). Providers' administrative costs were far lower in Canada. Between 1969 and 1999, the share of the U.S. health care labor force accounted for by administrative workers grew from 18.2 percent to 27.3 percent. In Canada, it grew from 16.0 percent in 1971 to 19.1 percent in 1996. (Both nations' figures exclude insurance-industry personnel.) The study concluded that the gap between U.S. and Canadian spending on health care administration has grown to $752 per capita. A large sum might be saved in the United States if administrative costs could be trimmed by implementing a Canadian-style health care system.
3. The OECD estimates that direct and indirect legal costs in 1987 amounted to 2.7% of America's GDP, which amounts to $2,600 per household. The Pacific Research Institute estimated it's $8,201 per household, or $6.4k per household more than the average OECD country's.
4. The US 2010 defense budget is $663.8 trillion. That's $6.3k per household. So the effect of dramatically slashing defense expenditures would be similar to that of slashing tort.
But the relevant cost of universal healthcare is just the cost for today's uninsured, because that's the marginal cost --the rest of us are already paying for healthcare in one way or another. The US Census Bureau estimates the uninsured at 15.4% of the population (that includes those who were uninsured only part of 2008).
In brief, reducing healthcare OH could reduce healthcare costs by about 15% and thus pay for the entire cost of the uninsured. A 10% additional income tax on the 1% of richest Americans would suffice to pay for Universal healthcare for all. Of course, taxing more than just the richest 1% would reduce the tax rate needed. Reducing the cost of tort to the levels of other industrialized countries would pay for about twice of the cost of universal free healthcare. Reducing military expenditures by 45% could pay for it too. Thus, it seems all four factors are significant contributors to the differences between the healthcare systems of the US and those of other countries, and that any of them can be used to pay for universal healthcare. Better yet, a combination of reducing tort, military expenditures and healthcare administrative overheard and a slight increase in tax rates for the wealthiest would allow us to go way beyond healthcare reform. We could invent a future so prosperous for the average American no country has ever experienced it before.
Alex Backer, Ph.D., March 28, 2010
For further research with a humorous approach, see the movie Sicko by Michael Moore. See also http://michaelmoore.com/books-films/facts/sicko
Calculations and references:
Combined wealth of 400 richest Americans $1,270,000,000,000 Fortune magazine Households in US, 2000 105,480,101 http://quickfacts.census.gov/qfd/states/00000.html Average annual family healh insurance premium with an annual deductible of $10,000 $5,380 http://healthinsurance.about.com/od/healthinsurancebasics/a/cost_of_health_insurance.htm Half of combined wealth of 400 richest Americans per household $6,020.09 Average annual family health insurance premium for plans with no deductible $12,686 http://healthinsurance.about.com/od/healthinsurancebasics/a/cost_of_health_insurance.htm Top 400 income earners in US annual income, 2007 $137,900,000,000 Half of top 400 income earners in US annual income, 2007, per household $653.68 United States health spending per capita per person according to Catlin, A, C. Cowan, S. Heffler, et al, "National Health Spending in 2005." Health Affairs 26:1 (2006). $6,697 Administrative overhead excess in US vs. Canada 14.300% United States health spending per capita per person minus unnecessary OH (2006). $ 5,739.33 the richest 1% reported share of the nation's total adjusted gross income in 2006. 22% 2006 US GDP $13,060,000,000,000 Richest 1% 2006 adjusted gross income assuming 100% of income belongs to someone $2,873,200,000,000 Half of 2006 income for richest 1% $13,619.63 Persons per household 2.59 http://quickfacts.census.gov/qfd/states/00000.html Annual healthcare cost per household (2006) $17,345.23 % of annual healthcare cost covered by 50% income tax on richest 1% of Americans 79% 64% Annual healthcare cost per household minus unnecessary OH (2006) $ 14,864.86 % of annual healthcare cost minus unncessary OH covered by 50% income tax on richest 1% of Americans 92% # of licensed attorneys in US according to American Bar Association 1,143,358 http://wiki.answers.com/Q/What_is_the_total_number_of_lawyers_in_the_US Median annual wage of all wage and salaried lawyers $110,590 http://wiki.answers.com/Q/How_much_money_does_a_lawyer_earn Total salary of US attorneys (excluding bonus & profit sharing) $126,443,961,220 Lawyers per capita US 0.38% Lawyers per capita France 0.07% Amount saved if US had France's lawyers per capita $102,561,103,256.14 Amount saved if US had France's lawyers per capita, per US household $972.33 OECD estimates that direct and indirect legal costs in 1987 amounted to 2.7 percent of our GDP, compared with 0.5 percent to 0.7 percent for other OECD countries. OECD estimate of direct and indirect legal costs over and above other OECD countries' $274,260,000,000.0 OECD estimate of legal costs over and above other OECD countries' per household $2,600.11 PRI estimate of tort costs per year in US $865,000,000,000 http://arbitration-forum.blogspot.com/2007/04/cost-of-litigation.html PRI estimate of tort costs per year in US per household $8,200.60 PRI estimate of tort costs per year per US household if legal costs were those of other OECD countries $6,378.24 US 2010 defense budget $663,800,000,000.00 US 2010 defense budget per US household $6,293.13 US healthcare per person 2008 according to US DOHHS $7,681 http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp % of US population w/o health insurance at least part of 2008 according to US Census Bureau 15.40% http://en.wikipedia.org/wiki/Uninsured_in_the_United_States % reduction in US defense budget needed to pay for the uninsured 9.85600%
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