Healthcare: Public versus Private
Healthcare as a 'right'
Healthcare is the eye of a political storm. Here we have the provision of a service which could be met through private arrangements but is instead in the UK paid for via taxation and provided by the state. This situation is apparently the envy of many, particularly the American left. The fact that the rest of Europe has not followed the UK's example, and has its healthcare systems run by a plethora of private medical and insurance providers, goes virtually unacknowledged. As in the case of education, the idea of healthcare being a “right” and that therefore the state must provide it, holds true. In the case of healthcare, some people go so far as to call it a “human right”. It does not follow that commodities necessary to sustain life ought to be provided by government. Where the absence of healthcare for a sick person could spell the end of their life, so would the absence of food and water for any person – yet no reasonable person suggests that the government should dispense food and water.
World history and our lives as they are today are proof beyond a doubt that the market provides food and water at levels of abundance, quality, variety, and affordability that no government could ever dream of achieving. Indeed, government control of food and agriculture has caused the deaths of tens of millions in living memory¹,². World food poverty has been all but eradicated³ by free market principles and private charity. It is clear, therefore, that government provision of healthcare is something that must be taken on its merits and demerits, and not a policy accepted as preferable based on feelings, ideology, or faulty axioms.
To say healthcare is simply a private versus public issue is not to say anything serious about the reality of the situation. Healthcare systems may be privately or publicly funded, single-payer or multi-payer, privately or publicly owned and run, centralised or decentralised, in many varied combinations. Healthcare systems of the world are all varied combinations of these methods and structures, each a part of an international collage. A closely reasoned analysis of these ideas is required, and I will endeavour to do that later. First, let us set the scene with an overview of the British system, followed by an American perspective of the same system.
Healthcare and Politics in the UK
The UK’s National Health Service (NHS), instituted in 1948, is a government owned and run healthcare system which is funded out of general taxation. This state-enforced monopoly has a huge amount of support from the population generally – so much so that openly making an argument in favour of privatisation is political suicide. Those MPs, mainly in the Conservative Party, who have made noises about privatisation or have written about it, have had to retract their statements in public or deny they were ever made when pressured. Otherwise, they talk in euphemistic terms about “having a mature debate about the funding of healthcare in the country”, as Ann Widdecombe did on the BBC’s Question Time⁴. This was simultaneously sensible sounding and cryptic enough that it garnered applause from the audience.
Her implied solution could be interpreted to be dramatically more NHS funding, with or without hefty cuts elsewhere, or to be a private system funded by individuals – all biases appeared to be satisfied. However, the mere implication that there may be options for funding the NHS other than by the state continually spending more is sufficiently risky that a politician can only say it if they are retired. As Ms Widdecombe quite sensibly pointed out, three premises on which the NHS was founded – that demand would decline as we get healthier, that demographics would stay roughly the same, and that the stamp tax (national insurance today) would cover much of the cost – have all been proven wrong. Demand is higher than ever, our population is more aged than ever, and our expenditure on healthcare from general taxation has forever risen.
The British public are by-and-large staunch supporters of the NHS, and many assume the alternative situation to having the NHS is a country without healthcare where people just die. It is a bizarre assumption, for sure, but a pervading one on social media⁵. To broach the subject of private healthcare as the alternative with most Millennials is to find that their perception of it is solely based on pitting the USA against “Europe”, as though Europe has the same healthcare system everywhere and must have better outcomes than the USA. Many young people especially deem the USA’s system to be the worst in the world and vastly inferior to the great NHS.
Given the anti-American sentiment regarding government policy harboured by British people in general, it is an uphill battle to have a fair discussion in good faith around this issue. To briefly dispatch of the ideas, let us firstly point out that the USA is not the only country which has a private healthcare system. Most countries, including the vast majority of first-world countries, have highly decentralised healthcare systems which combine public and private provision. Whether the funding is mostly via taxation, or via private premiums, or a mixture, they all harness private provision and decentralisation in a way the UK does not. The UK finds its system most similar not to other European social democracies’, but to Cuba’s.
These falsehoods must come from somewhere, indeed some of them come from seemingly authoritative and official sources. In order to shed some light on this issue, I will break down a popular report which ranks countries by their healthcare systems.
Mirror, Mirror on the Wall, Which is the Worst Report of All?
The Commonwealth Fund’s “Mirror, Mirror on the Wall” report¹⁸ is often cited to me as the definitive case-in-point source by those arguing in favour of state-run healthcare and against privately run healthcare. In writing, in conversation, and on social media, it rears its head, for it presents conclusions attractive to many. It places the USA dead last out of the eleven countries included in the report. The eleven countries chosen for comparison appear to have been chosen because they are all first-world wealthy nations (and not because of their membership or not of the British Commonwealth – to avoid any confusion, The Commonwealth Fund is a US think-tank). Curiously, countries like Hong Kong, Singapore, and South Korea, which have some of the best education establishments in the world, are not included in the report. Why this is I do not know, and the selection criteria for countries included are not provided.
Stranger still is that the UK scores top on nearly everything. The Americans who put together the report must not have seen headlines in the UK which perpetually describe the NHS as being “in crisis”. Brits often to go to Europe and America on their holidays, and whenever a friend or relative of mine has had to visit a hospital abroad they tell tales of how superior they are to our own. I can profess the same experience. One often has to pay for it, but it is better. It is common knowledge that foreigners have access to better healthcare facilities than we do, but this is of course purely anecdotal.
Foreign excursions aside, it is alleged that the NHS was supposed to be on the verge of collapsing because of “Tory cuts”. (The Conservative party have decreased the amount by which the NHS budget raises each year, but the NHS budget has still increased every year since its inception in 1948). The data is from 2011-2014, so it was collected amidst George Osborne’s infamous austerity budget¹⁹. The leftist cannot have their cake and eat it: the NHS cannot simultaneously be collapsing under Conservative rule and be the best healthcare service in the world under Conservative rule. If the Conservatives are running the NHS into the ground, surely privatisation would be a preferable policy as it means some persons other than the worst government in the world would be running the show. Putting aside the strange juxtapositions of the political rhetoric and the report’s findings, let us turn to some specifics.
The report scores each country on “Quality Care”, under which are the subheadings: effective care, safe care, coordinated care, patient-centred care; “Access”, under which are cost-related problems and timeliness of care; “Efficiency”; “Equity”; “Healthy Lives”; “Health Expenditures/Capita”. These all sound like perfectly reasonable metrics by which to assess a country’s healthcare, but closer examination is required to find it why the NHS ranked 1st on 9 out of 12 scores (including the overall ranking). “Efficiency” is the most surprising and humorous measure on which the NHS came 1st. Even if I discount the anecdotes of idleness and inefficiency I have heard from NHS and ex-NHS employees, and the complaints of a disproportionately large number of managers (‘too many chiefs, not enough Indians’), I still cannot square the results of an internal audit, the leader of which said that before the NHS deserves any more funding it needs to “put its house in order” and “make changes to improve the quality of care”²⁰, with a number 1 spot on both efficiency and quality of care. When the national director for clinical quality and efficiency, Professor Tim Briggs, says the service currently wastes too much money on “poor care”, I am more inclined to pay attention to him than to the people at the Commonwealth Fund. When the chief inspector of hospitals, Professor Ted Baker, says the NHS is “not fit for the 21st century”²¹, I am inclined to question the methodology used in compiling the “Mirror, Mirror on the Wall” report. Why is it that they do not see what auditors at the NHS see, then? This is where we must look at precisely what measurements were taken and fashioned into the generic headings listed above.
If we take the first aspect listed, which Professor Briggs says is somewhat lacking – quality care – we find that the score is arrived at by measuring things such as: “Physicians reporting it is easy to print out a list of patients who are due or overdue for tests or preventive care”; “Doctor or other clinical staff talked with patient about a healthy diet and healthy eating”; “Physicians reporting it is easy to print out a list of all medications taken by individual patients, including those prescribed by other doctors”; “Hospitalised patients reporting infection in hospital or shortly after”; “Patient believed a medical mistake was made in treatment or care in past 2 years”; “Doctor receives alert or prompt to provide patients with test results”; “Primary care physician always or often receives notification that patient is being discharged from hospital”; “Patient given wrong medication or wrong dose at a pharmacy or while hospitalised in past 2 years”.
Some of these criteria seem reasonable, but those are few and far between. The majority are either trivial or misleading. How much does the ease of list-printing contribute to the quality of one’s medical care? A physician’s opinion about the ease of their process in printing out lists seems even less important. What if one nation’s doctors are more inclined to complain about trivial tasks than another? What if a nation’s doctors don’t do much of their own admin at all? Do patients reporting re-infection constitute a reliable survey? Surely it is doctors who should be asked about re-infection, not patients who may be falsely self-diagnosing infection. Is what patients believe about how many medical mistakes are made a good measure of quality of care, or would the actual number of medical mistakes made be more useful? Does the process of a doctor being 'alerted' to provide test results matter as much as the actual promptness with which patients are informed of test results? These are not the same thing. Pharmacies in the UK are privately owned and must apply for inclusion on the NHS pharmaceutical list – if private pharmacies perform well does the NHS take the credit for this, in this report? On the flip-side, does the NHS effectively take the blame for an individual pharmacy’s failure? Since this report and others like it are regularly used in debate regarding how we should go about providing for healthcare, these distinctions are important. The strange measures, and the lack of specificity and objectivity, show the fundamentals of this report to be severely flawed.
“Health Expenditures/Capita” is another interesting measure to pick for assessing “access”, and one that is easily spun. We will go on to look at a graph of expenditure as a percentage of GDP earlier, and this can be helpful when observed fairly and considered in context. However, to simply quote the raw data for national spending per person, as this report does, and rank them as 'low is good, high is bad' is a nonsense approach. The result is that those countries that spend a lot on healthcare appear to be less affordable places to obtain healthcare. That is not necessarily the case logically, and indeed is not the case factually. The “Mirror, Mirror on the Wall” report makes no distinction between types of spending, which is crucial – it measures total expenditures on health as a percentage of GDP and ranks people by this figure alone. This is deeply flawed. According to OECD data, voluntary spending is far higher in Switzerland, Australia, and the US, than the UK, for example²². These three high-spending countries are among the lowest scoring for “affordability” in both the 2014 and 2017 “Mirror, Mirror on the Wall” reports, and that is misleading. What on earth does high voluntary spending have to do with whether goods and services are affordable or not? It could be the case that laser eye surgery is 10% cheaper on average in country A than country B, and people are 40% more likely to get the surgery in country A precisely because it is more affordable, making the overall expenditure much higher than in country B.
Take a real comparison: a prostate-specific antigen test (PSA) is a common screening for prostate cancer. In Australia, the typical cost is $30 to $50 (AUD, or £16.66 to £27.72). The same test in the UK is not easy to obtain, firstly because the NHS rations tests by its own criteria which make far fewer people eligible for screening than in other countries. I know men in my own family who contracted the disease before being eligible for an NHS test and went on to develop stage 4 cancer, and other men aged 50 who were turned away when requesting a test. If a British man would like to purchase a screening from a private provider, this is not easy either. There are few private providers to choose from (especially ones with physical premises) due to the state's NHS monopoly crowding them out, and the ones there are do not provide a price without a consultation. The entry cost for a consultation is typically £100, so it would be safe to take that as a baseline cost. Prostate Health UK charges £160 for this test²³, but it appears if you are not a corporate customer there are additional hoops to jump through. This leaves a couple of online laboratories which we are fortunate enough to have had pop up in the last few years, one of the most well-reviewed being an American firm called “letsgetchecked.com”, which are typically around the £100 mark.
How can a category assessing access to healthcare characterise high voluntary spending on healthcare as a “cost related problem”? Those people who choose to spend more on healthcare, and naturally experience better outcomes for it, would surely consider it a problem if they lost the freedom or ability to do so. If a health-conscious American, Swiss, or Australian were plucked out of their respective country and dropped in the UK, where there is no strong culture of voluntary spending on healthcare and the services are dramatically restricted and priced more highly compared to where they came from, I cannot imagine they would be best pleased. It is also reasonable to assume that citizens in richer countries – which is the same as saying, richer world citizens – will spend more on all manner of things, including healthcare, if given the opportunity to do so.
You will notice, reading through all the individual criteria for what constitutes “Quality Care”, that there are probably none that you would have guessed or chosen yourself. For example, in my opinion the most important goal in any healthcare system is to prevent deaths from illness. Not dying seems, to me, a fundamental part of receiving healthcare, but it is not considered in the “Mirror, Mirror on the Wall” report. An obvious place to go to might be cancer survival rates. Cancer kills many millions every year and will be contracted by one in every two people at some point in their lives²⁴. We have already seen that the UK is the poster child for quality healthcare in the Commonwealth Fund’s report, with “effective care” being only one of many measures on which the UK is number one. The UK has among the worst cancer survival rates in Europe²⁵²⁶ and Europe in general lags way behind the US.
How can it be the case that a country, in which if you contract cancer you are more likely to die than if you were in virtually any other first world country, can be scored number one on effective healthcare? The USA, on the other hand, is a world leader in cancer treatment. Even Cancer Research UK accepts that 5-year survival rates for men with prostate cancer are 51.1% in the UK against 91.9% in the USA²⁷. They would struggle not to accept it, seen as they funded the study²⁸ – CONCORD, performed by the Lancet – which is a remarkable piece of research. However, they do contest it on the basis that the USA is detecting prostate cancer too often. If only the Americans had a detection rate about as bad as ours, then our survival rate statistics might be closer. A peculiar objection, for sure, but let us hear them out. Cancer Research UK’s contention is that the testing used in the USA sometimes detects cancer that is not life threatening, and so a cancer is recorded as being survived which might not have killed the patient anyway. It seems a strange criticism to make, as the medical profession normally says that early detection and catching a cancer at a low-risk time when it is more easily treatable is better. The decision as to whether to treat or not can be taken after that.
The fact that their detection measures are better is a genuine contributory factor to better survival rates as people are less likely to go undiagnosed. Some diagnoses might be unnecessary, and some would have been missed otherwise, so the original contention seems to be without merit. Indeed, Prostate Cancer UK does recommend screening at a rate far higher than the NHS has capacity for²⁹. Cancer Research UK then goes on to say, “the NHS is doing a pretty good job of managing it when it’s detected early”. Detecting it as early as possible is only a laudable feat when the UK does it, it seems. PSA testing is clearly a topic of debate in the medical field at the current time. In either case, neither positives nor negatives of early detection can account for a 40% differential in survival rates.
Breast cancer is another of the most treatable forms of the disease, with some of the highest survival rates in general. The 5-year survival rate for breast cancer in women is 83.9% in the US, 82.5% in Canada, 81.6% in Japan, 80.2% in Finland, 75.5% in Germany, and 69.7% in England. On the 5-year survival rate for colon cancer, the UK falls behind Republic of Ireland, Northern Ireland, Spain, Finland, Austria, France, Portugal, Sweden, Norway, Germany, Iceland, Italy, Denmark, Netherlands, Australia, USA, Canada, and Japan, and perhaps others for which we do not have data.
Waiting times are also a top concern for many people, and it has been considered in the report in question. The Commonwealth Fund’s report finds that, in the UK, 21% of doctors report patients often experience long wait times to receive treatment after diagnosis. For the USA, that percentage is 8%. I do not find this very surprising, but I do find some of the other countries’ numbers a bit suspect: 59% for Germany? Perhaps it really is awful over there, or maybe the Germans just complain more because, again, this is a measure based on perception and opinion rather than hard data.
The most eyebrow-raising part of this section is not any one particular statistic, but the glaring absence of one for the UK under “waiting time of 4 months or more for elective/non-emergency surgery”. Apparently, the sample size of our 65 million strong population all accessing the same healthcare service is “too small”. At this point, it is becoming clear that some of the most damning statistics are simply left out of the report (purposefully or not, we can only speculate).
There is a well-known problem in the UK surrounding waiting times, especially for elective surgery, and a wait of a 6 months to a year or more is commonplace. It is sufficiently bad that a standard was put in a place – a lax benchmark, but a benchmark nonetheless – intended to improve the situation. England’s 2010 “NHS Constitution” declared that no patient should wait beyond 18 weeks for treatment after GP referral. The principle is one thing, but the actual target was that this should be true for 90% of patients. By August 2019, less than 49% of hospital services achieved that target and the average wait time in England was 23 weeks. In September 2018, the proportion of people waiting more than the six-week target for diagnostic tests was at its highest since records began³⁰. The BBC subsequently discovered, and published in 2012³¹, that many patients initially assessed as needing surgery were later “re-categorised” by the hospital trust and removed from waiting lists. In short, they were kicked off the waiting list to make it look better. The Royal College of Surgeons President Norman Williams called this “outrageous... very, very worrying”, and charged that hospitals are cutting their waiting lists by simply raising thresholds for surgery. Health Secretary Andrew Lansley said that treatment should not be “rationed”.
We will return to the idea of rationing in more detail, later. Continuing with the issue of waiting times, The Commonwealth Fund advise that in 2007 the UK and Canada had the highest numbers of persons who had to wait four weeks or more, at 60% and 57% respectively, to see a specialist physician. This is a result of rationing. In the USA, only 23% reported a wait of four weeks or more. Long waiting times clearly represent a reduction in “access” to healthcare, which is a word often used in defence of socialised healthcare.
Another important consideration regarding access is the phenomenon of the “postcode lottery” (zip code lottery, for our American friends). When services arise from the market, unfettered by government meddling, the supply – the types of service and the amount/capacity available – match the requirements of the geographical area they serve. A central planner could never hope to gauge this properly because the problem is far too complex, therefore the areas in which people live are often mismatched with the services made available to them. This is described colloquially as the postcode lottery – a situation where people in one geographical area are luckier than people in another geographical area in the abundance and quality of government distributed services made available, in this case healthcare. This disproportionately affects the poor, because low income people often do not have the means to move to areas with better services. Reports like the one under review here seem to skip over facts like these.
Out of hours care is notoriously difficult to obtain in the UK, and the only place I or anyone I know has ever accessed it is the Accident & Emergency room with a regular wait time of 4 hours or more. There is an out of hours service available which is contracted out to a company called Vocare, but it is only available until 8pm and the providing company has a poor reputation. Naturally, due to the public system, the tender process for this contract is hardly as free as a private one, and whoever wins it is the sole provider – there is no other one can choose if the service is bad. Despite all this, the Commonwealth Fund claims that “The U.K. has short waiting times for basic medical care and non-emergency access to services after hours. The U.K. also has improved waiting times to see a specialist and now rates fourth on this dimension with the U.S. ranking third.” To arrive at precisely the reverse conclusion to the reality is quite bewildering.
At this point, it is worth pointing out the obvious political orientation of the authors of the “Mirror, Mirror on the Wall report”, The Commonwealth Fund. It is self-described as “a private foundation that promotes a high-performance health care system providing better access, improved quality, and greater efficiency. The Fund’s work focuses particularly on society’s most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults.” They hope to “stimulate innovative policies and practices in the United States and other industrialised countries.” You can almost guarantee that any organisation which defines itself as working on behalf of the down-trodden, the marginalised, the poor, minorities, will be left-leaning. Whether their policy prescriptions will benefit those groups is an entirely separate issue. You often find, as we do here, that the results are actually the reverse of their stated aims.
The outcomes of public healthcare we have reviewed hardly represent an advancement in the lot of the poor. My suspicions of a strong socialist bias were confirmed when the report went on to speak in praise of then President Obama’s Affordable Care Act in completely unquestioning terms, without any evidence to back up their assertions about the real effects of the Act. So, as it happens, the above distortions are not at all a surprise to find. I have no problem with bias, per se, because everyone has it. I am biased toward enhancing and preserving the freedom of individuals, because I am convinced by my research that this position is grounded in good principles and has preferable outcomes. So long as people are honest about their biases, we can navigate discourse properly. Sadly, this report is presented as a factual analysis, and is not forthcoming about its agenda.
My aim, in briefly deconstructing this particular report, is to plant a seed of doubt in the minds of those who take reports at face value, and those who take for granted that healthcare is “good” if it is “given” to you and “bad” if you have to pay for it in any way other than taxation, and to challenge the peculiar status of the NHS as the UK’s golden calf (remember the 2012 London Olympics opening ceremony – a truly religious experience). Like any product, healthcare comes in varying qualities at different prices, and the government does not give you anything – it pays for things with your money, and you, your children, and their children will pay it back.
London Olympics, 2012: the NHS section of the opening ceremony
Mirror, Mirror, 2017
Before moving away from The Commonwealth Fund, I regret to inform the reader that my subject matter outpaced me at the time of analysis. The Mirror, Mirror 2017 report³² was released at the same time, and I felt it necessary to address it. Fortunately for me, and perhaps the reader who has had quite enough of report breakdowns, they didn’t do enough differently to warrant dwelling for long. The benefit of this, though, is that at least we know the last report was not just a bad egg. Unsurprisingly, the UK scores first and the USA last, again. However, if I didn’t know full well that my criticisms have been seen by no-one yet, and that it would be inconsequential even if they had, I might have been fooled into thinking that the Commonwealth Fund had acted on something I pointed out. They have included cancer survival rates in their new report – a measure bizarrely left out in the last report. It is worth pointing out that they have only included two types of cancer: colon and breast cancer, which, coincidentally or not, are not as disparate in their survival rates across countries as other types. Results that make the UK look too bad and the USA too good do not suit the Commonwealth Fund’s agenda, but we still have plenty to go at.
On both of the included statistics, the UK is last – lower than the other countries combined by on average 6.5% and 8.6%, respectively. As a result, this latest report bears on reality a little more accurately than the last one in one regard: the UK is 10th/11 on “healthcare outcomes” i.e. survival and mortality rates. However, true reflections of reality stop there, as the UK somehow still ranks no. 1 overall. Furthermore, the USA is placed 11th/11 on healthcare outcomes, despite being consistently among the top performers on numerous measures in the same report. How did the overall scoring in one category manage to drag the USA down to last place, then, if their scores were high? The sceptic in me points to selected, strange criteria, such as the percentage of “Adults age 18 to 64 with at least two of five common chronic conditions”, the chronic conditions being: joint pain or arthritis; asthma or chronic lung disease; diabetes; heart disease; and hypertension. A country’s healthcare surely must be rated on the care that it provides for someone with a chronic condition – it should not be rated on how many of its patients walk through the door with chronic conditions asking for treatment. A person can have a weak or strong genetic disposition to any and all of these conditions, and gene pools vary from country to country, from ethnicity to ethnicity. Components like diet and exercise, which also affect these conditions, are the personal choices of the individuals.
Trends of behaviour vary between countries, genders, ages, ethnicities etc. There are too many variables outside of the control of the healthcare system of a given country to make this measure reliable. Why should a healthcare system be blamed for a population’s personal choices or weaker constitution? Take the USA: black American adults age 20 or over are 77.5% more likely to have diabetes than white Americans, Hispanic Americans 66% more likely, and Native Americans 364% more likely³³. Asian Americans have significantly lower death rates for cardiovascular disease³⁴. There are many disparities along these lines, and it is accepted different races have predispositions to particular illnesses. With these facts in mind, consider that the USA has 21% of patients with at least two of the five common chronic conditions while the rest of the countries in the Mirror Mirror report have an average of 10.6%. Is it the fault of private enterprise, American medical staff, or American lawmakers, that the USA has over 104 million people in the three ethnic categories carrying the highest risk of diabetes, while the whole of Europe is home to approximately 10 million people of the same ethnicities combined³⁵,³⁶,³⁷?
The apparent incidence of higher rates of chronic illness could also be a simple reflection of the USA’s superior testing and diagnosis capacity, or Americans’ greater voluntary spending on preventative care, both of which we already know contributes to their favourable survival rates for disease. The inclusion of this measure and the respective statistics significantly knocks the USA’s score on “healthcare outcomes” without reflecting whatsoever on the efficacy of the American healthcare system. Imagine if, rather than ‘the 10-year rate of survival for skin cancer’, the ‘number of people diagnosed with skin cancer’ was taken as a measure: sunny countries with majority white populations would be significantly over-represented and branded failures – specifically, Australia, New Zealand, and Denmark (with an average of 8 hours sunshine per day from May to August, interestingly³⁸) would be the victims of such shoddy statistical shenanigans³⁹. As for the UK’s favoured performance, especially with a ranking of one in “care process”, I can only imagine the researchers didn’t think questions like ‘number of patients left in corridors of hospitals’ were of interest⁴⁰. One measure: “primary care physician reports electronic clinical decision support in practice” – I have no idea what this actually means, and nor do the doctor or dentist I asked, but it sounds like an administrative process. If the Commonwealth Fund thinks that form filling and red tape is equivalent to safe care, then we Brits shall never fall from our lofty position.
With the political motivations discussed earlier, it is apparent that the Commonwealth Fund’s report is constructed for the UK to win and the USA to lose, for that means their conclusions point to their end goal: greater government spending and state involvement in healthcare. The Commonwealth Fund’s bias toward the UK healthcare system may be part of a wider US bias in the same direction. I have visited the USA numerous times, and every time I have found Americans singing the praises of the NHS without ever having accessed it. The idea of socialised healthcare was positively utopian in the view of the Californians and Arizonians I spoke with. My advice to Americans would be: don't do it – there is a reason no other European countries have done so.
Measuring Outcomes and Pitfalls
The report above demonstrates a litany of failures in research and statistical analysis. It is important to spend some time discussing what does and does not constitute sensible measures when considering healthcare outcomes.
Five-year survival rates for cancer constitute high quality data for our subject for numerous reasons: it is a common illness; it has high mortality rates; it has quite variable survival rates; there are numerous options for treatment; survival chances are heavily dependent on the timeliness and quality of treatment; a five-year window after diagnosis minimises lifestyle effects. I will explain why each of these facts is an important one to consider for our purposes.
If an illness is common, it provides us larger sample sizes. Small sample sizes are less trustworthy when analysing a rate, like survival rates. If an illness has a high mortality rate, it is easy to measure good and bad outcomes. Doctors, statisticians, and governments can hardly ignore dead bodies. Mild illnesses are problematic because they offer no clear qualitatively different outcomes and we cannot set timeframes against them so easily. A highly variable survival rate is useful because it means there are differences to observe between cancers and between countries. Different treatment options are useful because it means we have a variable which informs survival rates. Dependency on good healthcare for good outcomes is useful because we are appraising healthcare outcomes (some illnesses can be fought off with no treatment, or only require basic treatment, or may not kill a person if left untreated). Lifestyle effects are important to minimise because they vary greatly between countries and have nothing to do with the efficacy of each country's healthcare system.
The common cold would be useless for our purposes, against all the criteria outlined above. It is too nebulous an illness for us to measure a healthcare system by. That much is obvious, but the effects of lifestyle require further discussion. One might dismiss the common cold because it goes mostly unrecorded, sees low engagement with healthcare providers, treatment is unnecessary, treatment is mostly ineffective, it has a low mortality rate etc.; but it does pass the lifestyle test. There is no effective way to stop people spreading around cold viruses – they are here to stay – and diet and exercise have little to no impact on the fact that virtually no-one dies of this virus. On the other hand, we also cannot simply take mortality rates by country, or excess deaths by country, in general. Mortality rates may fulfil our criteria regarding good and bad outcomes (dying and not dying), but it is as broad and nebulous as the common cold because people die for innumerable reasons apart from healthcare.
For example, in 2016, Malta had a lower mortality rate than Germany⁹⁹, which is interesting because Malta is a developing country and has a GDP per capita 45% lower than Germany's⁹⁵. We would not expect Maltese healthcare to be better than Germany's, Germany being a richer nation with multi-payer healthcare system featuring multiple insurance options and a mixture of public and private facilities. Indeed, to take a fairly reliable indicator, Germans have higher 5-year survival rates for colon and rectal cancers than Malta. The likely reason for this discrepancy is lifestyle. The Mediterranean lifestyle is a famously healthy one, and all the Mediterranean EU member states enjoy lower than average mortality rates. Therefore, we cannot take mortality rates alone as being reliably indicative of a healthcare system's efficacy.
Even heart disease, the leading cause of death worldwide, is a tricky one to use for comparison. It is easier to look at the progression of healthcare trends within a given country by observing heart disease death rates, but international comparisons are murky. Again, this is because of non-healthcare related factors which interfere with the data. Heart disease risk is increased by lifestyle and by genetics. As mentioned earlier, some ethnicities are less predisposed to it, as the Center for Disease Control and Prevention writes: "For women from the Pacific Islands and Asian American, American Indian, Alaska Native, and Hispanic women, heart disease is second only to cancer"⁹⁴. Because those factors differ more greatly between countries than inside a single country, heart disease survival rates are not especially well suited to our purposes.
As countries become richer, they approach first-world lifestyles, increasing their risk of heart disease. On the other hand, richer countries with better healthcare systems have better treatment for heart disease. Therefore, the data shows lifestyle and economic development to be greater variable factors than one healthcare system or another. To demonstrate that fact, consider Ecuador with its $6,345 GDP per capita⁹⁵ and sixth lowest heart disease death rate among all 177 WHO member countries⁹⁶, set against Russia's $11,289 GDP per capita⁹⁵ and ninth highest heart disease death rate⁹⁶. The poorer country drastically outperforms the richer one, proving this international picture to be something far short of clear.
Centralisation versus Decentralisation
When looking at European models (apart from the UK), we are comparing mostly between hybrid systems all of which are universal. Healthcare does not need to be centralised to be universal, as Europe proves with its myriad of arrangements, from completely private to multi-payer hybrids to single-payer hybrids.
Looking back at cancer survival rates, it is of no surprise that the countries with greater freedom in the healthcare market, and greater private involvement, have the best outcomes. Like most European countries, France's healthcare sector is largely funded via taxation and the services competing to receive that funding are highly decentralised. France has self-employed GPs and specialists, a mixture of public and private facilities, about 30% of healthcare is paid for privately, state healthcare is not free (a co-payment is paid by the patient), and it is reliably among the highest in 5-year cancer survival rates. It also famously has a healthy lifestyle, with good food and lots of cycling, and so has among the lowest mortality rates in Europe⁹⁹ and among the lowest death rate for heart disease in the world⁹⁶.
The Nordic nations generally have highly decentralised, mixed but mostly public healthcare providers, with the more centralised healthcare system in Denmark being the outlier. Again, it is no surprise that as a result of its greater centralisation Denmark has lower 5-year survival rates for cancer than Norway, Sweden, Finland and Iceland. Denmark is still not like the UK, although it may be characterised as such by some. Denmark outperforms the UK, and 19% of Danish expenditure is made by individual co-payments (private, individual patient payments)¹⁰⁰. In most of the Nordic nations a deductible is paid by the patient when accessing healthcare services, like in France. Therefore, the general Scandinavian model could fairly be described as: mostly publicly and partially privately funded, mixed in ownership and provision but mostly public, with public provision being highly decentralised (run by local authorities, not the central government).
Switzerland was not included in the CONCORD study, but if it had been there is no doubt it would have been among the top performers, if not the top performer. Switzerland is unusual by European standards, in that it has a universal system, but the government provides none of the funding. Its system is completely privatised and could barely be any more decentralised. Switzerland is even less socialised than the United States. The way in the Swiss system is 'universal' is that private health insurance is compulsory for everyone in Switzerland. Switzerland's overall 5-year cancer survival rate is very good, reported to be 66%⁹⁸.
Switzerland is an unusually successful country, with unusually high political and economic freedom. This is mostly because it has an unusual electorate which has the good sense to prevent centralisation and preserve the autonomy of individuals and local regions (in Switzerland, they are called cantons). Few electorates in modern times besides the Swiss would vote against a national minimum wage, as they did in 2014¹⁰². Even fewer would reject it so emphatically, with a majority of 76.3% voting against the proposal. The Swiss also have a cap on public expenditure as part of their constitution to preserve a healthy economy and to prevent growth of government. Switzerland has therefore protected itself against the march of socialised healthcare where most of Europe has failed and the UK has failed dramatically.
Both the minimum wage and socialised healthcare prove very attractive both to the expanding government and to the well-meaning ill-informed electorate. They are not the result of sound economics, good research, proven outcomes, or the betterment of the many - they are the result of persuasive politics. The Swiss have proven too resilient and well-informed to be tempted by falsehoods wholesale, but with a razor-thin majority of 50.03% passing a minimum wage law in Geneva the Swiss may be dipping their toes into the water of market manipulation¹⁰². Let us hope that they are not carried gently down the stream to serfdom. For most European countries, the horse has bolted the gate, and public sentiment around the issue is as good as set in stone. No matter the truth or complexity of these matters, the population that has adopted a minimum wage and nationalised its healthcare cannot fathom life any other way. An electorate is made to fear the loss of these 'protections'. It is a rare occasion that a country should ever abandon its socialist policies once they have taken hold. Those rare occasions are rude awakenings, and usually cost many lives.
Therefore, it is political pragmatism that dictates the trend in Europe toward socialisation in general, including in healthcare. It simply would not be politically feasible for anyone to stand on the ticket of individual freedom and a free market system in most European countries this day in age, no matter how much evidence bolsters their case. Even in those countries where a truly liberal party (in the traditional sense, now usually termed libertarian, such as the Moderate Party in Sweden) is a serious contender, their policies are so watered down that their principles are effectively abandoned. They are highly unlikely to win an election by promising changes that are not popular, not understood, and go counter to the status quo. Therefore, they are reduced to being the party that might reduce tax rates a little.
Pragmatism, to some extent, keeps Europeans from going off a UK-shaped cliff edge. Apart from in a strange lurch toward socialism, to which Europe unfortunately has been prone in history (especially Spain, in recent times), Europeans keep their systems decentralised with significant involvement of private enterprise, to preserve some competition and freedom of choice, thereby ensuring superior outcomes and the hope of sustainability.
Indeed, Britain has had to attempt to keep its healthcare system afloat by outsourcing many services, but it is so unpopular that it must be done via the back door. In fact, about 22 percent of NHS spending goes to the private sector¹⁰³, but the public is kept in the dark about this because their negative response is predictable. However, a crucial point of failure in the UK is its woeful track record of effective decentralisation in healthcare. A system in which the government grants money to private providers by public tender or some other process (like the UK), and a system in which the government financially empowers individuals to participate in a marketplace of insurers and providers (like Germany or the Netherlands), are worlds apart. In the former case, freedom of choice is removed from the individual and the system is stripped of any effective incentives for efficacy. In the latter case, a significant degree of freedom of choice and incentives to efficacy are preserved.
A fundamental difference like centralisation versus decentralisation manifests itself in innumerable ways, many of them observable and predictable, and some of them mentioned already. These differences come down to the reality that decentralisation fosters competition, brings healthcare costs down, puts healthcare provision in the hands of professionals close to the point of delivery, creates incentive toward efficiency, and gives cause for providers to want to see patients. Centralisation eliminates competition, threatens the viability of private providers by state monopoly thereby driving prices up, puts remote bureaucrats in charge of managing healthcare provision, harms efficiency, and makes it pay for demand to be low – in other words, seeing fewer patients is preferable to a resource-rationed system. The last point speaks to the fact that higher private involvement and freedom of enterprise permits and meets growth in demand, while a draw-down of defined resources necessitates rationing of some kind.
Rationing in Socialised Medicine and the NHS
In addition to the criticisms made of the NHS as part of my deconstruction of the Commonwealth Fund report, I will outline some others which also apply broadly to socialised medicine. One of the worst elements of socialised medicine, and one of its highest contributory factors to poor outcomes – whether they are measured, as in cancer survival rates, or experienced, such as denial of service – is rationing. As even the staunchest NHS supporters admit, the service is a rationed one: for every patient who drains more, another is afforded less⁷⁸.
I often hear conservative US commentators warn their fellow citizens that healthcare will be rationed under a single-payer system, and their warnings are laughed off by their adversaries. Those warnings are not unfounded – that is how it works. Where it is conceivable that an American may forego healthcare because of direct costs, Britons regularly forego healthcare after having already paid for it via their taxes (the real costs of which I will come to later) only to be turned away by the NHS or made to face a dangerously long waiting list. While data on how many people are turned away is sparse (as is to be expected, the NHS does not report costs saved by patients denied), waiting times, as discussed above, are indicative of the problem and they are quite damning.
Some of the data we do have on NHS rejections to patients surgery is worth mentioning, however. Hip and knee replacements are notoriously difficult to get in the United Kingdom, and most of us Britons know someone who is waiting for their condition to become sufficiently bad that the NHS will put them on the waiting list for an operation. The British Medical Journal investigated the number of rejections for exceptional funding requests for hip and knee surgery in England and found shocking results⁹⁷. In a single year, 2017 to 2018, 1,675 hip and knee surgery requests were rejected. The five luckiest areas had rejection rates of 5, 10, 16, 13, and 18%. The unluckiest areas had rejection rates of 88, 90, 92, 96 and 100%. To have thousands of citizens begging government commissioning groups for surgery, when they have already paid their dues for a 'national insurance' plan, is appalling.
For those that can afford to pay for their healthcare twice (once via national insurance, and once again via private arrangement), private surgery is an option. In the same year as those rejections, Spire Healthcare (one of the largest private providers in the UK) saw a 12% in revenue from self paying patients in 2017. Some areas reported a 60% growth in patients paying for orthopaedic procedures in the same period. If the required private surgery is not available in Britain, as some of the best treatment is not, the consumer must pay twice and then pay an inflated price to get treated abroad.
A freedom of information request found some more data on this issue, showing that rationing is rampant in treatment for nasal problems like chronic rhinosinusitis. Of all requests made in the period observed, only 4% were accepted¹⁰¹. These data finds are the tip of the iceberg, supplements by thousands more experiences most of which we will never learn of. I know of a few cases where people are struggling on with debilitating conditions, rejected for treatment by the NHS, and, if I know a few, then heaven knows how many there are country-wide.
Long waiting lists and denial of service are inevitable logical outcomes of a system which draws down from a centralised pot of finite resources. In the areas where not enough money is spent effectively – whether it is by waste, lack of funding, or misallocation of funding – there will not be enough supply to meet demand. In the areas where too much money is spent, supply exceeds demand and money is wasted, starving high-in-demand areas of needed resources.
A market system, on the other hand, provides as much supply as customers demand. Customer demand is dynamic, and the market system recognises that by permitting individual customers to express their demands by the money they spend. Collecting a prescribed sum of money from everyone to put in a central location fails to recognise demand for any particular service or medicine, completely negates the mechanism of supply meeting demand, and naturally results in rationing. It also results in shortages, which have been a regular feature of NHS history. An internal NHS document leaked in 2019 showed chronic shortages in medicine⁸³.
A scholarly study explored the chronic shortage of nurses in the NHS⁸⁴. This, again, is of no surprise to me having met British nurses in the United States who move there to get paid three times as much as they would in the United Kingdom. This is also true of leading doctors - they leave for countries with greater opportunities to practice their craft and which offer more pay, like the United States. The general trend of staff shortages is true in many countries which over-involve government and utilise large amount of public money to fund healthcare. A spokesperson for the French emergency-physicians’ labor union said that the pay and working conditions in French hospitals were too poor to attract enough staff to work in them¹⁰⁷.
Another practical way in which the NHS rations healthcare is by criteria which exempt a patient from care. For example, if your condition is 'cosmetic', you will be turned away⁸⁵. It is important to note that what you might consider qualitatively life-changing, the NHS might consider 'cosmetic', and there is significant discretion on behalf of the doctor or hospital/trust staff. Is a cyst on your eyelid a problem? In the UK, it is deemed cosmetic until it significantly reduces vision, and therefore not eligible for removal. If your condition and required treatment fall outside of the NHS inclusion criteria, it is put on you to petition the NHS for why you ought to have the treatment. In other words, you must beg to retrieve the money you have already paid into the system to treat an ailment you have already developed.
This is a key point to understand: pre-paying into a socialised healthcare system gives the healthcare provider the discretion whether they will dispense the services for which you have already paid. To an American, indeed to most non-Britons, this sounds insane – why would healthcare professionals take steps to avoid treating you? In short, because there is only so much to go around; because supply does not meet demand because the market is not permitted to operate; and because the incentive of an organisation which dispenses already-paid-for goods and services is to save money, not to spend money.
In most countries, if you go to a doctor and are diagnosed with an ailment, you can choose whether to receive treatment based on the doctor's advice, and the healthcare provider will be pleased to treat you. Why are they pleased to treat you? Because you are a paying customer. No matter whether you pay nothing on the day, and your insurance pays the fee, or if you pay a small deductible, or you pay the full amount, you as an individual are the health provider's source of income. This means that, where in a private system the patient is in charge of whether they will receive treatment for a diagnosed medical problem, in a socialised system the healthcare provider is in charge of that decision. This speaks to the profit incentive, which I will talk about in more detail later. As government owns the healthcare provider, controls its budget and sets policy around its operation, the reality is that the government is in charge of whether a patient receives healthcare or not.
Do not be mistaken – this phenomenon does not only apply to 'minor' surgeries or 'cosmetic' problems. The NHS rations cancer treatment too. When faced with the idea that cancer treatment is rationed, one sometimes hears equivocations claiming that it is reasonable to let elderly people with cancer go without treatment, because they 'probably would have died soon anyway'. Aside from the ugly ageism collectivist utilitarian philosophising promotes, this is simply a falsehood. It is sadly not uncommon for cancer patients to be denied treatment by the NHS on the basis of cost, and it affects people of all ages.
In an example close to home, my uncle was diagnosed with prostate cancer in his forties. That is young for a prostate cancer diagnosis, and to make matters worse he was already at stage four at the time of diagnosis. In seeking treatment, he was offered a range of options by a specialist at the NHS. What he did not know is that he had not been offered all of the options medically available, and the most effective option had been excluded. Fortunately for him, his wife, my Auntie, is very astute and a thorough researcher. She determined from her own research that a course of treatment not on offer would afford her husband the highest chance of survival. She put it to the specialist, who said it was not typically on offer due to cost, but she pushed him to accept this route due to the severity of my Uncle's cancer and his young age. For someone without a spouse of such high intellect and motivation, that meeting would have been a death sentence, as the appropriate treatment was not even offered.
There are also cases where UK citizens find themselves relying on charity and on foreign countries to fill healthcare needs their home country failed to. The following case involves a child who went to Singapore: a country proud of having a social trampoline rather than a social safety net⁵², and another example of an effective privately run healthcare system⁵³. Charity is much more prevalent in countries with lower tax burdens, but significant media attention is sometimes enough to produce charitable results anywhere in the world. In 2019 in the UK, £500,000 was raised by crowdfunding (an online charitable process which is free to set up) for a five-year-old boy called Oscar who had leukaemia⁵⁴. This was raised in order that his parents could take him to Singapore for life-saving treatment. The reason it was necessary for them to do this is because 1. The NHS rations stem cell transplants, and Oscar had used up his permitted amount of treatment for a 12 month period, and 2. The NHS does not offer treatment for the form of cancer Oscar had. Conditions like these being the inhibiting factors to receiving treatment are unconscionable to people from countries with more regular privately run healthcare organisations. The fundraiser raised £670,484.14 ($857,649.79), plus gift aid (a euphemistic name for a scheme in which the government graciously gives 25% of the money confiscated in tax on earnings back to the charitable cause) it totals £713,674.05 ($912,896.16)⁵⁵.
Oscar's life was saved by his parents' efforts, charitable members of the public, and the Singaporean healthcare system. As of summer 2020, Oscar is free of cancer and back home in Britain⁸⁷. The British healthcare system had decided to let him die. This example is an important illustration that hard cases exist in all systems and that there is unique opportunity for them to be exacerbated in socialised systems. The cost of correcting a hard case in a socialised system is far greater because the costs initially sunk into the failed socialised system, which cannot be opted out of, are compounded with the travel costs and out-of-pocket medical costs incurred by obtaining treatment in a country with a well-funded private healthcare system. Britons do not tend to buy medical insurance of any kind, not least international insurance, because of the cost and culture created by the NHS, the compulsory National Insurance tax, and generally heavy tax burden; therefore, all private medical costs must be paid directly by the patient.
There are cases like this all over the country, and many of them are not so fortunate in their outcome as Oscar's. Another local case I have been made aware of involves a young man called Rory who has an aggressive brain tumour. Surgery has failed him thus far, and he requires drugs for chemotherapy which the NHS is not willing to pay for. He is therefore having to pay out-of-pocket upwards of £10,000 for these drugs. If you can support Rory, please do so at his Just Giving page: https://www.justgiving.com/crowdfunding/rory-darley .
Britain's lack of a culture of buying healthcare insurance induced by its socialised system means the practically fictitious horror bills posited in countries thoroughly backed by health insurance are a reality for most people obtaining private healthcare in the UK. Such costs would come as a shock to a Briton who has the expectation that their national 'universal healthcare system' should provide 'universal' care. Only in a socialised system is it conceivable that a person could be forced to pay for a service they never receive, and then be forced to pay again to obtain it privately if they want to obtain it at all. Without private charity, some people in the UK are denied healthcare even after having paid for it.
To briefly revisit the start of this section, where 'minor' (non-fatal) and 'cosmetic' ailments were discussed and severe rationing found, it seems quite rational to completely cease the funding of non-essential treatment until we can fully fund treatment for people who have a life threatening illness. The NHS does not do this, and we end up with a bizarre situation where women can successfully argue for their breast enlargement to be paid for by the taxpayer, while a child with cerebral palsy in the same neighbourhood is denied an operation which might allow him to walk again. That is not exaggeration, that was a real case in England¹⁰². Fortunately, because the woman then wanted to reverse the procedure – asking for a breast reduction on the NHS – the story grew into one so ludicrous that it gained public attention, and once again resulted in charitable giving that saved a child from the cruelty of rationed healthcare. £24,000 was raised so the boy could purchase his operation privately. The person inclined to game the system or employ superlative in order to get treatment does so at the expense of someone else. That someone could be a person with a life threatening illness.
The NHS is no more effective at preventing hard cases from 'falling through the cracks' than a private system, but even if it was, the effort made to do so is at the cost of the majority of the population. Does it make sense to subject the majority of the population to a relatively poor healthcare system in an effort to prevent a small number of hard cases? Do the worst off people have a greater moral worth than the more typical poor person, or an average person, or a middle-class person, or a rich person? We have seen the statistics, and a 'sacrifice' in healthcare does mean increased deaths. In order for that moral calculation to sit right, the life of an individual person who is a victim of a hard case would have to be worth several other individual's lives put together. Surely the eradication of hard cases cannot be pursued at any cost – there is a point at which cost becomes too high for anyone to accept. I would contend that significantly higher death rates for disease is too high a cost.
'The NHS just needs more money, then none of this would happen!', I hear the socialist cry. The UK is already living beyond its means, spending far more than it raises in revenues; but even if we could afford to drastically increase NHS expenditure, the truth is no amount of funding can fix the money sink that is the NHS for it is its nature and structure which causes it to be so inefficient and ineffective. It is as inefficient and ineffective as the government that owns it. If the American can imagine their own healthcare costs, amplified by introducing a government middle-man, with large healthcare agencies, all of which needs to be paid for, and their overpaid employees remunerated, then they can begin to understand the problems of socialisation. So much of that tax revenue is money which never makes it to the destination you intended it: your healthcare provider.
The United Kingdom spends more of its public money on the NHS than any other area – more than on pensions, education, social security (welfare), defence etc⁸⁸. Its budget has raised significantly every year since its inception. Regardless of whether an area of the NHS is well funded or poorly funded, the nature of its economic model will cause it to be wasteful for it has no strong incentive not to be. It will always cut costs where it should not (to the detriment of the patient), and spend more where it should not (on management, pet projects and endless bureaucracy), because it has no incentive not to. There is no competing health service putting pressure on the NHS to be better – it is a monopoly. No special effort has to be made to keep the custom of the patient, because their money has already been granted to them by the taxpayer – they do not have to earn it. This is why competition and the profit incentive are crucially important.
The Profit Incentive
It is common for people to get hung up on the idea of whether healthcare providers are operating 'for profit' or not, correlating profit with ill-will and dividing the world by good and evil. Profiting from healthcare, education and the like is seen as 'wrong' – a sentiment which goes largely unchallenged. This line of thought is emotionally seductive, but economically nonsensical. Let us assess this idea logically. As we have seen, the majority of the first world's healthcare providers are privately run institutions, and they are a mixture of profit and non-profit organisations, whether by choice or by law.
A for-profit organisation raises money from private investors – shareholders – and from the sale of its goods and/or services. Some of its revenue above its costs – its profit – is returned to its shareholders, and some reinvested into the business. A non-profit organisation naturally still has to generate enough revenue to sustain their costs, such as their employees.
Doctors at non-profit hospitals do not work for free. A non-profit's income can broadly be categorised as one of two types: earned income and donations, as opposed to investment. This income covers costs, and is reinvested, but it not returned to shareholders. The donors want something in return though, whether it is political or social influence or some perceived social return. Therefore, the significant difference between a profit organisation and a non-profit organisation is reduced to the return of some profit to shareholders, or not, and the social return for donors, or not. With that comes the pressure of the shareholders and the incentives they produce, or the absence of them, and the same for donors.
The outcomes of the respective organisations are the way they are, many are reflected in the statistics cited throughout this article, and for-profit organisations are clearly capable of excellent outcomes – the best outcomes, it seems, from the data. Why is this the case? In a word: shareholders. The reason is the same as it is for any other industry, good or service: that profit incentivizes better service, superior results, and cheaper procurement. It is plausible, indeed it is often the case, that profit-run businesses are cheaper to buy from than non-profit organisations, due to the efficiency differences created by profit incentives.
Conversely, non-profit organisations may find themselves suffering inefficiency, not only due to the lack of profit incentives, but also because incentives to pursue social aims are costly. Any incentives toward extraneous aims – be they environmental, social, to do with equity, positive discrimination etc. – drain resources away from the central purpose of the organisation. On the other hand, excess profits spent on a social cause do nothing to harm the central purpose of an organisation - so long as business management understands its shareholders well – and in fact often raise even more profit by the exposure. Take Dominoes Pizza: the for-profit company fast food company filling in potholes on public roads⁸⁰. Evidently, the profit incentive can have great results for services rendered and social impact, even alleviating problems the government tries – and fails – to solve.
The idea of a 'drain' on resources is apt in the case of the non-profit organisation: the non-profit has a pot of money, and every cost in a service rendered or social cause pursued is either a zero-sum (when the service is paid for) or a subtraction from that pot; the for-profit organisation has an income proportional to the costs it incurs in service rendered. This means that the for-profit organisation has an incentive to maximise services rendered in a way that the non-profit organisation does not. Non-profits have an incentive to seek to render enough services to justify the grants and donations they receive, but not so many that they go over budget or have too much work to do.
A summary of the benefit of the profit incentive on service provision might go like this: the owners of for-profit organisations want your custom so that they may generate profit, while the owners of non-profit organisations only want so much of your custom as they require to justify their salaries. Put differently: profit is a mechanism which transforms selfishness into helping others, whereas the optimisation of non-profit activities relies on selfless individuals. In a world where most people are not selfless, harnessing selflessness is clearly of limited utility. This dynamic informs many aspects of how a company is run: customer service, the range of choice in goods and services, the quality of goods and services, and the availability and accessibility of goods and services.
My experience of working in both profit and non-profit organisations certainly reflects these logical truths. Non-profit management tends to do as much as it deems enough to secure the next contract, and no more. Indeed, any greater expenditure than the amount required to meet contractual obligations may be seen as over-expenditure, and could serve to damage the case for future contract-bids. Applying these principles to healthcare organisations reminds us how important they are.
Incentives in Relatable Terms
If these principles seem unrelatable to you, if they are not mapping onto the discussion of private versus public healthcare in your mind, ask yourself the following questions: 1. Do you suppose people are more worried about losing their own money, or someone else's money? 2. Which person do you suppose has a greater incentive to provide a high number of good quality services: the one who starts with no money and must earn money by providing services, or the one who is granted a large sum of money and given the task of rendering services in a way they deem appropriate?
The private consumer spends their own money wisely on products, and the private provider spends their own money on the consumer's care. They both have a vested interest in a maximally efficient exchange. The public consumer spends someone else's money on products, and the public provider spends someone else's money on the consumer's care. Neither have a vested interest in a maximally efficient exchange because neither incur any cost. The provider which exists by virtue of patients choosing their services over another provider's necessarily acted on incentives to improvement. The provider which exists by virtue of confiscated wealth from consumers and an absence of alternative choices for consumers has no natural incentives to improvement. The combination of those two incentives means the private provider (A) is forced to provide a higher quality service at a lower cost lest consumers choose competitors (B), (C), or (D), and harm (A)'s profits. The public provider faces neither of these incentives, because it is guaranteed an income and faces no effective competition. Politicians then fruitlessly try to manufacture artificial incentives, creating 'targets' of the sorts we have seen not just ignored but badly failed.
Private Money versus Public Money
One of the simplest and most important considerations to make is whose money is being spent. Much of this article has characterised private and public spending as the same, in the sense that it costs the citizen. However, a key distinction is that public money is also nobody's money, in the eyes of the spender. Nobody spends their money so carefully as themselves, and public money has no careful custodian over it like a person managing their own bank account. In other words, expenditures are made where they never would be if it were private money, and revenues are declined where they never would be if they were private revenues.
One could generalise this as wasteful money management, of which there is plenty in an institution like the NHS, but an especially stark example of this is healthcare tourism. An American student, who had illusions that the British healthcare system was superior to the American one, informed me in conversation that her professor had been hiking in Britain with his wife, the wife had fallen and sustained an injury, and had been seen by the NHS. This American couple had private health insurance, and had raised it with the NHS. They were told there was a process to claim from that insurance, but were told they did not need to provide their details as they wouldn't go down that route - presumably it would have been more hassle to utilise the patient's private insurance than just to put treatment down as an emergency and take few or no details of the patient.
In the eyes of the couple, and of the student relaying the story, the receipt of 'free' healthcare - no questions asked - speaks to the virtues of the British healthcare system and is nothing short of amazing! The reality is that a wealthy American had the British taxpayer, who is on average significantly poorer than the average American, pay for their healthcare. The Americans had not contributed anything to the British treasury, moreover the means by which the NHS could have reimbursed the British taxpayer - the American's health insurance - was voluntarily declined by the NHS. The NHS staff on the scene have more of an incentive to behave generously than the NHS has an incentive to be financially responsible. While the private hospital is concerned with providing the best treatment at the lowest cost, which necessitates financial responsibility, the NHS is not. The NHS casually wastes money and fails to take revenue because it has no incentive to do so. The NHS is not spending its own money, it is spending someone else's money - the British taxpayer's money.
Provision versus Funding
There are many variations on how a country might legislate around healthcare, with varying levels of taxpayer money raised and spent on it, and they all demonstrate the fact that healthcare providers are better at providing healthcare than the government and insurers are better at providing insurance than the government. It is obvious from the evidence that the provision of healthcare and health insurance is better achieved in a free market system. Healthcare providers must compete for a patient's custom, and usually the insurer's money. The source of funding is a different issue, but it does inform provision to some extent too.
The socialisation of health insurance (taxpayer subsidy or provision of insurance) is a half-way house many countries find acceptable, but it comes with its own problems. It is firstly beholden to the waste of government, a loss of value by the inclusion of an expensive middleman in a transaction that does not need one. The customer and the insurer could very well come to agreement without the government's interference, with far greater transparency and at a lower cost. Whatever the taxpayer puts into the machine of government, a lesser amount falls out of the other side.
Secondly, a socialised healthcare system is beholden to loss of dynamism in supply and demand. In a free market system, where people spend their own money on their own healthcare, the market can most accurately and dynamically respond to the wants of its participants. Even if provision is completely private, a public source of funding is defined, finite, pre-determined by the tax revenue generated and the government's allocation of the tax revenue to this one area of expenditure. This means that, even where we have a preferable system in all other senses – private provision, decentralisation, a profit incentive, and high competition – public funding can cause supply problems. Where demand is low, expenditure on excess supply is wasteful; where demand is high, supply is low and restricts care provision resulting in worse outcomes.
Take Sweden: as mentioned earlier, a fairly decentralised system with significant elements of private funding and provision. This system fosters some competition, some good incentives by costs incurred to the patient, and it does produce decent outcomes by world standards. However, its majority public financing means there is less flexibility in supply and effective less market pressure on supply. As such, Sweden is experiencing a crisis: a chronic shortage of cancer care resulting in long wait times for patients¹⁰⁶. As a result, more people are choosing to go private, effectively paying for healthcare twice (once via taxation and once again privately).
Aside from the economic problems, the principles of freedom, personal responsibility, and economic efficiency extend to the idea of having health insurance and therefore also to who is responsible for obtaining it. That is: individuals, and not government officials, should purchase coverage. In my view, people should not be coerced into buying a good or service by forcing a coverage plan, or a voucher, or a fine for abstaining from market participation, upon someone. People act more responsibly when they are given responsibility, therefore it seems not just undesirable to curtail a citizen’s freedoms by legislating what they must buy, but unwise to. Furthermore, the government is an expensive middleman to perform a procurement exercise which we can perform better as individuals with greater relevance to our own lives. The quite literally extortionate cost of government represents an introduction of significant inefficiency into a transaction which does not require it. There is no reason private or public funding assistance could not be available for those who struggled to arrange their own affairs due to disability and for other hard cases. At the very least, citizens ought to be able to opt out of any government-issued insurance schemes (including National Insurance tax in the UK), and either be able to claim refunds proportional to the general taxation used for public services opted out of, or to receive an income tax cut to the same effect.
The Argument from Incredulity: the UK vs. the USA
This next section will apply the principles above to real scenarios and real numbers. It is an answer to UK readers who have particular reservations regarding medical bills in the USA. Or, to those US readers who are not yet convinced that the NHS is not 'free'. Many UK citizens simply don't believe that private systems are financially viable for customers, and think that people – especially American people – are regularly bankrupted due to illness.
Secondly, the USA is the world leader in healthcare. This is not to say that the USA is some kind of healthcare utopia – it has its problems, like any country. One of its problems today is the Affordable Care Act, also known as “Obamacare".
The Affordable Care Act is essentially the provision of taxpayer money for subsidising eligible insurance coverage plans and the payment of a fee to government if you are not insured (in essence, a fine which if unpaid will be held back by the Inland Revenue Service at any given opportunity – the fine has been discontinued as of 2019 under President Trump, but we shall proceed with the critique of Obamacare in its full original form). In the conversations I have with European people, it seems most have the idea that Obamacare has been at minimum a necessary policy change and at best a great success. It is alleged to have saved many lives and is a step towards the nirvana that is state-run healthcare. American opinion is far more mixed. Contrary to popular belief, the Affordable Care Act has seen mortality rates increase⁷, the aggregate number of people insured has not increased (new enrolees are offset by losses in private coverage), and it did not make healthcare more affordable – it has made it more expensive.
While it would be difficult to prove that Obamacare has itself caused an increase in mortality rates, we can say at the very least that it has done nothing to reduce them or stop an increase. We can say with more certainty that Obamacare has directly affected costs. Average state individual market premiums were to increase by 41% between 2013 and 2014, according to the Manhattan Institute⁸. A study in the Brookings Papers on Economic Activity used actual pre-ACA individual market premium data and found that “across all states, from before the reform to the first half of 2014, enrolment-weighted premiums in the individual health insurance market increased by 24.4% beyond what they would have had they simply followed state-level seasonally adjusted trends.”⁹ Economists at the University of Pennsylvania, also using actual pre-ACA individual market data, estimated that the total expected price of individual market coverage (premiums plus out-of-pocket payments) increased by 14% to 28% as a result of the ACA¹⁰. However, if you trust the strong and stable state more than those scelestic statisticians, you will be pleased to know that it’s not just economists who come to the conclusion that Obamacare has cost Americans more money. According to the Department of Health and Human Services (HHS) under the Obama administration, premiums were expected to rise by 25%¹¹ (HHS also claimed that this didn’t matter too much because the taxpayer funded subsidies should offset some of that increase, and I have a feeling they didn’t say this ironically).
This is a sobering reminder that redistribution comes with a high price tag, and that increase in price affects everyone. We should not forget that so long as the policy remains in place, government subsidies for healthcare will rise to prop it up. Arizona’s premiums were to increase by a whopping 116% after the bill was enacted. All this extra expense, for the privilege of having less choice as insurers pull out of providing plans through the ACA programme. The severity of the limiting of choice has been enunciated by a county by county analysis of current projected insurer participation in health insurance exchanges, carried out by the Centers for Medicare and Medicaid Services (the federal agency responsible for overseeing Obamacare)¹². I do not think the agency responsible for overseeing the project can be accused of overegging the pudding of failure, and they say that almost 40% of all counties nationwide are anticipated to have only one insurer left. 47 counties are expected to have no insurers engaging in the exchanges – none. Ironically enough, it is usually advocates of nationalisation of all kinds who complain most about monopoly, and they blame free markets for their existing. Having one option to choose from sounds pretty close to a monopoly to me, and having no options under the scheme sounds remarkably like access has reduced – especially when coupled with increased premiums.
The reality is that a free market, free from government intervention and free of punitive or preferential treatment for businesses, is the best tool to minimise monopoly and ensure it is as short lived as possible. The USA's current healthcare market is a far cry from a free market system. The direction and intention of Obamacare may not have been to protect one insurer from competition, or to push insurers out of markets, but its results have had the same effects and worse. In the case of Obamacare, not only has government intervention meant that thousands of counties will have only one insurer to choose from, but it has also managed to remove all options under the scheme in the states where no insurers remain. Only government, by wielding legislation, could pull off the feat of making a market which is desired and required by the vast majority a nation’s population so unattractive that no-one wants to participate in it on the terms set. As Milton Friedman once quipped, “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”
When challenged on the failure of Obamacare, proponents now usually do not quarrel with the facts, but blame them on “the wrong implementation”, or that “it wasn’t embraced”. So, naturally, the next step in politics to fix a broken idea is to reincarnate it in a more extreme way. “If only this failed experiment had more money thrown at it, then it would surely work”. Enter the Sanders proposal: the ‘single payer healthcare’ plan. This policy was one of the reasons he was such a hugely popular candidate among young Americans (and young Brits, for that matter). The Tax Policy Center estimates that Sanders’ proposals would increase the national debt by $18 trillion over a decade¹³, which is almost as much as the total US federal government debt was at the time (2016)¹⁴. That is to say: one popular policy change would have doubled the national debt in a mere ten years. Compounded with all other manners of overspending the US government is currently engaging in plus interest, the prospective figure would be astronomical. Even the Urban Institute, a left-leaning think-tank, part of whose statement is to “reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector”, accept that the amount of money raised by Sanders’ tax and revenue proposals would fall $16.6 trillion short of funding his single payer healthcare plan¹⁵. To clarify: that is only the healthcare plan, not including any of the funding required for non-health spending in Sanders’ manifesto. If this fact is not a blunt enough an indictment of Sanders’ plan, then I do not know what is.
Caricatures of American Healthcare
Scary-looking hospital bills are shared on the internet purported to be from American hospitals. One example, tweeted by Gary Barker (referenced by Metro as the original tweet seems to have disappeared)¹⁶, shows a photographed receipt from a hospital with his tweet reading: “For those who just shrug at the thought of NHS privatisation – this a bill for just six nights in a US hospital.” There is only a list of services with prices adjacent – there is no currency or hospital name in sight, nor any reference to verify the validity of the photograph. The Metro then ran this tweet as a news article, of course checking all the non-existent references first for accuracy’s sake. Around $55,000 is close to the average for a six-night stay in a US hospital, and my quibble is not with that figure per se. The first thing to point out is that this average is just that: an average, not what you can expect to pay for every condition. Naturally, conditions which demand more complex care are more expensive, while minor ailments and simpler care are cheaper. Secondly, the cost would be mostly met by your insurer. For example, they would pay 60% to 90% of the expenses, and the remaining 10% to 40% would be paid as coinsurance or co-payments. The out-of-pocket maximum means when out-of-pocket payments meet a threshold, the insurance plan pays for itself for the rest of the year¹⁷. Insurers must compete with one another for your custom in a marketplace, so their plans must be attractive.
The main problem with a reference of this kind being used lies with how these bills are presented as an argument against private healthcare, because it is implied that these costs are somehow exclusive to the private market and do not exist when the state provides healthcare. It is as though the proponent seriously believes the hospital will just give away its services if the government is the face of the customer or if the government owns the hospital. This style of “criticism” is just another way to reinforce the old myth that provision by the state is “free”. It is not – healthcare costs money. This debate comes down to how the cost should be met, not whether it should be met. Before delving deeper into costs and expenditure, and US-specific healthcare cost problems which are real, we should have a look at what we are paying for. By breaking down a popular report, we will explore various aspects of healthcare and compare between countries.
Desirable Elements of Expenditure
While US medical bills may be held up as a critique of the US system, that does not constitute an argument against private healthcare. The majority of the first world provides for healthcare via the private market. However, the comparison between UK and US health systems, while not especially revealing, is ubiquitous. No doubt some UK/NHS sympathetic readers are clinging to the low cost ('free') nature of the NHS, in the face of the stark reality that it lags behind the healthcare systems of virtually every other first world healthcare system in the world on many of the most important measures. Therefore, we turn to cost and expenditure in more detail.
It should be no surprise that the privilege of better healthcare costs money. The best healthcare in the world, based on measures which most of us deem important such as survival rates from disease and waiting times for surgery (as we have seen above), are those with private systems operating within freer economies. The citizens living under free, highly productive economies are also richer, so the healthcare costs are more affordable in relation to their incomes than for people from other parts of the world. I do not think Britons would have a problem in paying more for their healthcare, and polling shows that Britons do support greater taxation specifically for the NHS⁸¹.
There is no guarantee that raising tax rates would increase revenues, but that is another conversation for another day. If there is a willingness to pay more for healthcare via taxation, it stands to reason that the same people would be willing to pay more in their individual capacity in a market system. This seems especially likely when one considers that Britons have on average more disposable income than almost all other European countries⁴². Indeed, as far back as 1961, D. S. Lees identified that “far from being extravagant, expenditure on the NHS has been less than consumers would probably have chosen to spend in a free market. The record of hospital building in particular has been deplorable”⁴³. The situation has changed little since then.
Why opt for greater spending in a private market than taxation? Aside from the demonstrably better outcomes in private systems outlined above and by many other sources, there are good reasons to prefer insurers handling insurance than the government handling insurance via taxation. Insurers provide premiums at rates which consider the risk of paying out, and the rates of rival insurers. The cost is spread across all policy holders, some will cash-in their policy more than others, but those who are more likely to cash-in will pay a higher premium than those who are considered low-risk. This ensures some proportionality in cost against services rendered, and rewards those who take steps toward preventative healthcare i.e. screening, an awareness of family medical history, a healthy diet, exercise etc. In a socialist system like the NHS, the spreading of cost is blind. There is no cost-risk analysis, no financial incentive to promote responsible use of healthcare services, and a large number of people end up paying for healthcare which they will never receive. Indeed, some I know in the medical field in the UK make the complaint that preventative medicine is virtually a non-entity, and finding a way to introduce to the market appears an impossible task so far. This is hardly surprising in a market which, by unfortunate design, does not reward preventative measures.
Those in good health subsidize those in poor health in skewed, blanket fashion which, as is clear from the data, is not conducive to preferable outcomes. The sight of an NHS patient hooked up to respiratory equipment, stood outside the entrance to my local city hospital, smoking a cigarette, is one which I have never appreciated the irony of more, or what it indicated about the importance of cost incentives, than now. I'd put my money on this kind of behaviour being almost non-existent in other countries, except for the deranged, and those few individuals for whom money is no object – just as money is no object to the NHS patient. This takes us back to the rationing problem. Draining health services is not desirable in any case, but to drain health services at the expense of someone else, as is the case with public funding, adds insult to injury.
What America as a Nation Spends
Below is a graph from World Bank displaying a number of the countries discussed in this article and their healthcare expenditure as a percentage of GDP per capita:
The USA spends more on healthcare than any other country in the world. This graph is not the full picture, as we will see. We will also come on to criticisms and problems arising from that fact, but let us first acknowledge how much of a debt the rest of the world owes to the USA: we have already ascertained that the USA is the world leader for healthcare and research⁶, and for that they incur a huge cost. The rest of the world, which benefits enormously from that research and medical advancement, ought to thank US investors and the US consumer for paying for it.
It is also worth mentioning, after reviewing the outcomes of British healthcare above, and being reminded of the cost, that British costs ought to be lower than they are. Mounting inefficiencies in the NHS mean Britons pay more for a lower standard of service which would be cheaper in a more efficient system. One example is prescription drugs. For everyone in Scotland, Wales, and Northern Ireland, and for 88% of people in England, prescriptions are free of charge at the point of access⁸². Prescriptions are funded by taxation. The problem is: 'free' prescriptions are often far more expensive than just buying the medicine over the counter, especially for inexpensive drugs like painkillers and allergy remedies. The over-the-counter costs for boxes of such drugs are typically between £1 or less and £6. The various administrations of the NHS prescription, and the costs of dispensary of medicine rather than simple retail purchase (the involvement of a pharmacist etc.), mean the basic rate for a prescription is £7.65. The significantly higher cost feels 'free', because it is subtracted from the patient's income at a much earlier stage, and does not come out of the patient's pocket on the day – but they are in truth paying many times more than the market price for cheap medicine, and so is everyone else in the UK. Similarly, where the patient is expected to pay for their prescription out-of-pocket in addition to the taxation they have paid, they will pay £7.65 for medicine which may be cheaper over-the-counter. This is likely to occur whenever the doctor considering prescription is unfamiliar with the cost of a medicine, and they cannot fairly be expected to know the price of every medicine. Otherwise, human error, or laziness in not checking prices, are contributory causes to inefficient prescription practices.
Why America Spends More
The glaring feature of this graph is the amount of money the USA spends on healthcare, which brings us back to the popular topic of scary American medical bills. While the caricature painted by people aiming to whip up hysteria by wielding itemized bills is inaccurate, the fact of unusually high expenditure in American healthcare is something that requires addressing. While the USA's position as the third highest country in the world for voluntary healthcare expenditure goes some way to explaining its total expenditure, and its position on the graph above, it is not a good answer by itself. Australian and Swiss voluntary expenditure is higher, and yet their total expenditure is lower as a percentage of their GDP. Why? Research and medical advancement is expensive, and, as stated earlier, the USA are the world leaders in this respect.
Bohemian American lifestyles is another explanation: that more healthcare is required for a less healthy, more obese population, than any of the other nations on this chart or any nation in the OECD⁵⁷. If one looks at wider statistics to compare general mortality rates and healthcare outcomes, one finds that countries with demonstrably superior healthcare outcomes often have similar or higher mortality rates than countries much poorer. This is again because citizens of some poorer countries, like Greece, have famously healthy lifestyles. Citizens of richer countries have more means to kill themselves with glutton, should they choose to.
Another significant factor is the US legal system. Class action law suits against healthcare providers are hugely expensive – Community Health Systems, the Tennessean Fortune 500 firm, paid out $53 million in a recent class action law suit and lost 47% of its stock value in the circumstances surrounding it⁵⁸ – and any losses felt by an industry is necessarily met with price hikes in order to keep business afloat. If a business' prices become so high as to be undesirable or unaffordable, they will go out of business. The balancing act of viability and competitiveness works well, but the price floor to which competitiveness drives prices is only as low as it may viably be. The price floor is raised for every successful class action law suit, and for every other external factor that causes loss to the industry.
Perhaps one of the most commonly held erroneous beliefs is that the US healthcare system is some kind of laissez-faire enterprise, a wild-west of market economics. This is not true – healthcare is one of the most heavily regulated sectors of American life⁵⁹, and American healthcare is one of the most highly regulated industries in the world. Indeed, regulation is probably the greatest cause for the unusually high costs that exist in American healthcare. The single greatest offender might be the Food and Drug Administration (FDA). Many Americans, particularly those living on the southern border, know that many drugs are far cheaper in Mexico than the United States. This is largely because of the onerous regulations put upon the process of bringing a drug to market by the FDA, whose approval is required. The economist Milton Friedman wrote the following, regards the consequences of the FDA gaining its expanded powers in 1962:
‘[…] the number of “new chemical entities’ introduced each year has fallen by more than 50 percent since 1962. Equally important, it now takes much longer for a new drug to be approved and, partly as a result, the cost of developing a new drug has been multiplied manyfold. According to one estimate for the 1950s and 1960s, it then cost about half a million dollars and took about twenty-five months to develop a new drug and bring it to market. Allowing for inflation since then would raise the cost to a little over $1 million. By 1978, “it [was] costing $54 million and about eight years of effort to bring a drug to market” – a hundredfold increase in cost and quadrupling of time, compared with a doubling of prices in general. As a result, drug companies can no longer afford to develop new drugs in the United States for patients with rare diseases. Increasingly, they must rely on drugs with high volume sales.’
Today, another twenty years later, costs of developing a new drug range from $143 million to $6.4 billion and the mean average cost is in excess of $1.3 billion.
Citizens must also pay Medicare tax (a tax for publicly provisioned healthcare insurance subsidies). As we observed earlier, US efforts to socialise healthcare have driven up costs, and heavy regulation has done so too. The history of the US (for example, pre and post FDA, pre and post ACA), and the examples of other countries, show how freer markets lead the way and the sacrifices required to socialise the industry.
American Spending of American Earnings
The US system is far from perfect, and its enviable healthcare outcomes come at a cost. However, it is a mistake to consider the American costs in relation to the incomes of non-American people. If a Briton reads this, it is not logical for them to conclude American costs are not affordable if their only frame of reference is the average British income. We need to consider American costs in relation to American incomes, and British costs in relation to British incomes.
The median annual income for full-time workers in the USA was $44,720 (£34,082.23)⁶⁰ in 2017, and if you are living in the country's biggest state – Texas – then you will pay $7,129.48 (£5,433.55)⁶¹ in taxes on what you earn (total, state plus federal), including $648.44 (£494.19) in Medicare tax. Your take-home pay would be $37,590.52 (£28,648.68), or $3,132.54 (£2,386.98) per month. (Note, Texas is not the lowest tax burdened state – it is middle of the road and has a large population, so it quite representative – anyone in Alaska, Delaware, or Tennessee, among other states, gets an even better deal).
The average annual income for full-time workers in the UK was $37,803.48 (£28,600)⁶², and no matter where you live you will pay $7285.76 (£5,512)⁶³ in taxes. Your take-home pay would be $30,517.72 (£23,088), or $2,543.14 (£1,924) per month.
Initially, we should acknowledge that part of the philosophy of the USA healthcare system – that it may be run for profit – is part of the reason the US economy is stronger and its citizens' earnings higher than Britons'. Then, if we observe the figures above, we must recognise that the UK tax burden is so much heavier that, despite earning less than Americans, Britons pay more in tax. This disparity in tax burden is even higher in reality, because when you start spending your income in the UK, you are subject to a further 20% VAT⁶⁴ (value added tax, or sales tax), compared to between 6.25% an 8.25% sales tax in Texas. Then, there are other means the tax burden is increased in ways the population is largely ignorant of, such as duty and excise taxes: for example, UK fuel duty tax is 287.65¢ (219.63p) per US gallon⁶⁵, whereas Texan fuel taxes (total, state plus federal) are 38.4¢ (29.32p) per gallon for gasoline/unleaded, and 44.4¢ (33.90p) for diesel⁶⁶. The UK scam doesn't stop there – that 20% VAT mentioned above comes after duty is applied, meaning the real tax paid is 20% of the fuel cost plus the fuel duty tax. So, the real tax paid on fuel in the UK is 345.18¢ (263.55p). In a sentence: fuel taxes are 9 times as high in the UK than in Texas. This is why it is so expensive for Britons to fill up their tank.
Examples like these are common, and compound to build the picture of UK life, popularly termed "rip-off Britain". With these conditions considered normal to people in the UK, it is no wonder that paying significant amounts of money on healthcare insurance or medical bills is unfathomable to them – they simply do not have the disposable income to do so. According to the OECD Better Life Index⁶⁷, the average American household has a disposable income of $45,284 (£34,575.20) per year. The average British household has a disposable income of $28,715 (£21,924.45) per year. In addition to the $16,569 (£12,410.26) gap in disposable income, the US has cheaper goods across the board in most geographical areas, compared to the UK: cheaper property, cars, gasoline/fuel, shoes, clothing and footwear, basic foods such as eggs and milk, utility bills– all of which the average person buys. Bread seems to reliably be very cheap in the UK, for some reason (the international consensus on the forums is that British bread is bad: cheaply made, with cheap ingredients, on an industrial scale. Apparently, about 80% of the British bread market is industrially made!). The overall average cost of living in the US is lower than in the UK, and US are salaries higher, therefore their purchasing power is significantly higher⁶⁸. In short, your money goes farther in the USA than the UK, despite healthcare costs. Nevertheless, we can consider healthcare costs on their own, and see how they work in the US.
Take an Obamacare Platinum Plan⁶⁹, at a 90/10 coinsurance, costing $363 per month in an insurance premium. This premium may not have to be met at all if you have the plan as a work-benefit, paid fully by your employer, but let's assume this cost is incurred by the individual for now. Of the medical bills received, you would pay 10%, up to an out-of-pocket maximum for the year of $2,437, to take average numbers (combined medical and prescription limit, for ease; deductibles (the amount you pay before the insurance starts to pay) vary but a $21 average for this plan is reasonable).
In the year when you don't visit the doctor, and your expensive platinum plan turned out to be unnecessary, you'd pay $4,356 for the peace of mind. In the year when you fell badly ill and maxed out your out-of-pocket maximum, you'd pay $6,814. If you had couple of health scares in the year, and you opted for some check-ups resulting in 3 visits to your primary care physician, and another one to a specialist, you'd pay $4,463 in total. After the cheapest year, you have $12,213 more disposable income than your British counterparts, and even after the most expensive year you'd still have $9,755 more disposable income.
In fact, to indulge in the most extreme and morbid of propositions, if you were very unlucky, and didn't take cancer-specific or critical illness insurance cover, you could pay $16,569 every year out of your own pocket for cancer treatment, without dipping into your savings, and still be on par with your British cousin for disposable income. Fortunately, if one digs for scientific reports rather than policy-driven ones, we find that Americans are not burdened with such costs even for more difficult cancers. For example, ovarian cancer treatment for the first year after diagnosis – including surgery, chemotherapy, and prescribed drugs – costs a median average of $93,632, of which the patient pays $2,988⁷⁰.
In simpler terms, the very best cancer treatment in the world, which costs $100,000 to treat, costs 3% of that sum to the patient, or $3000. Fortunately, this is not a situation most people are faced with, nor is it a sum the afflicted face regularly after that first most expensive year. Even if the average American woman, after surviving Ovarian cancer, paid for the same cancer treatment for someone else every year of her working life until she retired, she would still have more disposable income than the average British woman. One could avoid all out of pocket costs with more insurance, such as critical illness cover. Nonetheless, it still interesting to consider: how do these costs compare to the UK costs?
British Spending of British Earnings
Some may think it impossible to quantify the cost of the NHS to the individual, as the payment is lost in the chasm of the public purse, but it is possible. It is not as easy to determine as by a statement received from a hospital or an insurer, which is an undesirable fact in itself, but all we need to do is consider the tax paid by the average worker and the proportion of tax paid on healthcare.
We established earlier than the average UK worker pays $7285.76 (£5,512) in tax. From the Office for Budget Responsibility, we know that healthcare spending makes up 15.5% of total public expenditure⁷¹. Therefore, the average worker is forced to spend $1,129.29 (£854.36) on public healthcare every year, whether they like it or not and whether they need it or not. This is a conservative figure, because there is a litany of reasons people have to spend their own money on healthcare in the UK, not least what the NHS does not fully cover: prescriptions for people in England (sometimes subsidised), dental check-ups and dental work (subsidised), anything deemed 'non-essential', 'cosmetic', too costly, and other exempting criteria as discussed earlier.
While a UK taxpayer would not be expected to pay anything extra in many cases, they almost always do in the case of dentistry. If the Briton had to have a dental crown fitted toward the back of the mouth, they would either 1. Be limited to a metal crown and charged $353.34 (£270) on the NHS, or 2. Get a white crown privately for a minimum of around $719.76 (£550)⁷². If they were standard materials, like porcelain or metal, neither the NHS or private options would be as good quality as an American clinic, because the NHS monopoly means most of the same laboratories and resources are used by UK private providers. In other words, you pay a lot for private treatment in the UK, but, because of the public monopoly, its insistence on cost cutting, and therefore the country's general industry standard, it's not necessarily going to be any better than the NHS. In the case of dental work, it is likely to be the same doctor sitting you down in the same chair whether you are going with the NHS or going private.
In the US, you'd pay anywhere between $335 (£255.99) to $1450 (£1108.01) without insurance⁷³, or $33.50 (£25.59) to $145 (£110.80) with the platinum plan illustrated above. Strangely enough, only yesterday did a Brit living in Texas tell me about how much higher quality the dental work, and healthcare in general, is there compared to his home town of Bolton. Here, it seems the British don't have it better in quality or cost. While the cost differences are not drastically different for dentistry, or even favourable for Americans, the stereotype of the British having bad teeth is widely agreed upon – so perhaps, if Americans do spend more on dentistry, contributing to their top-spot on the overall spending graph, this is out of personal choice. Perhaps what constitutes voluntary spending is hard to separate from general expenditure in data from the US, because all spending is technically voluntary. Dental work which Americans may deem necessary, Britons, of their own volition, or on the NHS' advice, or on the NHS' refusal to assist with costs, might not receive.
While the cost differences are not drastically different for dentistry, I'm sure some of the disparity is also due to Americans opting for more expensive, high quality treatment options more of the time. Both of these points ring true with my experience and the tales I've heard of both systems. The compulsory payment for the NHS might be akin to forcing an American to take low level insurance plan, which they don't want, and leaving it to them to purchase a second plan in addition to the first if they want better coverage. For many US citizens, this is in effect what Medicare does, to a lesser extent than the British tax system, and we must remember to add that $648.44 in Medicare tax to the average US worker's expenditure on healthcare per year. We must also factor in the fact that for the average US worker, the employer pays 82% of the healthcare premium⁷⁴. Now, with the facts for healthcare outcomes and finances outlined above, we can summarise the positions of the average worker from each country.
Accounting for Reality: The Real Costs to Americans and Britons
As per the figures above, the average healthy person who pays their health insurance and doesn't access healthcare in the year, in Britain, spends 3% of their gross annual income on some of the worst healthcare coverage in the first world. The identical American spends 3.2% of their gross annual income on a top-tier insurance plan for some of the best coverage in the first world. Considering the Briton loses 19.3% of their gross annual income to the government, while the American loses only 15.9% in taxes, the US cost for health insurance begins to look like a welcome alternative. Remember, that tax paid gap is even bigger when observing lower tax burdened states, when other taxes are taken into account.
If the American opted for a bronze plan, they could get a premium as low as $200 a month, making their total annual expenditure 2.4% of their gross annual salary per year. Those US figures are 9.7% and 5.4%, respectively, if the worker is employed by one of a minority of employers who do not pro