The debate over American health care has a familiar structure: Sally Pipes at National Review argues that “the American health-care system is world-beating.” Sarah Kliff at Vox, by contrast, declares that “the American health care system is literally the worst.” Pipes cites access to quality medical services; Kliff points to high costs.

A clear relationship holds between the availability and affordability of health care in the United States, as it does everywhere else—when you spend less, you get less. But both sides in this debate also find it easy to make their respective cases, because the “American health care system” is not one thing. Rather, it is five very different things. And these five health-care systems each have more in common with health-care systems in other countries than they do with one another.

America’s largest health-care system is employer-sponsored insurance, which covers 50 percent of the U.S. population—typically middle-class workers and their families. For years, the bulk of health insurance in the Netherlands and Germany was financed similarly. Employer-sponsored coverage generally provides good access to quality care with broad provider networks. Most benefits are paid for pre-wage by employers, with covered workers contributing an average $1,327 in additional premiums, while out-of-pocket costs are capped at an average of $4,355 per year. But firms struggle to constrain the cost of health-care services consumed by their employees, and so premiums have soared. As a result, low-wage workers are typically not offered health-care benefits.

Congress has established various entitlement programs to cover those lacking employer-sponsored insurance. Medicare covers 14 percent of the population that is out of the workforce due to old age or disability; these people often have the greatest medical needs. Medicare functions similarly to “dual-payer” health insurance in France and Australia, with the government covering core benefits with substantial out-of-pocket costs, typically supplemented with private insurance. Medicare beneficiaries receive good access to care as part of the basic benefit package, for which they must contribute $2,441 in additional premiums. Individuals may cap out-of-pocket costs at an average of $4,972 per year by opting for privately managed Medicare Advantage plans at no extra charge, or they can eliminate them entirely by purchasing supplemental Medigap insurance.

Medicaid, meantime, covers 21 percent of the U.S. population of all ages with low incomes. It operates like “single-payer” health coverage in Canada, with the federal government providing funding for states to distribute medical services to those eligible without premiums or out-of-pocket charges. Beneficiaries receive comprehensive coverage of hospital procedures, prescription drugs, and primary-care services, but access to specialty physicians often falls short.

Medicare and Medicaid payments for hospital services are fixed by law, but they cover substantially less than the average cost of care. Hospitals are eager for tax exemptions tied to treating Medicare and Medicaid patients, and they want high volume to defray substantial overhead costs—so both programs secure substantial discounts relative to fees that private insurers must pay.

Because the bulk of the U.S. population receives either employer-sponsored benefits, Medicare, or Medicaid, 82 percent of Americans rate their own health-care coverage as “excellent” or “good.” For those who lack access to such care however, the situation is less encouraging.

Since the 2010 passage of the Affordable Care Act (Obamacare), America’s individual health-insurance market has been structured like that of Switzerland. Obamacare prohibited insurers from selling coverage at a lower price to individuals signing up before they got sick than for those who sought to enroll only after they became seriously ill. This pricing restriction caused insurers to flee the market, drop the best hospitals from their networks, and hike premiums. For 2023, individual market premiums will average $5,472, with out-of-pocket costs capped at $9,100. Only 6 percent of Americans opt to enroll in individual market plans, three-quarters of whom have incomes low enough to qualify for federal subsidies to cover part of the premiums and out-of-pocket costs.

Accounting for those covered under these four main health-care systems, that leaves 9 percent of the U.S. population uninsured. These participants in the fifth and final system are typically low earners, residents of states that have not expanded Medicaid, or recent immigrants. In return for federal subsidies and tax preferences, hospitals must treat all individuals needing emergency care and provide charity care to the uninsured poor. Yet hospital policies regarding provision of free and discounted care are loose and inconsistent, and accounts of enormous bills collected from households of modest means abound. The absence of widespread health insurance, and reliance on a combination of out-of-pocket payment, hospital subsidies, and charity care, is typical of many Third World health-care systems.

The specific payment structures of American health care do not differ greatly from those existing elsewhere. Rather, American health care is distinguished by the variety of these systems that it employs. On the plus side, this system enables the United States to draw upon both public and private resources to pay for health care, allowing Americans to consume more medical services overall. It also means, though, that people falling in the gaps between systems may find themselves facing high costs and shortfalls in access to care.

The United States cannot solve its health-care challenges by adopting one or another country’s health-care system wholesale. But it could avoid lots of heartache by better aligning its four principal health-care systems. In recent decades, the Netherlands and Germany have sought to break down barriers between employer-sponsored insurance and individual coverage. The United States should do something similar.

Photo: sdecoret/iStock


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