Private-Sector Socialism: What the Right and Left Don’t Understand about Healthcare in Other Countries

There is no topic in healthcare that is more misunderstood than what other countries are doing. At both ends of the political spectrum, the mistake is the same: the belief that other healthcare systems are radically different from our own. They aren’t.

Take the United States and Canada. I would say that the healthcare systems of these two countries are 80 percent the same. In both countries, third-party payers pay the vast majority of medical expenses. In both countries, the third parties pay by task. In Canada, when patients see a physician, it’s free. In the United States, it’s almost free. In both countries, normal market forces have been completely suppressed. Healthcare in both places, therefore, is bureaucratic, cumbersome, wasteful, inefficient, and unresponsive to consumer needs.

As I examine in my new book, Priceless: Curing the Healthcare Crisis, one reason so many people get misled is that in Canada, government is the third-party payer, whereas in the United States, about half of all spending is private. The mistake is assuming that there is a substantial difference between public and private insurance in the United States. There isn’t. As we have seen, Medicare in the United States is managed almost everywhere by private contractors, and much of Medicaid is privately managed as well. Furthermore, one out of every four Medicare enrollees and a substantial majority of Medicaid enrollees are enrolled in private health plans, even though government is paying the bill. Most of the time, private insurers pay providers the same way that the government pays. They use the same billing codes and pay for essentially the same services the same way.

Moreover, private insurance in the United States is so heavily regulated that there is no important difference between the public and the private sector. Our public insurance looks just like the socialized insurance we find in Canada. But so does our private insurance. Indeed, what we call private insurance in this country is little more than private-sector socialism.

One more thing to keep in mind: in the United States, we do not have one health system. We have many. In addition to Medicare and Medicaid, there is the VA health system, CHAMPUS (for military families), the Indian Health Service (which is apparently even worse than Medicaid),[1] all the employer plans (running the gamut from “mini-med” plans[2] to cradle-to-the-grave coverage), a whole host of special labor union plans, and, of course, garden-variety health insurance. There is far more difference within US healthcare than there is difference between the US and other countries.

The pluralism of US healthcare is important to keep in mind in thinking about health reform. Suppose you are dissatisfied with the way the healthcare system is working in your city or your locality, and you are curious about whether somewhere in the world people have found a better way of doing things. Odds are that you are going to find better answers somewhere within the United States than outside of it.

People on the left and right who are prone to stress the differences between US healthcare and the healthcare of other countries invariably ignore the 80 percent commonality and focus on the remaining 20 percent. On the left, the focus is usually on the ways we appear to be worse; on the right, the focus is usually on the ways we appear to be better. But even here the differences are narrowing, and I expect that trend will continue.

Doctors who object to managed-care interference with the practice of medicine in this country will not be pleased to learn that everything that is happening here is finding its ways to other countries as well. Indeed, US insurance companies are contracting with governments in other countries to export what they do here to other places.[3] People who are concerned about rationing by waiting time in other countries had better brace themselves. Waiting times are growing in the United States as well.

As for global budgets, a lot of state Medicaid programs already have them, and they may go system-wide in Massachusetts in the near future.[4]

Another way in which people get misled is in assuming that differences in health outcomes are mainly due to how the medical bills are paid. Yet, differences in health outcomes are far more related to lifestyle, culture, and personal behavior. The United States is an incredibly heterogeneous country—especially in contrast to the homogeneous populations of most Europeans countries. Transplant the US population to France and replace the indigenous population there, and I suspect that in a short period of time, the French healthcare system would come to resemble the system we have in America today. Conversely, transplant the French population to this country to replace all the Americans, and in short order, I suspect that our healthcare system would come to resemble what you see in France today.

Differences in outcomes are very often due to differences in the people involved. Too often, these differences are wrongly ascribed to differences in the payment systems.

[1] “Broken Promises: Reservations Lack Basic Care,” Associated Press, June 14, 2009.

[2] David R. Henderson, “Mini-Med Plans,” National Center for Policy Analysis, Brief Analysis No. 727, October 21, 2010.

[3] Karen Stocker, Howard Waitzkin, and Celia Iriart, “The Exportation of Managed Care to Latin America,” New England Journal of Medicine 340 (1999): 1131–1136.

[4] Abby Goodnough and Kevin Sack, “Massachusetts Tries to Rein in Its Health Costs,” New­ York­ Times, October 17, 2011.

Note: Cross-posted at Psychology Today blog, “Curing the Healthcare Crisis.”