Healthcare

Several reforms can be made to our current healthcare system, including lowering costs and bringing healthcare onto a single-payer tax funded system. This information will discuss the different factors that affect the cost of healthcare, as well as how to transition into a single payer system. Healthcare costs in the United States in 2019 was around $2.8 trillion. This is based on Medicaid, Medicare, and private health insurance spending, and out-of-pocket costs.1 Health care costs in the U.S. were around twice the amount compared to other countries. In the United States about ½ of health care spending is covered by the government, while half is covered by the private.2 Due to the high costs, this increases government spending and as well as private spending. The primary factors that affect health care costs in the U.S. and globally include 1. Salaries of Medical Staff 2. Pharmaceutical Spending 3. Diet. 4. Private Health Insurance. 5. Size of industry.  In some countries the health care system is not as developed and health care only covers a small percent of the population, so costs are lower as percent of the GDP because of this. 6. How data is collected. It is also possible data is off, as raw figures show U.S. health care spending to be $8,528 per capita which is about 80% of the amount reported by the World Bank in the data below. But data may also be off for other countries if they all use the same equations.

Table A: Healthcare Costs by Country

         This table records the cost of health care in OECD countries in 2019. The best way to measure health costs is by looking at the health care expenditures per capita as a percent of the GDP per 1000 hours worked. The reason GDP per capita isn’t used is that the amount of labor taken to produce it differs by country, so it is not a consistent measure. GDP per 1000 hours looks at how much is earned within a fixed period. Health care costs may be the same in each country, but if the GDP per capita differs because of how much labor it takes to produce it, health care costs may appear more or less as a percent. For example, if health care costs are $100 per capita, and GDP per capita is $200 in one country and $400 in another, percent of the GDP per capita will differ even though the costs are the same. Another way to look at health care costs, is by looking at health care expenditures adjusted for differences in the GDP per hour. The reason we don’t use health care expenditures per capita raw is that exchange rates alter the value of the expenditures. Adjusting the healthcare expenditures for differences in GDP per hour eliminates the effects of exchange rates, as GDP per hour reflects the average cost of labor in each country.

Table B: Income of Medical Professionals

         The table below records the income of doctors by country. In this table, we compare salaries to GDP per 1000 hours in each country. GDP per 1000 hours is a fair reflection of average income by country produced in a period of 1000 hours, and a good measure to compare relative differences in salaries by country. Doctors may work different amounts of hours in each country, which could affect their salaries; this should be investigated. Other positions in the medical industry don’t have data about salaries, but should be investigated. The ideal solution to decrease pay, is to have the government regulate pay and slowly decrease it over time. Positions that aren’t as critical could be regulated first, such as non-surgical, and non-emergency positions.

Table C: Pharmaceutical Spending as % of GDP by Country7

In 2019, pharmaceutical spending in the United States was around 2% of the GDP and 12.5% of health care spending. Since 1990, pharmaceutical spending in the United States has increased from 1% of the GDP to 2% of the GDP. Although some countries have followed this trend, many have not. Whether the cause of the increase is due to drug prices rising at higher rates than the GDP, or increased prescribing is uncertain. Several studies have been done that show drug prices are higher in the United States relative to other countries.8 The best way to compare prices by country is to compare the drug prices in each country to the country’s GDP per hour/income per hour. Another factor in costs is how revenue is distributed and the expenses of the pharmaceutical industry. Currently, 20% of the revenue of pharmaceutical companies goes into research and development, 40% goes to supplies, while profits and marketing make up around 40% collectively.9 There may be ways to decrease prices by eliminating unnecessary expenses. The government also funds a portion of medical research, but whether they own stocks and see any returns is undetermined.

Private Health Insurance

         The United States is one of the only countries with private health insurance. Private health insurance does not increase health care expenditures by that much overall. Profits of the health insurance industry were $67 billion in the year 2019.10 Total salaries, wages paid out in the life, health, and medical industry were an estimated $50 billion.11 There is probably a few other unnecessary expenses, such as advertising and marketing, that could also be eliminated. By eliminating private insurance and having a single payer system, all profits will be eliminated, as well as a large portion of extra employees, such as insurance agents, extra accountants, and managers. Single payer eliminates these jobs by eliminating extra jobs that come from competition, such as insurance agents and advertising, and streamlining accounting processes. Savings would have been an estimated $100 billion for the year 2019, about 3% of health care expenditures.

Diet

Diet may play a role on healthcare costs. For example, among different racial/ethnic groups, life expectancy is lowest for AIAN (natives) people at 67.9 years, followed by Black people at 72.8 years, White people at 77.5 years and Hispanic people at 80 years, and Asian people at 84.5 years.12 Meanwhile, health care spending per person in 2016 was $7,649 for American Indian and Alaska Natives, $7,361 for Blacks, $8,141 for Whites, $6,025 for Hispanics, $4,692 for Asian, Native Hawaiian, and Pacific Islanders.13 There seems to be a direct correlation between groups with the highest life expectancy also having the lowest health care spending per person.

Through education and possible regulation, people could be steered to eat healthier. Education could include teaching the basic life expectancy and cost implications of having bad health, as well as what ingredients are most harmful. Teachers could potentially remind students once or twice a year. Possible regulations include organizing stores so healthier versions of food are separated from less healthy versions. Shelves could be color coordinated to mark which foods are healthy. This could make it easier for customers to find healthy options quickly. Amounts of salt, sugar and saturated fat relative to calories could be regulated in products. Oftentimes, similar products have different ratios, even though it has no effect on the taste.

Table D: Out-of-Pocket Costs by Country14

         In different countries, out-of-pocket costs make up a different % of health care spending. Out-of-pocket costs are present in every country. Out-of-pocket costs in countries with universal health care are mainly used to help manage use of the health care system and ensure there is not over-demand on services.

Benefits of Single-Payer and Universal Health Care

Universal Health Care is when the government guarantees that all people have health insurance. There are various models for this. Some countries have single payer systems where tax revenue covers all insurance costs, while in other countries government covers health care for the poor, some countries require companies to provide health insurance. Universal health care has several benefits. Morally speaking, it is essentially a form of homicide when you withhold health care from the sick if you have the ability to provide it. There are indirect effects on the economy that are also beneficial. As life expectancy increases, the chances of innovation also increase, as people can continue to increase their skill level as they get older. As life expectancy increases, production per-capita and employment can also increase, as a smaller percentage of the population is non-working. This has to do with there being fewer underaged people, as well as sick and disabled people, as a percent of the population. Single payer is also beneficial as it covers all medical facilities and services under one system, which means users have complete choice over where they go. Single payer is also a more efficient business model and cuts out the extra costs that stem from private health insurance, such as unnecessary profits and extra employees.

In order to transition onto a single-payer system, health care-costs can be lowered first. As health care costs are lowered all individuals who don't receive health care from a company, could be brought onto the government-run system. Eventually, companies can start transferring onto the system. In the short term a state-run health insurance company that sells health insurance to the private can be used. The insurance company will cover all medical facilties under one system, so patients have complete choice over where they go. As private insurance companies are put out of business, if they do not have assets or savings to cover stockholders, the government can exchange government bonds for stocks.