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Posted on October 27, 2009

OECD Bias in Evaluating U.S. Health Care Reform

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The Organization for Economic Cooperation and Development and Health Care Reform in the United States

By Don R. McCanne
International Journal of Health Services
Issue: Volume 39, Number 4 / 2009
Pages: 699 - 704

Abstract: Among OECD nations, the United States is an outlier in having the highest per capita health care costs in a system that unnecessarily exposes many individuals to financial hardship, physical suffering, and even death. President Obama and Congress are currently involved in a process to reform the flawed health care system. The OECD has contributed to that process by releasing a paper, “Health Care Reform in the United States,” which describes some of the problems that must be addressed, but then provides proposed solutions that omit consideration of a more equitable and efficient universal public insurance program. The same omission is taking place in Washington, DC. By reinforcing proposals that support the private insurance industry, the source of much of [he waste and inequities in health care, the authors of the OECD paper have failed in their responsibility to inform on policies rather than politics.

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It would be an understatement to say that, when it comes to the effectiveness and efficiency of the health care financing system, of all member nations of the Organization for Economic Cooperation and Development (OECD), the United States is a highly exceptional outlier. With a per capita spending at twice the average of the OECD nations, the United States is receiving the worst value for its health care investment (1).

Not only is population health lower in the United States than OECD averages, but the nation’s fragmented, dysfunctional health care financing system has allocated spending in a manner that fails to prevent financial hardship for those individuals with health care needs. No other nations would tolerate the numbers of people without health insurance coverage, now at about 46 million, nor would they tolerate the explosion in underinsurance products that fail to provide adequate financial protection for those who are insured. In spite of spending more than 16 percent of gross domestic product (GDP) on health care, or $2.5 trillion, excessive financial burdens and even personal bankruptcy have become commonplace for those who must access the health care system (2).

Although the growing problem has been recognized for decades by legislators and the policy community in the United States, they have been overwhelmed with inertia, partly due to anti-government, pro-market ideology, and partly due to the tremendous influence of special interests that fare well under the current financing system. Particularly influential has been the private insurance industry, especially through its lobby organization, America’s Health Insurance Plans.

Advocates of health care justice have long supported reform that would remove financial barriers to access for everyone who has health care needs, but egalitarianism is so weak in the United States that it has failed as a driving stimulus for reform. The failure to act has gradually magnified a problem that all sectors recognize as being intolerable. The payers of health care are crashing into the solid barrier of unaffordable costs. Employers have had increasing difficulties in paying for their employee health benefit programs, and they have responded by reducing the coverage or even dropping it altogether. The federal, state, and local governments have struggled with budget constraints and have responded by reducing payments to the health care delivery system, shifting costs to other payers. Especially threatened are the safety-net institutions.

Most severely affected by health care affordability are the individuals with health care needs. Health care is now so expensive that the premiums for insurance products that cover necessary services are no longer affordable for average-income individuals and families. To make the premiums more affordable, the private insurers have introduced innovations in their products that shift more of the costs to those accessing health care. Thus health care is now frequently unaffordable even for those who have private insurance. The Milliman Medical Index for 2009 shows that a family of four with employer-sponsored coverage (a healthy sector and lower-cost risk pool) now has average annual health care costs of $16,771, clearly a burden when the typical household income is about $60,000 (3).

It is a sad commentary that egalitarian concern for our brothers and sisters was not enough to mobilize the president and Congress, but we do have some consolation that pecuniary interests may now actually move the process. Most observers of the U.S. health care scene believe that we are in another window of opportunity to achieve the reform that has eluded us for so many decades. Although other nations should learn from the United States what not to do, the United States has an opportunity to learn from other nations what has worked well.

The OECD has been a particularly valuable resource for highly credible studies of the health care systems of its member nations and for the international comparisons provided. As an example, the OECD-WHO-Eurostat Health Accounts database has been particularly helpful for economists in the United States (4). It is probably more than a coincidence that the OECD has just released a new paper, “Health Care Reform in the United States,” by David Carey, Bradley Herring, and Patrick Lenain (5). David Carey and Patrick Lenain work in the OECD Economics Department, and Bradley Herring is a professor at the Johns Hopkins University. The paper includes the usual disclaimer that the views are those of the authors and do not necessarily reflect the position of OECD. The only role of OECD was to provide two of the three authors and to publish and distribute the document at the time that an intensive effort for reform is taking place in the United States.

Fulfilling its role of providing an objective assessment of health care problems within the United States, the paper is helpful when it describes the very high health expenditures along with a population health status that is falling behind other nations. More specific to the need for financing reform, the paper explains the growing proportions of both the uninsured and the underinsured. Individuals over age 65 and individuals with long-term disabilities are covered by the public Medicare program. Many, but not all, lower-income individuals are covered by the public welfare programs, Medicaid and CHIP (Children’s Health Insurance Program). Everyone else either relies on private insurance or has no coverage at all, primarily because they cannot afford it.

With heavy reliance on pro-market ideology, especially since the Reagan years, the nation has been waiting for the private insurers to solve the problems. The private insurers did exactly what any reasonable business would do. They made the premiums for their insurance products competitive by reducing spending on health care through marketing practices that targeted the healthy, especially the healthy workforce and their young, healthy families, and through innovative product design that shifted more of the responsibility of paying for care to those with health care needs. Yet, except for instituting contracted rates with health care providers, they did nothing to slow the rapidly escalating costs of health care. Clearly, comprehensive reform is no longer an option, but a necessity.

Although the OECD paper helps us understand the deficiencies in the U.S. financing system, the recommendations are problematic. To maintain academic purity, the discussion should have included the benefits and deficiencies of a public insurance model such as single payer, a model built on private plans, and a hybrid model of public and private plans. The authors remain silent on a public insurance model. They primarily discuss changes in private insurance coverage to address insurance market failures. They recommend greater risk pooling, providing income-related subsidies for the purchase of private plans, and paying for the subsidies by eliminating the tax exclusion for employer-sponsored plans. In spite of having cited the growing problem of underinsurance, they recommend avoiding moral hazard by increasing cost sharing, which can only further accelerate the problem of underinsurance. They also recommend a few tweaks in the Medicare program that would have a very small impact on future trends. The recommendations would greatly increase health care spending while falling short of the goals of equity, universality, and cost containment.

A previous OECD report stated that “whatever the role played in a health system, private health insurance has added to total health expenditure” (6). A WHO report stated that “evidence shows that private sources of health care funding are often regressive and present financial barriers to access. They contribute little to efforts to contain costs and may actually encourage cost inflation” (7). Several micro-simulations of proposed models of health care reform in the United States have shown that a single-payer national health program would be the most effective model in providing all necessary health care services for absolutely everyone, while being the least expensive model of beneficial, comprehensive reform.

The 30 member nations of the OECD are “countries dedicated to democracy and the market economy” (8). This may explain why the two authors who are OECD employees produced a paper that limits its recommendations to private insurance markets, without discussing the possibilities of a public insurance program. However, as an academic, Professor Bradley Herring should not be constrained by a mission to limit consideration of policy options to those in a market economy.

It is not as if Professor Herring does not clearly understand the single-payer model. In a very recent Kaiser Commission/Alliance for Health Reform forum, he discussed four models of reform for the United States (9). He described single payer as “very elegant and simple.” “You pay taxes into the system and in return you get the medical care that you need.” He stated that single payer is probably the only model that is going to get everyone covered, and that there would be large reductions in administrative costs. In response to a question about the ability of the various options to control costs, he said: “I would think that the single payer approach yields the most promise towards reducing health care costs.” His academic ethics would have been better served had he included these comments in the OECD paper on reform in the United States.

A single-payer national health program is precisely what the United States now needs. It would establish a single universal risk pool, funded equitably through progressive taxes, and it would remove financial barriers to care so that absolutely everyone could receive the care that they need, when they need it. The $2.5 trillion that we are already spending is more than enough to ensure adequate capacity in the health care delivery system.

Senator Max Baucus (D-MT) is leading the closed-door process wherein the reform legislation is being crafted. He has said that all options are on the table, except single payer. In this last election cycle he received over a million dollars from the insurance and pharmaceutical industries (10).

President Barack Obama recently held a health care summit at the White House. Representatives of every sector and interest were invited except single-payer advocates, who were specifically excluded. Less than 24 hours before the summit, the president of Physicians for a National Health Program, a single-payer advocacy organization, was invited to attend, in exchange for agreeing to cancel the planned white coat demonstration in front of the White House, which would have been composed of physicians, nurses, and medical students. Although President Obama has previously expressed his support for single-payer reform, he has decided that political pragmatism requires him to support inclusion of the private insurance industry within the framework of reform.

As innumerable polls now demonstrate, a majority of Americans support national health insurance. It is what we want, what we need, and what we are already paying for. Yet the politicians, working with the moneyed special interests, continue to conspire to deprive us of health care justice. The political opponents to a public insurance program have been effective in excluding single payer from more than a token representation in the legislative process. The people of the United States do not benefit when representatives of the OECD join in that conspiracy merely to advance the ideology of the market economy. Continued financial hardship, suffering, and death are far too great a price to pay.


REFERENCES

1. OECD. OECD Health Data 2008: Statistics and Indicators for 30 Countries. www.oecd.org/health/healthdata
2. Himmelstein, D. U., et al. Illness and injury as contributors to bankruptcy. Health Aff, w5.63, February 2, 2005, doi 10.1377/hlthaffw5.63.
3. Milliman. 2009 Milliman Medical Index. May 2009. www.milliman.com
4. OECD. A System of Health Accounts. www.oecd.org/health/sha
5. Carey, D., Herring, B., and Lenain, P. Health Care Reform in the United States. Economics Department Working Paper No. 665. ECO/WKP6. OECD Economics Department, 2009. www.oecdwash.org/PDFILES/ECO_WP_Health_Reform_US.pdf
6. OECD. Privale Health Insurance in OECD Countries. OECD Policy Brief. September 2004. www.oecd.orgldataoecd/42/6/33820355.pdf.
7. World Health Organization. What Are the Equity, Efficiency, Cost Containment and Choice Implications of Private Health-Care Funding in Western Europe? July 2004. www.euro.who.int/document/e83334.pdf
8. OECD. Mission Statement. www.oecd.org/pages/Q,3417,en_36734052_36734103_1_1_1_1_1,00.html
9. HealthCast. Covering the Uninsured: Options for Reform. kaisernetwork.org, March 2, 2009. www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=3120
10. Center for Responsive Politics. Sen Max Baucus (D-MT). OpenSecrets.org. www.opensecrets.org/politicians/summary.php?cid=N00004643

Direct correspondence to: don@mccanne.org

International Journal of Health Services, Volume 39, Number 4, Pages 699-704, 2009 © 2009, Baywood Publishing Co., Inc.