President Trump isn’t greatly enamored with the idea of Medicare for All. He considers it another step to socialism in America (it’s actually toward social democracy, but that’s still not something he’s in favor of). It would seem that the World Bank agrees with Trump, that Medicare for All is not the way to push the healthcare system. According to one reading of their latest report, the entire system should be pushed the other way completely, toward something much more market friendly.
Their report is about human capital, by far the most important form of capital in this modern world, the founding blocks of it being how healthy people are, how well educated, and so on. There’s then a ranking of countries by how well they achieve these goals of a healthy, educated, citizenry. At the top of this ranking is Singapore, which achieves it through its "universal healthcare system, education exams results and life expectancy figures." The last of those is a result of the first, of course.
Which means that we should be looking to that Singaporean healthcare system for solutions to our own woes. When we can point out that it achieves life expectancies above those of the U.S. at something like one-quarter of the cost, then we really should be taking note, shouldn’t we?
The trick is that Singapore distinguishes between what can usefully be done by insurance and what can usefully be achieved by markets and price systems — even, gasp, by people spending their own money.
Our essential problem in abstract is that of course we cannot shop around for an emergency room when we’ve had a car crash. Add to that the uncomfortable truth that some heinous illnesses will bankrupt any one individual who tries to pay for their own treatment. Thus we cannot use simply a swipe of the credit card to buy all treatment — both because we’ll not have market competition for some of it and also because we need that risk pooling which insurance provides.
Yet it’s also true that a system where no one ever pays anything out of pocket is going to face almost unsupportable demand, and also nearly no price competition to rein in the greed entirely justified remuneration of the suppliers.
The trick is to use those parts of each system where they’ll do most good, which is exactly what the Singapore system does. Each individual must pay some portion of their income into a health savings account. This is then used to purchase routine treatment over the years — any balance remaining at retirement is added to their pension fund.
But obviously some of us need far from routine treatment. So for anything that is catastrophic, the bill is picked up by the government. This produces long lifespans at some 4 to 5 percent of GDP, about a quarter of what the U.S. currently pays, and about half or a little less than the European healthcare systems do.
That is, by properly identifying where we can use personal out-of-pocket expenditures, and where we’ve got to use insurance and risk pooling, we can have a better, cheaper, healthcare system. It’s just fine if it’s government covering part of the cost through taxation as long as we do get those first baby steps right.
The solution to America’s healthcare woes is Health Savings Accounts plus Catastrophic Health Plans. This is what Obamacare doesn’t allow, not properly, and nearly the exact opposite of Medicare for All.
Trump is right to say that the current offerings from the progressives aren’t the right way to go. We really should be copying what is probably the best healthcare system in the world, certainly by far the best one for the money. Which is, as the World Bank points out, one that properly uses both markets and insurance to extend lifespans for less money. Who wouldn’t want that?
Tim Worstall (@worstall) is a contributor to the Washington Examiner's Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.