The American healthcare system is – to use public policy jargon – a mess. Such a mess in fact that this supposedly free market system costs taxpayers more than Britain’s uber-statist model.
The World Bank estimates that the US spends 8.2% of its GDP on public healthcare, while in the UK the figure is 7.7%. This actually has the potential to understate the disparity because the US’s GDP per person is higher than the UK’s. So according to the OECD, the UK spends less than $3000 per capita on public healthcare but the US spends north of $4000.
Underlying these figures are two realities. Firstly, America really has a mixed economy when it comes to health. Just under three in ten Americans are covered by government programs like Medicare and Medicaid. That number includes most senior citizens who will typically require the most interventions. The result is that – according to the OECD – about half of America’s health spending comes from the government. However, that’s still a long way short of the 83% of spending we see in the UK.
What puts America ahead is that second reality: American healthcare is expensive. Ezra Klein points out that an MRI costs $280 in France and $1,080 in the US. He argues convincingly that this difference comes about because most countries “negotiate very aggressively with the providers and set rates that are much lower than we do…[t]hey do this in one of two ways. In countries such as Canada and Britain, prices are set by the government. In others, such as Germany and Japan, they’re set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail.” By contrast, in the US “it’s a free-for-all. Providers largely charge what they can get away with” and often ill-informed, desperate or actually unconscious customers have little ability to say no.
In this way Americans wind up with the worst of all worlds. They pay as much in taxes towards healthcare as Europeans but typically still have to go out and buy private insurance as well. And for this great expenditure they get a system that leaves millions out and delivers some of the worst life expectancies in the OECD. The indictment of this messed up system is as close to an open and shut case as you’ll find in public policy.