Thursday, August 20, 2009

Health Care Reform and single payer – an Australian perspective

I write a financial blog which is republished on the largely political Talking Points Memo.  I thought I better write something for both my audiences sometime – so I am jotting down my thoughts – from an Australian perspective – on single-payer health care reform.  After all the ongoing Fannie and Freddie series has a limited audience.  

Warning – I am putting the positives of the Australian system up front.  There are some very substantial losers too – those are discussed at the end of the post.

Much of what I write is a 12 year old perspective (and the data I have in my head is that age) because 12 years ago I worked at the Australian Treasury and followed the numbers more closely.  Moreover I am normally a bank analyst – and am stepping (way) out of my area of expertise.  There are bound to be some errors and the lack of (recent) quantification I would not normally tolerate.  With that caveat – here goes.

Australia has a hybrid private-socialised medical system.

For reference I think the Australian system is superior to anything in Canada or the USA. I am less familiar with the European models. The Australian system is better thought through and will work better than anything Obama is proposing. However Australia had weaker incumbents than America, some advantages over America (which I will get to) and has had 20 years tweaking the system in lots of ways to make it work better.  These systems require a lot of tweaking and if Obama implements something worthwhile the next twenty years will be spent reforming it.

The way I think about it is that the US has a fundamentally broken market system. We know it is fundamentally broken because it costs a lot and produces fairly poor outcomes in aggregate.  Stories about failure of insurance companies to honour their promises are legion.  Many people have conditions that make them uninsurable. America spends a greater proportion of GDP on health (and greater dollars) for worse outcomes almost no matter how you measure it. If you do not agree with that statement you simply refuse to acknowledge clear facts on the ground. Health coverage is one of the major issues for middle America and many are unsatisfied.  By contrast political and general population satisfaction with the Australian system is high and has by-and-large been rising.

Australia has a system whereby primary medical care (general practice doctors), much specialist health care (for example a cardiologist) and almost all important pharmaceuticals are covered by the government but with a copayment by patient. Most the copayments are large enough to be annoying (the service is not free) but do not cover anything like the costs. The copayments differ sometimes due to your income status. For instance most people have a copayment for pharmaceuticals of about $20 – but for (low income) pensioners the copayment is $5.

There are also government run public hospitals – run by State Governments – but where the funding almost entirely ultimately comes from the Federal Government through transfer payments to the States. These hospitals have a public emergency room which rations via triage. [Turn up with a sprained ankle and you might wait twelve hours, turn up with chest pains and the waters part for you.]

After admission to the public hospital [either through a consulting specialist or through the emergency room] you will get a shared ward and no doctor of your own choice – but a very high standard of care by global standards. Non-urgent procedures are queue rationed – and the queue is long and annoying and was once the main issue at State Elections. But the treatments eventually happen. Queue rationed conditions can involve some pain and hence there is real annoyance at the queues. [Gall stone removal for instance is queue rationed. They are painful until removed.] 

You can be admitted to a private hospital in the same way as the public hospital. The admission is either from a consulting specialist or through the emergency room at the public hospital.  At a private hospital you have your choice of doctor, often a private room, sometimes slightly better food and distinctly less pressure to leave until you are recuperated. Most importantly, private hospitals are not highly queue rationed.  When my wife needed knee surgery after a skiing accident the wait was two weeks at a public hospital or alternatively the next day the doctor was in surgery at the private hospital.  That was an easy choice.

To go to a private hospital you will either need to pay for it or have private health insurance. Most people do it with private health insurance with a moderately large copayment. [It costs me $800 to go to a private hospital – as a one-off payment – and there might be additional copayments for particular doctor treatment in the hospital. Nonetheless I would get out of something dire like open-heart surgery for a couple of thousand dollars. And I would get a nice room to recuperate in…  The cost to me of open heart surgery and a knee reconstruction in a private hospital to me are about the same – the various excesses on private insurance.]

Many people with private health insurance choose to be treated in public hospitals because the service is better in the public hospital.  For instance I know of the husband of a medical specialists who chose to have his open heart surgery in a public hospital because the hospital had an excellent reputation (and they knew and trusted the surgeon they were getting).  They chose however to recuperate largely in the comfort of the (attached) private hospital.  Many people also buy private health insurance because of the tax-driven requirement to do so – but chose to get treated in the public hospital because the copayments are (much) lower.

Ostensibly all of this was paid for through a “medicare surcharge” on your tax – about 1.5 percent. If the medicare surcharge was going to cover it the tax would have had to be about 8 percent (or about 6 percent of GDP). Many Australians (though far fewer now) did not know that the medicare surcharge did not fund public provision.

Private health insurance was originally and remains almost entirely community rated. That means that a private health insurance company charges the same amount to a 31 year old as a 75 year old. Moreover there is (and remains) almost no exclusion for pre-existing conditions.  (The exclusion for pre-existing conditions usually just applies a waiting period – including some which are prohibitive such as an exclusion longer than nine months for pregnancy.) 

Anyway community rating and lack of exclusions meant that private health insurance became the province of the elderly and the ill – and eventually became basically untenable because no healthy people ever took private health insurance. To keep the cost of private health insurance down private hospitals wound up getting subsidized – but even that did not work well.

Eventually the obvious solution was adopted – which was that if you earn more than $50 thousand per year your medicare surcharge rises by 1.5 percent if you do not have private medical insurance. This means that the young and wealthy take private health insurance even if they not think they have a reasonable probability of using it. The private health insurance business again became viable. The legal inability of private health insurance to exclude pre-existing conditions means that the private health insurers do not spend money denying claims on the basis of pre-existing conditions. Legal and claims denial cost is more than 10 percent of costs in America – so that is saved.  The resurrection of private insurance (and hence private hospitals) has meant that queue rationing in public hospitals is reduced.  That has meant that “hospital waiting lists” are much less of an issue at State elections than they were a decade ago.

The community rating of health insurance has also changed in one more important way – which is that it used not to be age-rated – and it is still not age rated provided you took out private health insurance before you were 30 and you maintain it continuously. If you took it out for the first time at 35 you will pay a “five year surcharge” for the rest of your life.

There are thus strong incentives for the well to do and the young to buy community rated health insurance. Insurance companies are not allowed to price discriminate in favour of the young – but they do advertise in favour of the young. Health insurance adverts are targeted entirely at the young (with pictures of 25 year-olds with health insurance) – and believe it or not trying to match health insurance brands with ipods.

There are plenty of things not covered by either medicare or private health insurance. These are known as extras. Extras include things like physiotherapy and dental – and they are exclusively marketed to the young. Whilst the health insurance company is prohibited from bundling their marketing looks bundled. Also there are things like “sign up for extras and get an ipod”.

There have been plenty of tweaks around the edges over the years. For example the elderly on low incomes (who qualified for a full government pension) and a few other selected elderly (veterans, war widows mainly) were entitled to the primary health care and pharmaceuticals without any copayment. There arose a small number of (mostly) elderly women whose idea of a social life was to visit a different doctor and a different pharmacist each day to have a chat (and get a script and have it filled). These small numbers of women imposed enormous costs on the medical system and a very small copayment ($2) produced a very large saving. When the copayment was raised to $5 there was no correspondingly large saving. Just the $2 mattered, and it mattered a surprising amount.

Also – even with very low cost medicine there are some things that are still not delivered even though it they clearly represent cost-effective medicine. The best example is pap smears. Very few women would go to the doctor for a pap smear for a social activity. They do however represent very cost-effective medicine. Getting young women to take jabs (the new HPV vaccine) also requires a solid advertising campaign.

Also some drugs pose particular issues. Viagra for instance is not delivered at subsidy through the health care system (for obvious reasons). But you can get subsidized Viagra if you have certain medical conditions (paraplegia being the important one). I kid you not that there have been minor problems with paraplegics dealing in Viagra.

Still – on most measures – the Australian system is a resounding success. The cost (proportion of GDP, dollars) is about half the USA – but the outcomes are better across the board. And that is not diet or lifestyle related.  Australians are almost as fat as Americans.

Surprisingly the outcomes are as good or better for the rich too. The only exception is Australia’s chronically disadvantaged native (aboriginal) population.

Political acceptance is very high. The conservatives have (totally) made their peace with the system as proposing to remove it is electoral suicide. The support of the populace is almost total.

A major American hedge fund that once tried to employ me included in their pitch their (superior) access to medical care (as they are big donors to medical charities).  To an Australian that sounded odd. Nobody would advertise a job (any job) or a business relationship with access to health care. It is just assumed to be OK. The idea of going to the USA for a medical procedure is also absurd (except for revolutionary new procedures done only by say two doctors in the world). And it is just as likely that an American will come here for such procedures.  We simply do not carry an inferiority complex with respect to our medical care.

Bluntly the system works in almost every sense that matters.

From an investment and policy perspective the more interesting question why does it work so well and how can you learn from that?  I am NOT going to assert that socialist provision of services works well in general – indeed if you believe it does then you are also failing to observe facts on the ground.

I do not have the numbers at hand – but I have a fair idea of this.

There are basically two ways Australia gets much better outcomes per dollar than America. They are the unimportant (but nice) one and the important one. Given Australia produces better health outcomes at spending maybe 7% of GDP less this is a very substantial economic issue. Translated to America those savings would be about a trillion dollars per annum. [Observation: getting this more-or-less right would be one of the most important things any government would ever do…]

The unimportant (but nice) way of getting lower health care costs in Australia

The advocates of the Australian system will note that lots of primary medical care is very cost effective. For instance pap smears stop cervical cancer. Cholesterol testing might lead to better lifestyles.

The primary health care is cheap compared to the cancers and the heart conditions. If you do better primary health care you can save money in aggregate.

I believe this – and it is important from a social perspective – but I remember chatting to the Treasury health care guys (a decade ago) and they thought that this was (at best) about 1 percent of the (then about) 7 percent cost advantage Australia had. [It may be very important though in the outcome advantage…]

The important way of getting lower health care costs in Australia

By contrast the main way getting lower health care costs in Australia is to squeeze the suppliers using government controlled and often government monopoly buying.

A very large part of the difference – the biggest single part when the Treasury guys took it apart – was that doctors were paid less in Australia. Doctors (not specialists) are middle income in Australia now – earning about 1.5 times average earnings. Thirty years ago doctors earnings were maybe 5 times average. The medical schools are now majority female reflecting in part the career aspirations of women versus men. General practice for instance can be performed part time (whilst the kids are school) and is thus a common women’s career.  In regional areas Australia clearly does not pay doctors enough.  Australia often imports doctors to work in remote areas and lack of doctors is a problem in aboriginal communities, mining towns and drier inland centres.  Queue rationing is particularly bad in places that are less attractive to live.  [As I live at the beach and have private health insurance queue rationing is not an issue for me – but it is a pivotal issue in many areas.]

Suppliers in general get squeezed. For instance the Australian government pays considerably less for most pharmaceuticals than is charged in the US. Margins in lots of research driven pharmaceutical would be squeezed. Badly.

Its not all bad though. Universal coverage means that volumes go up. A drug company may sell at a thinner margin – but the volume can offset this. In most prescription drugs the incremental costs are only about 10 percent – gross margins are 90 percent.  Volume matters for profitability.

Reasons the US will never do this as well as Australia

The outcomes in Australia are surprisingly good – but they depend at least in part on the fact that Australia is small. Australia can shave margins for research driven medical products to very low levels because the research is not funded from Australia. If the US were to push margins too low they would crimp medical research.

I have no quantification of how important this is but if had to guess it would be at least about 1 percent of GDP or a seventh of the the entire savings. It may well be 2 percent. In the US context that is $150 to 300 billion per annum.  If anyone has a quantification could they please share it.  [Modification due to someone making an entirely sensible comment on my blog…]

The second reason that America will not do this quite as well is the power of the American vested interests – and those vested interests have a lot to lose because the main way lower costs are achieved is by squeezing those interests.

Winners and losers

For medical industries there are two effects going in opposite directions.

1). The government – being a monopoly buyer – squeezes margins, and

2). Universal coverage expands usage.

It is entirely possible that something will be a big winner or loser – but the savings as a percent of GDP means that the losers will be significantly more prevalent. As a rule this is atrocious for investment in medical related businesses.  The Bronte Capital blog was founded as an investment blog.  So I should state that negative up front.  However this saving – and it is a huge saving – is transferred in part to other businesses – and hence is not bad for investments in most the rest of the US economy.  If you are a manufacturer with huge health costs in America this would be a great boon.

By contrast if you are part of the medico and medico-legal establishment then any decent semi-socialised medical system is long term poison for you.  It has proven to be long term poison for doctors’ incomes in Australia.  Dentists – where socialisation has not taken root – earn considerably more than doctors these days.

PS.  The first comment on this post nailed one other major difference between Australia and the United States.  Australia has a much less expensive tort regime.  Insurance premiums are MUCH cheaper for Australian doctors and that benefit is passed on to patients.

PPS.  I would like to thank Yves Smith of Naked Capitalism for the link and comments.  Yves has lived in both NYC and Sydney and concurs with my article.  However Yves experience of the Australian system would have been biased (upwards) in the same matter as mine as she too lived in a place which was attractive to live and she too would have had the income to queue jump had something required hospital treatment.  John Barrdear’s comments are also accurate. 


CrocodileChuck said...


an excellent post; thank you for your cogent analysis. one other difference between the two markets is malpractice insurance and tort law. Australian doctors enjoy much lower premiums than their US counterparts-up to several times cheaper-a benefit passed to their patients in 'lower rents'.


Jeff R said...

Thanks for the thorough and well-written perspective on the Australian system.

I think it would benefit both sides of the US debate to study the Aussie experience and acknowledge that real reform is difficult and will take time.

dsquared said...

John, are the dollar amounts for the copays USD or AUD?

Anonymous said...

I think your 300bn for medical R&D might be a bit high. The total budget for the NIH is about $30bn, and (for instance) the budget for the Mayo Clinic is $6bn (and they treat a lot of patients). Glaxo's R&D spend is about $6bn.

You could double the budget of the NIH, set up 5 additional Mayo-clinic equivalents, set up 5 big pharma research departments for $90bn/year. (A bit of double counting too, since Mayo gets NIH grants).

John Hempton said...

For the 300 billion - I have modified the blog post. Thanks.

For copayments - they are in AUD - but the difference at the moment is small - and in purchasing power or relative to income you can roughly think of an AUD as equal to a USD.

cian said...

Most pharmaceutical research, and medical research generally, is funded by governments. When you exclude Me To drugs, and marketing disguised as research, pharms contribute comparatively little. What drug companies do contribute is drug testing for safety and effectiveness once they have been created. Its an important function, but not a particularly innovative one. And as we have been discovering over the last ten years, drug companies are incentivised to distort the results of testing.

Its worth noting also that electronics/computer companies have extremely high R&D costs, with low overheads. So obviously it can be done.

babar ganesh said...

from your descriptions of the banking and health care systems i conclude that australia is an extraordinarily boring place to live.

John Hempton said...

Babar - yes - it is boring - when the alternative is that you live in "interesting times".

JoshK said...

It's not fair to say that the US has worse outcomes. The US has among the best outcomes but amongst the most sick populations.

Here's a good link to some properly adjusted data:

Also, if the US would move towards a system where suppliers are squeezed as much as they are in other countries, what would happen to medial innovation?

John Hempton said...

Josh - I will straight agree with you on the medical research. Indeed I said as much in the post.

The outcome statistics can be cut whatever way you want - but picking a few stats where the US wins is selective.

I can be equally selective if you want. In the post I said that it was just as likely an American would come to Australia for a particular service I had in mind a service where Australia was the unequivocal leader for a long time - microsurgery.

Two Aussie doctors were the first to sew an arm back on so that it worked. They were also the first to reverse a vasectomy. For a while Australia had better outcomes for severed hands and arms. But it would be hugely selective use of data.

If you do not want to cut the data with the big macro indicators (life expectancy, spending as proportion of GDP) then - hey - you can prove anything.


David said...

Thanks John for a great summary.

A couple of points I disagree with however.

The stats on doctors incomes are incorrect. I presume the 1.5 times average salary is as it states, pre tax salary. Most doctors however have structures in place that produce this low salary to minimise tax. The real income for an average GP working full time would be closer to 5 times average salary, or about the same as 30 years ago as you note.

I agree Australia has one of the best systems in the world.

The interesting thing is I suspect we could do much better than this however with a few tweaks which seem pretty obvious to me.

New Zealand gets its drugs at in some instances 30% of our cost, by intelligent use of playing pharma companies against eachother.

Our PBS has been hijacked by pharma to a certain extent.

The other huge saving would be to abolish the private health rebates as the Rudd Gov't is trying to do, and redirect the money into the more efficient public hospital system.

The expansion of the private system is in my opinion going to blow out our health care costs over the next 5 years unless we do not take action to reverse its growth.

David W

Patrick said...

I grant that the US has an expensive tort regime. But isn't the expensiveness of the medical malpractice tort regime directly tied to the nature of the health care system?

1. Damages are calculated based on the medical bills incurred treating the malpractice. A cheaper system would have lower malpractice damages.

2. The percentage of those malpractice costs that rest on the consumer of medical services is a big motivator in deciding whether to sue for suspected malpractice. If your doctor might have erred, but all you suffered was some pain and an $800 copay, you aren't likely to sue. Your insurance company might want to sue to recover their portion of the payment, but there are mechanisms by which that is far cheaper than if you sue on your own.

3. To the extent that medical expenses shift from expensive and invasive treatments to cheaper, less expensive preventative care, it seems that malpractice costs will drop. Tests like pap smears aren't malpractice free, but I suspect they're less malpractice intensive than chemo.

I'm not an expert in this. It just seems that the nature of the malpractice system is at least in part determined by the nature of the medical system onto which it is attached. Not 100% determined, but at least in part.

Anonymous said...

I think the argument in the US is far simpler than this. Right now, government is about 60-70% involved in healthcare. The question is do you want 95 or 100% involved. And because government *could* do something better is not a reason to reward government when, especially in the US, they have proven far less efficient than the private sector in virtually all ways.

As for efficiency, asbolutely. Cost savings are driven by efficiency always. I live in a fairly affluent suburb of NYC. There may be as many 2,500 stay at home moms who are highly educated and talented women (and may 10 dads). I am talking women who had education at leading private universities and who had successful careers. And they are caring for say 6,000 children. I am fairly certain that government could ration this childcare. I am sure that 1,000 could care for 6,000 children. At most 1,250 could private high level care to 6,000 children (seriously, more than half the kids are in school for half the day anyway). Releasing 1,250 to 1,500 talented people to "productive" means. But I am less certain that I or government could force that "optimal" and more efficient outcome.

Oh, this is a relatively small town that could easily be replicated 50 or 100 times over just in NYC metro area and maybe another 8-10x over than across large cities in the US. What's that in lost GDP? Why stop at healthcare?

Potato said...

Just further to the malpractice comments... as a Canadian I've heard it said that public health care is a reason for lower malpractice costs: if you're harmed by malpractice you may need followup treatment, possibly for life. If there was a cost to that, you'd sue for huge malpractice sums. But if the care is free anyway, you don't need to get that money from the doctor (or his/her insurance company). You can still sue for damages of course (lost wages, suffering, etc), but those perhaps pale in comparison to the costs of private health care in the US.

In Ontario unfortunately we're having a bit of a problem with squeezing the doctors because we're just not training enough: like you said, GPs (especially women) want to do it part-time these days. But we're limiting med school enrollments to the number of doctors that would be needed if they were each committed to putting in 50-60 hour weeks like the GPs of yore.

Mike Millar said...

PWC published a report recently on wastage in the US health care system. The biggest single item was wastage on redundant or unnecessary tests with an estimated cost of $210 bn. The tort regime is partly to blame but the biggest factor is probably reimbursement on a per procedure basis. Doctors are incentivised to do lots of tests so every time you visit the doctor in the US you end up taking a battery of blood tests.

JoshK said...


The stats for the US are the same for both heart disease and cancer, which account for around 30-40% on non-accidental deaths each year).

There are two big issues in the US that critics of the US system unfairly ignore:

1. People in the US are sicker than most of the developed world. This is very start when broken down amongst demographic (race/gender) groups.

2. The US has a much higher rate of accidental and/or violent death.

Bottom line, if you are a US resident of European ancestry who doesn't get hit by a car you will do much better here.

There certainly have been medical advances from many countries that employ socialized medicine. To be fair, the system that we have here is not a true free-market system in any way. I have United Health, which has around 30-50m members. I think that's more than NIS in England.

IMHO, the changes need to come on the supply side. There's little cost incentive here to innovate in care delivery b/c the end-user pays the same co-payment regardless of how primary and specialty care. For a short time some of the pharmacy chains (WAG I think?) were trying to offer their own, lower cost, clinics. But they never took off b/c the consumer would have to be crazy to trade in their doctor for the same co-payment, even if the real cost of the service was 20%.

Donald Pretari said...

This was another excellent post. Very fair. Here's my plan, which I'd like to couple with a Guaranteed Income. Obviously, your views are more realistic:

Let me ask everyone a question: Do you consider price and discount when buying Tylenol and Pepcid? I answer in the affirmative.

Here's another question: Do you consider price when considering brain surgery? I answer in the negative.

Therefore, I suggest splitting health care costs into two categories:
1) Medical goods that a consumer could price and shop accordingly on.
2) Medical goods that a consumer cannot price and shop accordingly on.

Once you do this, you can split up medical costs into:
1) Costs subject to a deductible.
2) Catastrophic Costs.

And, further, you can say the following:
For 1) You don't want third party payers, since you want the consumers to shop for the best price.
For 2) You can have a third party payer. In fact, you can have one: the Federal Government.

Now, here's Milton Friedman's plan:

"A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance—hard to justify with universal catastrophic insurance.

This reform would solve the problem of the currently medically uninsured, eliminate most of the bureaucratic structure, free medical practitioners from an increasingly heavy burden of paperwork and regulation, and lead many employers and employees to convert employer-provided medical care into a higher cash wage. The taxpayer would save money because total government costs would plummet. The family would be relieved of one of its major concerns—the possibility of being impoverished by a major medical catastrophe—and most could readily finance the remaining medical costs. Families would once again have an incentive to monitor the providers of medical care and to establish the kind of personal relations with them that were once customary. The demonstrated efficiency of private enterprise would have a chance to improve the quality and lower the cost of medical care. The first question asked of a patient entering a hospital might once again become "What’s wrong?" not "What’s your insurance?"

I would add a Democratic Party addition to this plan: You could relate the deductible to income.

That's my plan. Everyone covered.

I would add the following: I've no idea what the correct amount of money that we should spend on health care should be. That's why I would like some portion of our medical bills to be subject to our own choice.

Don the libertarian Democrat

BTW I'd love to live in Australia. But, as Colin Hay says, I'm waiting for my real life to begin.

JoshK said...

One last note. Regarding defensive medicine. Many of my friends here are doctors and they all say the same thing regarding MRI's, CAT scans, EKG's, and other diagnostics. They do thousands of them to avoid being sued, even though they find them inappropriate for the conditions.

Anonymous said...

I'm a dual citizen of the US and Australia and have been living in Australia for the past 10 years. I'm no fan of President Obama and his socialist agenda, but if the US has to have universal health care the Australian model isn't too bad.

It's really a blend of public / private coverage, so for those who can afford the extra $300.00 per month in private health care insurance premiums for your family you can get "great top notch coverage" better than anything I had in the US.

"Example" My wife took ill last year and had to be rushed to the private hospital (because we are insured) via ambulance and it was determined that she needed surgery and she was operated on that day. (the surgeon told me the next day that she would have died had they waited 24 hours) She was in hospital 12 days (private room) including 24 hours in ICU. And that cost me a grand total of $500.00 out of pocket. ($250 annual hospital and $250 Emergency)Additionally she required a second follow up operation to complete her treatment 4 months later wich had her in hospital another 10 days (private room) that cost me $0.00 out of pocket. GREAT!

On the other hand if we didn't have insurance and only had the public option my wife would be dead today. There is "NO WAY" she would have been operated on same day in a public hospital. The waiting lists down here for public insurance only are shocking. Forget elective surgery, that is a real joke! I'm talking about truly needed surgery on the public plan is "Take a ticket and we'll call you in a month or two" and then someone pulls a sicky and they call you and say your operation scheduled for tomorrow has been cancelled and they will call you next month with a new date. (That is no joke)

I live in Queensland (no big dif from state to state) but I just here the local news more and they do from time to time report on the shocking waiting times for certain proceedures and it's just shocking when you here people are waiting 9 to 18 months for real important things! Waiting list in the tens of thousands long!

But like I said if you can afford another $300 per month and reasonable co-pays you get State of the Art health care in OZ!

John Hempton said...

To the guy who thinks his wife would have died at a public hospital - respectfully I disagree - not that the waiting lists are not a problem.

The public hospital emergency room rations by triage - and most experience suggests that they are pretty good. There are problems I will get to.

But my first and only direct experience came when my then young son jumped on my chest and loosened the carteledge around my sternum. I did not know he had done it.

However I woke up with roaring chest pains and I got myself to hospital. The waters parted. I was on a bed being wired up to test for heart issues within 30 seconds of walking through the door. They did not bother taking my name.

When it was clear there was no heart attack I was left on bed in hall for 3 hours whilst I waited for a doctor.

I know people who have turned up at emergency rooms and being operated within 2 hours. Happens all the time.

When the waiting lists really matter in a life-and-death situation is for things like coronary bypass surgery. If you have blocked arteries and leave them untreated they will kill you.

However they probably will not kill you this week or this month or even this year. So you are put on a waiting list. The waiting list for heart surgery differs by jursidiction (and a little by triage) but is six to ten weeks.

Some people die on that waiting list.

You can jump waiting list by private hospital if you wish.

But your wifes condition - requiring immediate treatment - is actually what the system is pretty good at. Its the thing like the bypass surgery that gets lethal waiting lists.


Anonymous said...

Thanks for a thoughtful analysis. I'd love to read your views on the Medicare Select proposal by the National Health and Hospitals Reform Commission (see pp 10-11 of the Exec Summary for a start -

John Hempton said...

I would love to think about the various tweaking government does on Medicare. When I was in the Treasury few things amused me more. )The story about the ladies who visited a doctor every day is real - and it is one I watched a government grapple with.

But hey - I got a hedge fund to manage.


Tom Degan said...

The other day, I received an interesting and very instructive e-mail from my brother Jeff who lives in France. He asked me to share it with the readers of my blog. I think I will share it with you also.

“As an American who has been living in Europe for most of the last 20 years, one who has visited doctors numerous times in four different countries, whose two children were brought into this world in European hospitals (France and England), who has himself spent a week in a public British hospital, and who underwent an operation in a private British clinic, I think I can say a thing or two about health care in Europe.

“Our out of pocket expenses for the births? Zero, even though in France my wife spent 5 days in the hospital after the birth, which is standard, by the way.

“During the three years we lived in England, we never once paid for medicine for our children. Children get drugs for free in the UK. Visits to the GP are free for everybody.

“My expenses for the week in the NHS hospital? Zero.

“The cost of the operation in the private clinic? Zero, it was covered by my work insurance, as was the post-op physical therapy I needed.

“In Western Europe you would never be forced to sell your home in order to pay for your medical bills, as happens all too often in America when catastrophic illness strikes and the insurance company decides that your condition was ‘pre-existing’.

“The quality of the care? Mostly good. French hospitals are excellent, even the food is decent. The food at the NHS hospital was beyond awful, but then again most English food is pretty bad (though they do have great Indian food). At night, they were understaffed, but I am guessing that, apart from that place where Dr. House works, most American hospitals are understaffed at night, too.

“In short, in the US, you pay more, get less, and die younger than we do in Europe. What part of that don’t you understand?

“My fellow Americans, you have nothing to fear except those who would use fear to keep you enslaved to the myth of the might of the American health care system.”

Jeff Degan

What can I tell you? The guy is a Communist. Not only does he live in France, he actually likes it there. An eternal shame to our family's good name. Let us boil down his seven paragraphs to their juicy essentials, shall we?


Here is (Excuse me, I meant to say, “Here was“) a golden opportunity for real reform and the idiotic Americans are screaming about socialism. Is it any wonder that we have become the laughingstock of the Western world?

Tom Degan
Goshen, NY

PS - I love English food!

Keiran said...

John, spot on. I'm Australian, lived in the US for a while and am now in the UK. The British NHS is great if you get hit by a bus or turn up with chest pains, for less serious issues you can wait. The benefits such as free prescriptions for all children do seem absurdly generous, and I reckon a £5 copayment would radically change the usage statistics. In the US everything was shiny and new, apart from the staff who seemed overworked and stressed. I want my doctor to his time pondering my diagnosis!

An economics question which you didn't address: the most bizarre aspect of the US system is the involvement of your employer in your health care, what impacts does this have on companies and the labour force?

John Hempton said...

The involvement of an employer is a way of dealing with adverse selection. Group life policies - especially for large groups - require less medical checking than individual life policies. [The reason is obvious - if you are sick you might want to take an individual life policy - but you will not be able to manouver yourself a right to a Group policy...]

Ditto Group health insurance is a solution - only partial - to the adverse selection problems in health insurance.

Universality solves many problems better - but at the cost of socialisation and some inefficiency from that.

A 2 pound copaymnent is a MASSIVE improvement on the UK system. The experimenting with copayments was crucial in Australia - and made the system work much better.

They were politically difficult to implement - they should be implemented from scratch as a design feature.


gw said...

Thank you - am excellent post.

There is now an urgent need to manage down the earnings of doctors (and the rest of the medical industrial complex) otherwise the cost of providing health care will be impossible to fund. In good years there could have been a smooth adjustment but now it needs to be done abrupt and doctors will feel pain.

The current debate on death panels is a distraction ploy. Yes there is a need to do trade offs between the elderly who receive care and the younger who if un(der)-insured will not receive care at the moment. But the biggest balancing act is between the payers and receivers.

Your post is one of the few who nailed it. It may we worth extracting that insight into a separate shorter post and separate it from the very interesting but for a broader audience less relevant Australian background.

John Hempton said...

Thanks GW...

I am amazed at the extent to which it is just accepted amongst liberals that socialised medical systems get better outcomes without any understanding of WHY they get better outcomes. If the people were my staff and they refused to ask very basic questions like that of (say) a stock market investment I would conclude they were being feeble minded.

And I am amazed at the extent to which it is not accepted amongst conservatives that good outcomes are obtained by socilized systems despite extensive data. If they were my staff on the same stock market investment and they (consistently) chose to ignore stuff that was not consistent with their story I would also conclude they were feeble minded.

Now I have been guilty of a lot of feeble mindedness before so this is pot-calling-kettle-black. But I am glad you can do the maths.


Sort of obvious. If we all want this sort of medical care we need to keep its costs down - so we need to reduce its bargaining power.


This is the analog of a rich person I knew who lived in a large (not enormous) home that was finished to a very high standard. He worked out that just to maintain the home required six weeks of a tradesman's time per year.

His conclusion. We can't all live like this.


Tradesmen said...

Thannks for elucidating

John Haskell said...

"David W" flatly states that GP salaries haven't fallen due to some magic tricks involving tax. Since you did not amend your original post I assume you believe this is a fantasy?

It seems to me this is political problem #1 for moving the US system to something more like Australia or Europe. Doctor salaries in Europe and Australia are much closer to the median there and I assume that US doctors are aware of that.

Note that the favorite system of the hard Left, Cuba, runs on doctor salaries of $200/month and a ban on emigration... which unfortunately is not practical in the US.

kamagra said...

Some insurance company are restricted to selected health insurance policy,most insurance company do not include cancer and HIV in their policy. This is unfair for patients with illnesses like this,they are usually the victim of discrimination in our society.

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