Public policy debate often floats in a realm of fantasies, myths, and half-truths—more like a dream or a nightmare about a thing than the thing itself. The United States, which has for many years hosted a kind of theater of the absurd for the debate about health care policy prompted by the Affordable Care Act (Obamacare), is certainly no exception. The only thing that everyone agrees on in this drama is that the U.S. health care system is broken—and very expensively so.This is where the rest of the world comes in, either as a bogeyman or as a lodestar—but as part of a fantasy in either case. “You want to turn America into France!” Or, “If others can deliver quality care for a fraction of what we pay, why are we too bullheaded to learn from them?” As if the way other societies do things could readily be exported around the globe.It is true that America has much to learn from what the rest of the world is up to, both negatively and positively, but in this short space I can only hint at some examples that are particularly revealing. The cases show that the American health care debate is distorted by several destructive myths. Finally, while not all examples of best practice are exportable, some are, and it turns out that the ones that are have something important in common: They put as many decisions as humanly feasible in the hands of individual consumers.Case Study 1: The Free-For-Alls“Free-market health care” is like extraterrestrials: We keep looking for it, sometimes we may get our hopes up, but ultimately we come up empty. There is no such thing as free-market health care anywhere on this planet, but we do have some examples of “free-for-all” health care—contexts where the state is either impotent or uninterested in providing it. These are not “free markets”, because functioning markets are complex institutions that require more than simply “getting the government out of the way” (1990s Russia was not a free market), but they are nonetheless instructive. Precisely because they are “free-for-alls”, they are not “models” that one would want to transplant to the United States, and they are easy for those of bad faith to mock. But they nonetheless provide valuable insights and disrupt a narrative whereby progress on the health care front is thought to come from either government intervention or, perhaps, a technological deus ex machina, rather than from policy that seeks to decentralize decision-making as much as possible.Mutual Aid Societies: Our first example comes from what may as well be a foreign country: pre-New Deal America. As David Bieto’s book, From Mutual Aid to Welfare State (2000) relates, prior to the American welfare state, a striking number of Americans received social services from institutions that nobody planned, called mutual-aid societies. These fraternal societies or lodges were based on the principle of reciprocity: Today’s recipient might be tomorrow’s donor. And many of them provided health care services.Some of them provided only catastrophic health care services (what used to be called in America “major medical” insurance), but some had their own systems: They employed doctors and even built, owned, and operated hospitals and other health facilities. Importantly, given American history, some fraternal societies catered to African Americans, giving them a crucial leg up and safety net, and creating an important sense of empowerment. A full treatment of the history of mutual aid is impossible here, and no one is suggesting that if one ripped out the welfare state overnight, a magic pixie dust of mutual aid would solve all our problems. But it is still instructive to know that before health insurance was seen as the province of the government, many such services existed through unions, faith communities, and other voluntary associations.Community Health Workers in Africa: The story of mobile telephony in Africa is by now well-rehearsed: Because sub-Saharan Africa has a very poor fixed-telephony infrastructure by rich-world standards, mobile phones took off like wildfire. And many African countries have now leap-frogged the West in key technologies such as mobile payments and mobile banking, which are more widespread in countries like Kenya and Tanzania than in the countries of Europe and North America.A similar story may be happening with regard to health care delivery, although it is too soon to tell. But one widely shared Western assumption is in any case being overturned: the idea that doctors should be on the front line of medical services.In most sub-Saharan African countries, there just aren’t many doctors, so community health workers are taking up the slack. Many are trained to do routine procedures typically performed by doctors, and they work well. As Dayo Olopade writes in Bright Continent (2014), they have “performed admirably” to patch up holes in African health care. “Without formal regulation or explicit guidelines”, Olopade writes,
nearly half of the countries in Africa have already begun to use non-physician clinical workers to perform minor surgeries. In Tanzania, non-physicians perform 84% of C-sections, hysterectomies, and laparotomies for ectopic pregnancy. In Mozambique, the figure is 92%. In Angola, the Kalukembe Hospital is a rural facility with 180 beds and zero on-site doctors.
There is no evidence that the quality of care received is lower than it would have been if those workers were doctors. In the West, medical doctors are a cartel, using their political influence to protect their livelihood, with predictable consequences in terms of both innovation and cost. Again, no one pretends that health care is better in Mozambique than in the United States, but seeing how community health workers can replace doctors in many cases, cheaply and without fuss, ought to give us pause.Narayana Health, India’s Wal-Mart of Surgery: The greatest improvements in human welfare in our day-to-day lives have been the result of the wonderful process by which consumer goods are made affordable for the many. Cars went from being toys for idle aristocrats with a death wish to chariots for the common man. Once upon a time, only the Pentagon could afford computers; now children walk around with pocket-sized machines than can beat a grandmaster at chess. And many of the greatest fortunes in history, from Ford though Jobs, have been made in the relentless, inventive pursuit of making goods for the privileged available to the masses. The only sector that seems to resist this trend is health care—at least in the West.In the free-for-all world of health care in India, a company called Narayana Health brings the same maniacal focus on cutting costs to surgery as Sam Walton and Jeff Bezos did to retail. According to Bloomberg BusinessWeek’s Ketaki Gokhale, artery-clearing coronary bypass surgery at Narayana, with Western standards of quality, costs $1,555, versus $106,385 at Ohio’s Cleveland Clinic. India might be the best place to look for transformative health care innovation over the next few decades. Often-incompetent government leaves plenty of space for such free-for-all initiatives, if not for a real free market. A rising middle class means more and more Indians expect a Western standard of health care, even if they may not be able to afford it at Western prices.The point is that slightly chaotic development fosters inventiveness. Meanwhile, if food purchasing were accomplished in the United States by buying grocery insurance (the insurance company would negotiate with grocers), Sam Walton would never have left Bentonville, Arkansas.Narayana’s founder, Dr. Devi Shetty, has now decided to tap the U.S. market, but to do so, he had to build his hospital outside the United States, in the Cayman Islands, to escape stifling regulatory restrictions. It will be instructive to see how well Narayana’s Cayman enterprise does.Case Study 2: The Well-Tended GardenIf you could bottle together what India, sub-Saharan Africa, and 19th-century America have in common, the opposite would probably look a lot like Singapore. Far from a free-for-all, the metaphor for Singapore is perhaps that of the well-tended garden. The gardener does not make the flowers grow; but he waters and tills and prunes until everything is brought to perfection. Famously, Singapore bans pornography and chewing gum, but not caning. Authority is trump.If one were to pitch Singapore’s health care system as a model (and, unlike the free-for-all case studies, it is indeed a model), it would be a very simple pitch: First World outcomes at Third World prices. The statistics are striking, and worth briefly rehearsing.Both in per capita terms and as a percentage of GDP, Singapore has the single lowest health expenditures of any rich country, bar none. The World Health Organization ranks Singapore’s health care system sixth in the world in terms of quality, ahead of many rich countries. Its health expectancy is on par with any other rich country. “Singapore’s cancer survival rates are similar to Europe’s while its cardiovascular disease death rate is half that of the rest of the Asia Pacific region. . . . Singapore produces world-class outcomes on par with the most-developed nations of the world, but it does so at a fraction of the cost usually associated with high-quality care”, writes William A. Haseltine in Affordable Excellence (2013).How can Singapore accomplish what must be referred to as, insofar as such things exist in the public policy realm, a miracle? The central design principle of the Singapore system is that it puts as many health decisions as possible in the hands of the consumer—and this includes having the consumer pay for his own decisions.The way the Singapore system is set up is actually fairly easy to understand. The backbone is a program called Medisave, which is a mandatory health savings account. A percentage of each worker’s paycheck is deposited automatically into this account by the government. And it is through this health savings account that consumers can pay for their care. Savings from several health savings accounts from the same family can be brought together to pay for procedures.The Singapore government also runs a catastrophic health insurance program called Medishield. Medishield premiums can be paid out of Medisave dollars. Consumers can opt out of Medishield and buy private catastrophic insurance instead. But because this takes money and effort, the incentive structure is such that most people use Medishield, which provides for the system’s solvency.Then there is Medifund, a safety-net program for the poorest 10 percent of Singaporeans. Medifund is funded by an endowment set up by the government and regularly enriched by government surpluses; only the interest from the endowment is used to pay for Medifund recipients’ health expenses.Facing the problem of an aging population, Singapore has also set up ElderShield, an insurance scheme set up to support elderly people with chronic conditions or disabilities; ElderShield is a choice of private plans regulated by the government.Singapore’s system is by no means a free-market utopia. There is a government-run health system, but even those who do not use it benefit from it because it exerts downward price pressure on private-sector providers. Many procedures have their prices set by the government, or are subsidized, or both. Singapore has medical licensure, though it makes it easier than many other countries for foreign doctors to be licensed in Singapore.Of course, we should be wary of thinking that a system built for an authoritarian, island-urban nation of only five million people, with a consensus-driven culture and rule by highly competent technocrats, can be transplanted to an astonishingly diverse, fractious polity of more than 300 million people like the United States. But looking at the health care landscape in the United States, with its exploding costs and uninspiring results, it’s hard not to imagine that it would be better off if it tried to go more in a Singaporean direction.More specifically, Singapore has built its health care system on two very simple insights which, taken together, are very profound. First, if people have to pay for their health care needs, they will be more discerning consumers. Singapore bends over backwards to allow everyone in the country to be able to afford health care. As we have seen, procedures are price-fixed and subsidized, the government runs cheap hospitals, everyone has a health savings account, and the poorest have a government insurance scheme. But what you never see is first-dollar coverage: Everything must cost something. The elasticity of demand in health care is not an economic category alone; it is also a psychological category. It is amazing that a country as full of psychologists as the United States allows immaculate third-party payments to exist.Second, leading directly from the first, choice works. Some things in the Singaporean system are mandatory—maybe too many things for American conservatives and libertarians, as the Manhattan Institute’s Avik Roy points out. Everyone must have a health savings account, for example. But beyond these basic building blocks, everything else is up to the consumer: the choice of doctor, the choice of hospital, the choice of procedure (and even how to pay for it). On this score, America is far from being the land of the free.Finally—and this is important especially for the United States—universal coverage doesn’t have to mean socialism. The Singapore system works. Everyone is covered. There is choice and competition and innovation. It is common sense: Routine expenses are paid out of pocket or from savings, while only major expenses require insurance, which is the way insurance works in every other sector of the American economic system. It is also the way it used to work in the United States, when the phrase “major medical insurance” used to mean something.American Health Care MythsThe major impediment to American health care policymakers learning from foreign examples is a raft full of destructive myths. Before anything useful can be done by way of adapting best practices from abroad, Americans must be liberated from these myths.Myth 1: Universal coverage = socialized medicine. A common and frustrating feature of the U.S. public policy debate is that the Left will call attention to a fact X, and then assert that this fact requires policy response Y. The Right, instead of contesting the second part of the argument—that fact X necessitates policy response Y—will instead contest the notion that X is a fact.So, for example, a frustrating number of right-wing politicians, instead of questioning whether a global regime of carbon taxation might have more costs than benefits as a response to global warming, will instead question whether global warming is, in fact, actually occurring. In health care, one version of this phenomenon is the assumption that universal health care coverage requires a government takeover of the health care sector. Because the Left has a benign view of government and a laudable urge to help out the uninsured, it will call for such a takeover. Instead of questioning whether the laudable goal of universal coverage might be accomplished without a government takeover of health care, the Right will argue against the principle of universal coverage itself. As Singapore and other countries show, this is a false choice.Myth 2: The United States has a free-market health care system. This is a very pernicious myth and, again, it prospers because the Right grants the Left’s premise. “The United States has a free-market health care system—and look at the mess we’re in!” the Left crows. “The United States has a free-market health care system—and it is the best in the whole wide world! USA! USA!” the Right responds.This could not be further from the truth: Look at Singapore, itself hardly a free-market utopia. But more facts should be noted. First, nearly half of health care spending in the United States comes from the government, a figure that is sure to rise as Obamacare implementation continues, and a figure that is much, much higher than that in putatively “socialized” systems like those of Germany, Japan, and Switzerland. And this does not take into account the biggest “tax expenditure” in the American tax code: the tax deduction for employer-provided health care insurance. Macroeconomically speaking, such tax breaks are government spending—spending directed by the government even if not actually undertaken by the government.Second, the U.S. health care system is in fact highly regulated. Insurance companies must comply with countless mandates, depending on circumstances, such as “guaranteed issue” (granting insurance regardless of preexisting conditions) and “community rating” (a ratio between the lowest price charged and the highest price charged, which works out to a subsidy of the unhealthy by the healthy, who must pay more for their coverage). And this doesn’t get into issues like professional licensing.Regardless of the merits of such regulations, a sector in which at least half of the spending is directed by the government and the rest is highly regulated is not a “free market” in any meaningful sense of the term. If anything, Obamacare has had the benefit of laying bare the mental model the Obama Administration employs when it thinks about health care insurance: as a regulated utility. Private companies provide the service, but they do so only at the prices set by the government, according to the government’s requirements, and with government subsidies. Again, a regulated utility system may or may not be a good idea for health care provision, but it is not a free market.Myth 3: “Health care = “insurance”; “insurance” = “comprehensive insurance.” What a revealing turn of phrase is to be found in sentences like: “Do you have health care?” and “Everybody in the United States should have health care” and “You shouldn’t be denied health care just because you have a preexisting condition.” In each of these sentences, it will be obvious to any American that what is being called “health care” is actually “health care insurance.” This is so obvious that no one gives it a second thought—yet what is needed is a first thought. These phrases propagate falsehoods—for example, the claim that the debate in the United States over the past five or six years has been about health care, when it has only been about how to pay for health care. None of the key factors explaining rising costs and poor outcomes has even been touched in legislation.Furthermore, “health care” does not just mean “health care insurance” but “comprehensive health care insurance.” That is to say, when someone advertises a job that “has health care”, what will be understood is that the employee will be enrolled in an insurance plan whereby, perhaps with nominal co-pays, almost all procedures, even routine ones, will be principally paid for by the insurer. Nobody stops to notice the self-evident fact that health care and insurance are two different concepts; the word health care means the provision of health care services. After all, we do not ask “Do you drive?” when we mean “Do you have car insurance?” It might be very desirable—indeed mandatory—to have car insurance, but we still recognize that “driving a car” and “having car insurance” are not identical concepts.Neither does anyone stop to notice that the way health care insurance is conceived of in America is different from all other concepts of insurance. Car insurance typically does not pay for fill-ups at the gas station and routine repairs. Your homeowner’s insurance will not pay for the electrician to come change a light fixture. In health care, this is known as “catastrophic insurance”, a pleonasm, since the very concept of insurance refers to protection against low-probability, high-cost events, namely, catastrophes. Your house insurance pays out if your house goes up in flames or if a huge tree branch breaks off in a storm and crashes into your roof, not if it needs a new paint job. This may all sound pedantic, but it is not: How can Americans even begin talking productively about something if words do not mean what they mean?If insurance is not necessary for most health care decisions, how do you even begin to explain that you can have health care without insurance to someone for whom the words “health care” and “insurance” are synonymous?Myth 4: Technology is expensive. One thing everyone agrees on: U.S. health care spending is rising at an alarming rate. This is typically blamed on improving technology. To most people, this makes intuitive sense, until one realizes that in every other sector of the economy, technology gets cheaper even as it gets better. Computers are a well-known example of this phenomenon, but lest you think this an idiosyncratic artifact of Moore’s Law, compare a car today with its 1950s-era counterpart: You’ll find high-tech equipment, better security features, GPS, air-conditioning, multiple cup-holders, and so on. In terms of purchasing power, today’s cars are much cheaper than the 1950s equivalents were for a 1950s buyer. But wait: There is another sector of the economy in which technology only gets more expensive as it gets better: defense. What do defense and health care have in common? (Hint: Myth 2.)Think of Narayana Health, or of Amazon or Apple for that matter, on the one hand, and the extravagantly expensive and delayed F-35 project, on the other. Which one does the U.S. health system more closely resemble?Myth 5: Health care is unlike any other good or service. Every previous myth is really a consequence of this myth. The thing almost everyone agrees on is that health care is special, unlike every other good or service, and therefore the rules that apply to every other good or service do not apply to health care. Health care is different, and therefore government must run it. Health care is different, so of course a “free market”, as we see in America (and which does not exist), will be a disaster. Health care is different, so it cannot be insured the way everything else is insured. Health care is different, so of course technology gets more expensive as it gets better. Health care is different, so of course people cannot make their own decisions.This myth might be called “Arrowism”, after the Nobel Prize-winning economist Kenneth Arrow, whose ten-page 1963 paper “Uncertainty and the Welfare Economics of Medical Care” summarized this view, and is routinely trotted out as “evidence” for the myth. Never mind that the paper does not actually contain anything that could be called “evidence”—that is, observations gained as the result of experiments. Never mind that we do not typically base wide-ranging policies for other high-tech sectors on theoretical papers written in the 1960s.This isn’t to say that there aren’t differences. First, it is different in the sense that retail is different from automotive is different from mining. Second, it is different because industrialized societies share a number of moral intuitions about health care and who should have access to it—good moral intuitions, in my view. This means that at least some government involvement in health care will always be unavoidable, in a way that is not true for retail.That being said, while there is no room here for a full treatment of this point, the most subversive truth about health care, as David Goldhill convincingly argued in his book Catastrophic Care (2013), is that it is more like every other sector than it is unlike them.We all instantly recognize that it would be a disaster if we collectively decided that the way all cars should be purchased would be by having a job with a company that will provide you a car (with a tax break, and if you lose your job, you lose your car), and an insurer that will pay for gas and oil. Should you not be able to get a car that way, the government will buy you a car. We can easily imagine that, because the choices in the car sector would no longer be made by individual consumers but by powerful entities—the government, large companies, insurers—almost every car would be a hideous, hideously expensive, comically ill-designed clunker akin to the ones that became the butt of “Lada” jokes in the Soviet Union. Or consider what would happen if housing were provided the way we “provide” health care; the mere thought should send chills down one’s spine. But whenever we talk about health care, that part of our brain seemingly shuts off, and these simple truths become about as intelligible as an angry Klingon warrior.Myth 6: Health care is always good for you. This might be the most subversive untruth of all. What could be better than health care? Well, health, for starters. We agree that health care is a means to an end, not an end in itself, right? And yet, in most U.S. policy debates, health care is discussed as if it were an end in itself.This is partly because to talk about health instead of health care would broaden the debate to lifestyle choices Americans make that shorten their lives. If politicians were honest, they might say: “The best thing you can do for your health is to stop eating so darn much, fatso, and also drive less and make sure your guns are properly locked up.” Not exactly a winning political ad. “Vote for me and you’ll have health care” is, strictly speaking, nonsense, but it does get votes.As the economist Robin Hanson wrote, “It has long been nearly a consensus among those who have reviewed the relevant studies that differences in aggregate medical spending show little relation to differences in health, compared to other factors like exercise or diet.”1 Depending on which definition of waste one accepts, we are talking about at least $1 trillion per year and as much as $5 trillion. The RAND Health Insurance Experiment is infamous for showing that families that had easy access to health care consumed a lot more of it, but did not show better health outcomes. This finding was replicated by the recent Oregon Medicaid study. (Both these studies are randomized, controlled studies—the gold standard for evidence in social science.)Getting a medical procedure you don’t need is not just a waste of money and time, it is also, in many cases, positively dangerous. Virtually every medical procedure carries some risk. Those risks may be minute at the level of the individual, but at the level of the system they work out to unnecessary suffering and death on a large scale. The CDC estimates that 1.7 million people per year, or close to 10 percent of everyone who goes to a hospital (read that again), catch a nosocomial, or hospital-acquired, infection, leading to close to 100,000 deaths per year. It is almost certain that many of those people who died because they went into a hospital shouldn’t have gone in to begin with. Hospitals are very dangerous places to be—particularly if you are sick.Overuse of antibiotics, too, has led to the emergence of antibiotic-resistant “superbugs”, which might be the most potentially scary health care issue of the 21st century. Almost all of the astonishing increases in health over the 20th century are basically due to antibiotics. If antibiotics stop working, the good bet is that most of us will die of some now-harmless disease before we get to try the amazing new cancer treatments that are being invented as I write this.For health care waste, the Left will blame greedy insurers; the Right will blame government mandates or trial lawyers, whose depredations are thought to cause doctors to prescribe useless tests. But in reality, everyone is to blame, starting with you and me. Imagine yourself cradling your feverish, sickly, trembling child. You may know in theory about the antibiotic resistance problem, but at that moment you will do everything you can to have your child pumped full of all the antibiotics in the world, even though the best thing for the child is probably to just lie in bed for a few days and drink lots of fluid. To be sick is to be powerless, in more ways than one, and there is nothing we dislike more than feeling powerless, so we do everything we can, including the counterproductive, to feel less powerless. Like the Romans offering a sacrifice to obtain a blessing, and with about the same evidentiary basis, we order all the medical procedures we can in order to distract ourselves from our fundamental powerlessness in the face of disease and death.What can we learn from all this? The examples of the free-for-alls of 19th-century America, sub-Saharan Africa, and India, and of the well-tended garden of Singapore, all point to one conclusion: The more that individual health care consumers are in charge of their own decisions, the better off everyone will be. This is not about “free market” versus “big government.” Someone who has no money, no health insurance, and no help is not in charge of his or her health care decisions. It is very legitimate for the government to give cash to those who need it for medical expenses. But the crucial insight is that the more third parties are involved in making health decisions for individuals, whether government bureaucrats or insurance bureaucrats or medical bureaucrats, the crazier the system will become.One ray of sunshine might be an involuntary heightening of the contradictions: The structure of the Affordable Care Act, by removing health care decisions even further from consumers, all but ensures that costs will escalate even faster. At some point, most employers in America will only be able to afford catastrophic health insurance for their employees. If and when that irony busts onto the scene, perhaps real consumer dynamics will emerge, and perhaps America will stumble backward into a Singapore-style system. In the meantime, as we wait for this to play out, American myths about health care will prevent any learning from the best that the world has to offer. If Americans insist on making their own mistakes, well, they will.