Replace

Ssrsh Kliff analyzes the long-awaited Republican alternative to the Affordable Care Act.

Sam Baker writes that the plan is for people to pay more for their own care.

The Tragedy of the Ten-Million Acre Bill

President Franklin Pierce

I readily and, I trust, feelingly acknowledge the duty incumbent on us all as men and citizens, and as among the highest and holiest of our duties, to provide for those who, in the mysterious order of Providence, are subject to want and to disease of body or mind; but I can not find any authority in the Constitution for making the Federal Government the great almoner of public charity throughout the United States. To do so would, in my judgment, be contrary to the letter and spirit of the Constitution and subversive of the whole theory upon which the Union of these States is founded.

Franklin Pierce, in his veto of the 1854 Bill for the Benefit of the Indigent Insane

Though forgotten today and though issued by a one-term president whose name is synonymous with Oval Office mediocrity, the veto of the Bill for the the Benefit of the Indigent Insane became one of the most long-reaching vetoes in the history of the presidency. With it, Franklin Pierce derailed an early attempt to define a wide federal responsibility for the general welfare; the government would not seriously consider a broad role in this arena until forced into it by the social blight of the Great Depression.

Three times before, in 1848, 1850, and 1852, the great social reformer Dororthea Dix had petitioned Congress for a land grant that would fund asylums for the indigent insane. Three times, her request disappeared into the maw of conflicting interests and philosophies about the proper disposition of federal land. Only a few politicians considered her request from the moral angle. Finally, in 1854, she prevailed, only to see President Pierce veto the Bill for the Benefit of the Indigent Insane.

Pierce vetoed the bill on three grounds. First, he wrote, nothing in the Constitution authorized Congress to pass this kind of legislation. Second, however worthy the bill might be, enactment would open a floodgate of federal welfare legislation. Third, care of the indigent insane was properly the right and responsibility of individual states. Dix, of course, pursued the legislation in the first place because in her mind the states had abdicated their responsibility.

Dix used her powerful personality in the cause of social reform. Her organizing skills were limited, though, and she did not respond to Pierce's veto with a lobby or movement. Subsequent 19th C. progressives did not pursue health care reform of any kind even when they had the organizing ability. Because of the precedent set by Pierce's veto, the federal government did not significantly involve itself in social reform legislation until the New Deal (with of course the notable exception of the bills underlying Reconstruction).

And so Pierce, a president whom historians have described as "timid and unable to cope with a changing America," established the terms of a debate that resound today. In terms of promoting the general welfare, what is the proper extent of the federal role versus those of the states and private philanthropy? Or is the question itself disingenuous? In some matters, perhaps leaving the general welfare up to the states is a rationalization that accepts injustice in the interests of limited government and the advantages that brings to special interests.

For liberals and progressives, Dix's defeat taught a lesson that went largely ignored for 75 years: Congress is unlikely to pass social reform legislation out of a sense of moral imperative. Social reform legislation requires organization, a skill progressives finally mastered and applied during liberalism's great era stretching from 1933-1965. Today, despite the left's inability to mount a large-scale progressive movement, the lesson of 1854 is reflected in the efforts of thousands of community organizations across the United States. One of their members became president.

To read more about this fascinating episode in American history, see The Social Service Review, Vol. 36, No. 1, March 1962 (link unavailable).

Country Profile: Belgium

Population 10,400,000

Government Federal parliamentary democracy

Health Care Model Bismarck

GDP 395B (2010 est.)

%GDP spent on health care 9.5

Per capita income $37,900

Health care expense per capita 3,563 (adj.)

Health care expense per capita normalized to income of 50K 4,700

Life expectancy (m/f) 77/82

Health life expectancy (m/f) 69/73

Overview

• Goals: Increasing access, ensuring quality of care, sustainability of system
• Universal access
• Choice of provider
• Broad set of benefits
• Mix of public and private funding
• Economic efficiency of delivery comparable to other European nations
• Regulated at national level
• Preventive care and health promotion delivered at regional and community levels

Structure

The Belgian health care system is organized around a "principle of solidarity" that recognizes no distinction between rich and poor, healthy and sick, with no selection of risk. Based on the Bismarck concept of social insurance, the system covers more than 99% of the Belgian population with more than 8000 services. Treatment decisions are made by doctor and patient, and patients are free to choose their own doctor. 

Health policy decisions are split between Belgium's federal government, regions, and communities. The national government regulates and finances the system; among other responsibilities, regions and communities deliver public and preventive health and coordinate primary and palliative care.

Financing

Financing occurs through a combination of progressive taxation, social security taxes, a consumption tax, and out-of-pocket payments (20%). Six private, noncommercial sickness funds provide compulsory health insurance to all Belgians regardless of economic status, medical condition, or risk; a federal agency supplies a budget to the sickness funds. Patients make a co-pay to physicians or hospitals, which bill the sickness fund for the remainder. Occasionally, patients make an out-of-pocket payment.

Delivery
Although primary care is typically the first point of contact for a patient and the health care system, there is no formal referral system. Thus for many patients, the specialist is the initial contact. Ambulatory care practices are private and paid via fee-for-service.

Belgium offers two forms of hospitalization: general (acute, specialty, and geriatric) and psychiatric. Alternatives include day hospitals and long-term care facilities, as well as community services of the elderly and the mentally ill.

While communities have responsibility for most public health services, including education and preventive care, they have on occasion collaborated with the federal government to coordinate and finance public health activities such as immunization and breast cancer screening.

Generally, the federal government sets policy and sets targeted taxes. For example, Belgian taxes on cigarettes and alcohol are designed at the federal level to discourage consumption. However, Belgium's Flemish, French, and German communities establish policies for their particular health needs.

Challenges

Belgium's health care challenges are familiar: The elder population will double over the next 25 years, creating budgetary and capacity difficulties. Moreover, aggregate costs will rise as medical inflation continues to outstrip general inflation. As a result, the federal government and the community government will struggle to meet the commitments to access, quality, and sustainability. 

Overall

According to the Brookings Institution,

Devoting only half as much of its GDP to health as the United States does, Belgium has created a flexible, public-private partnership to pay for and deliver health care that preserves many of the attributes that Americans desire: universal coverage; comprehensive coverage of physician services, hospital care, and prescription drugs; free choice of primary physicians and specialists; and acceptable waiting periods for non-emergency services.

WHO Ranking  21 (US 37)

To read more about Belgium's health care system, click here and here.

To Live Longer: Don't Smoke, Eat Less, Exercise More

According to a National Research Council report, Explaining Divergent Levels of Longevity in High-Income Countries, life expectancy in the United States continues to increase, but at a slower rate than in the past. The most likely culprits are smoking and obesity; the latter may account from 1/5 to 1/3 of the reduced rate. According to the CIA World Factbook, the United States currently ranks 49th in the world in life expectancy. (Monaco, at nearly 90, is first.)

To learn more about life expectancy, click here.

In another study, Circulation: Journal of the American Heart Association reports that the costs of heart disease are expected to triple over the next twenty years. Combined costs in dollars and lost productivity are expect to rise from $445B today to $1.094T.

Principles of Efficiency

So why is it that other countries deliver health care with greater economic efficiency than the United States?

For starters, it would be hard not to: The United States doesn't really have a health care system. It's a more like a fragmented, uncoordinated apparatus linked by a loose and often contradictory regulatory framework and characterized by both overtreatment and undertreatment. An onerous administrative burden, health care driven by profit and not value, and the absence of several vital traits of an economically efficient system combine to give the United States the most expensive health care in the world, although by no means the best.

What are some of those key traits? Let's look briefly at two systems that are efficient, despite diametrically opposed approaches to universal access. The health care system of Finland (%GDP on health care of 8.5%, HCE of 7.6) is government-owned and -operated -- classic Beveridge Model socialized medicine. Singapore (%GDP on health of 3.4%, HCE of 21.5) is a public-private partnership funded by a combination of government subsidies, a limited NHI scheme, mandatory Health Savings Accounts, and out-of-pocket payments. Nonetheless, these two disparate systems have much in common:

• a national health policy formed by a democratic process and directed by the national government
• a commitment to universal access and care, regardless of ability to pay
• an emphasis on preventive health based on primary care and public education
• a strong government regulatory presence
• targeted policies and incentives aimed at bolstering efficiency within the model (Finland, for example, has a pharmaceutical policy that rewards use of generic drugs.)

As we'll see again and again, these are vital elements in the successful delivery of health care based on value, a results-driven approach that Michael Porter and Elizabeth Olmstead Teisberg, in their influential book, Redefining Health Care: Creating Value-Based Competition Based on Results, that produces both quality and efficiency. (Click here to for Porter and Teisberg's excellent web site.)

So, it turns out that the road to efficiency is straight enough. Obviously, negotiating the obstacles of special interests along the way is another story. 

HealthMatters will discuss each of these conditions in detail in later entries.

Hell, Handbaskets and Hellenic Default

Regardless of what the IIF and the Greek government may announce, Greece is heading inevitably for a destabilising default to some or all of its bond creditors. The most articulate and comprehensive account of the reasons why this must be so are documented in the ZeroHedge masterclass on Subordination 101: A walk thru sovereign bond markets in a post-Greek default world. Roubini concurs.

I've written before about what this implies for the financial system:

If any OECD state were to default there would be very serious implications:
- The Basel Accord zero risk weight of government debt would be proved fanciful;
- The assumption of government debt as a liquid asset suitable for bank Tier 1 reserves to meet unanticipated and sudden cash demands will become unsustainable;
- Banks would be forced to recapitalise at much higher levels, forcing even sharper deleveraging and contraction of lending;
- Governments would lose the captive, uncritical investor base they have relied on to finance excess public expenditure for the past 30 years;
- Central banks could be forced to suddenly monetise even more government debt if required to meet the cash demands of a run on their undercapitalised banks.

Worrying, but not unexpected. A few of us predicted back in 2008 that the implosion of RMBS and bank capital, leading to central bank and sovereign bailouts, would fuel a central bank balance sheet and sovereign debt bubble. The central bank balance sheets have since balooned to 20 percent of GDP for the Fed and Bank of England, and 30 percent of eurozone GDP for the ECB. Deficits have spiraled everywhere, despite promises of austerity. Now the sovereign bubble too may burst.

From Deflation Has Become Inevitable in December 2008:

In Lombard Street, Bagehot’s seminal tome on fractional reserve central banking, Bagehot advises any central bank facing a simultaneous credit crisis and currency crisis to raise interest rates. By raising rates they will ensure that foreign creditors remain incentivised to maintain the general level of credit available while the central bank resolves the local liquidity crisis through liquidation of failed banks and temporary liquidity support of stressed banks.

The very opposite policies have been pursued by central banks in the US, Europe and UK since the beginning of the sub-prime crisis in August 2007. They have cut policy rates drastically, and as the crisis escalated and spread, the yield on government debt has dropped to negative territory. Meanwhile they have shielded those responsible for the creation of record levels of bad debt from any regulatory accountability, relaxed transparency of accounts, and provided massive taxpayer-funded financial infusions to prevent failure and liquidation.

While in the short term these policies have expediency and the maintenance of market “confidence” on their side, in the longer term these policies must undermine any confidence a rational and objective saver or investor might have that savings or investment in the US, EU or UK will be fairly remunerated at an above-inflation rate, or that savings and investments will be protected by effective oversight and regulation from the sorts of executive debasement and outright misappropriation and fraud that are beginning to colour our perceptions of the past decade.

Anyone sitting on a pile of cash now is unlikely to want to either (a) place it in a bank, or (b) invest it in the stock market. As a result, the implosion of the financial and real economy must continue no matter how big the central bank’s aspirations for its balance sheet or the treasury’s aspirations for its deficit.

I'm sorry I was right. (sigh)

An Act for the Relief of Sick and Disabled Seaman

President John Adams

In 1798, President John Adams signed the United States' first health care reform law -- An Act for the Relief of Sick and Disabled Seaman. The law authorized the creation of a government operated marine hospital service and mandated that privately employed seamen purchase health care insurance. Attorney and health care journalist Rick Ungar explains the law here. Click here to read it in its entirety (believe it or not, the law is but a little over a page long).

Survivor Bias and TBTF Tyranny

It's time to write again about insolvency, as the MF Global failure and the Greek debacle raise new troubling concerns.

As I wrote in Ring Fences and Rustlers before Lehman failed in 2008:

The key to having a happy insolvency, if such a thing exists, lies in ensuring that when a globalised bank goes bust, all the best assets are inside your borders and subject to seizure by [your banks or] your liquidators on behalf of your creditors.

If one were cynical, and one believed that Lehman was going to be allowed to fail pour encouragement les autres one might wonder if Lehman was quietly bidden – or even explicitly ordered – to sell off its foreign holdings and repatriate the proceeds to asset classes within the US ring fence. This would ensure that US creditors of Lehman received a satisfactory recovery at the expense of foreign creditors. It would also contribute to a nice pre-election illusion of a “flight to quality” as US dollar and assets strengthened on the direction of flow.

If one were really cynical, one might even think that a wily bank supervisor might arrange to ensure 100 percent recovery for its creditors with a bit of creative misappropriation thrown in the mix. Broker dealers normally hold securities and other assets in nominee name on behalf of their investor clients. Under modern market regulation, these nominee assets are supposed to be held separately from a firm’s own assets so that they can be protected in an insolvency and restored to the clients with minimal loss and inconvenience. Liberalisations and financial innovations have undermined the segregation principle by promoting much more intensive use of client assets for leverage (prime brokerage and margin lending) and alternative income streams (securities lending). As a result, it is often very difficult to discern in a failed broker who has the better claim to assets which were held to a client account but reused for finance and/or trading purposes. The main source of evidence is the books of the failed broker.

On the wholesale side, margin and collateralisation in connection with derivatives and securities finance arrangements mean that creditors under these arrangements should have good delivery and secure legal claims to assets provided under market standard agreements. As a result, preferred wholesale creditors could have been streamed the choicest assets under arrangements that will look above suspicion on review as being consistent with market best practice.

The official report of the court appointed examiner confirmed my worst suspicions. We now know that the Federal Reserve Bank of New York and the SEC co-located staff inside Lehman from March 2008 to oversee the global repatriation of assets and cash in the run up to the insolvency in September. The Fed kept Lehman on life support during this period with more than $20 billion of liquidity which it paid back to itself from Lehman cash on the day Lehman filed for liquidation. In the meanwhile, from March 2008, Lehman looted its affiliates and client accounts worldwide by using prime broker and securities lending mandates to lend assets to the US affiliate which were sold (hence the sharp fall in Eastern Europe and Asian markets and growing volatility eleswhere from March 2008) and the proceeds streamed to US creditors as margin payments on derivatives and other obligations. The official receiver elected not to challenge the cash transfer to the Federal Reserve or any of the transfers of cash or securities made to major Lehman counterparties and creditors.

Those following the MF Global failure have noted a strikingly similar pattern of conduct by JP Morgan in advance of failure as occurred with Lehman, although without obvious official mandate. Yves at Naked Capital has been covering the parallels admirably. Carrick Mollenkamp, Lauren Tara LaCapra and Matthew Goldstein at Reuters have provided a very substantive story of how JP Morgan used its superior knowledge of MF Global's trading and credit position to enrich itself at the expense of MF Global and its clients before precipitating the MF Global failure.

I am concerned that MF Global demonstrates that the too-big-to-bail banks have found a new and almost riskless way to make outsize profits. Because derivatives, repo and liquidity are so very highly concentrated now, and leverage is at pre-crisis levels again, these few players can rig the markets and liquidity to choose when and how their clients fail. Their top down view of clients' trading and custody portfolios and cash positions and flows puts them in a position to exercise tyranny. They can game their clients, taking advantage of superior information, credit and liquidity to ramp or crash targeted markets as needed to precipitate a crisis. They can demand the choicest assets as collateral, setting very high over-collateralisation thresholds, and then exercise during post-failure turmoil to retain everything they hold at rock-bottom prices.

In today's low volume markets, a crash or squeeze is even cheaper and less risky than ever before. Instead of working for their clients' success, an unscrupulous clearing bank - or several operating in collusion - can profit on engineering market instability or turmoil.

If one were a conspiracy theorist, one might suspect that such games were being played now in global markets. Perhaps gold is being used as collateral for margin and cash liquidity, sold by counterparties to bring the price lower, leading to margin calls for even more. A crisis arising from a major default (Greece, Portugal, a huge bank) would force the price lower still, when the collateral would be exercised on default. Following on, the price might rocket again to enable the conspirators to seize outsize profits. Just a scenario, mind you! (Although, I note that Lehman's counterparties reported record profits through much of 2009.)

What is left of the global markets becomes a game of engineered survivor bias. Only those operating outside the law and with unlimited regulatory forbearance can win while the rest of us lose. As I noted in 2008, after Lehman failed, in Financial Eugenics, "It's not your survival they're engineering."

I don't say absolutely that what I describe is actually happening. But it may be. Certainly market conditions are ripe for it, and MF Global reinforces the pattern.

Now over to Greece. I find the PSI (private sector involvement) negotiations for Greece's restructuring of its debts troubling because it shows the same determination to engineer survivor bias. One of the core principles of insolvency law is that all creditors of like standing should be treated equally in the resolution. The PSI approach is starkly contrary to this principle, despite the evidence that Greece is well and truly insolvent. First, the official bond holders (central banks, supranationals, governments and the ECB) are excluded from mark-downs of their debts, preferring to impose the burden of capital losses entirely on the private sector bond holders. Second, the private sector bond holders are divided between those with an interest in preventing a declaration of default (either unhedged or have written credit default swaps) and those who will profit from a default through claims on credit default swaps. Rather than being represented equally in the negotiations through a creditors' committee, the negotiations are being driven by the Institute of International Finance, a trade lobby of just the biggest banks. Why the IIF should have credence as representing hedge funds, pension funds and insurance companies holding Greek debt is beyond me.

Once again we see centuries of jurisprudence and decades of statutory law and market practice cast aside for the convenience of a handful of big banks. They argue that abandoning our principles is desirable to prevent destabilisation of the financial system - again. I am wondering if a system that requires constant sacrifice of all the principles of market price discovery, rule of law and equitable treatment of like behaviours is worth stabilising.

If the Greece negotiations fall apart, and Greece defaults, is it likely that the banks will embrace the rule of law and let their contracts stand? Or will they try to "reinterpret" their obligations or once again seek taxpayer reimbursement for their losses?

Tyranny takes many forms, but the essence is arbitrary exercise of power or despotic use of authority. Given their willingness to throw principles out the window whenever profits are threatened, it seems we are confronting a tyranny by a handful of bankers. Perhaps we should embrace some sacrifice of stability to forestall a more stable and much more dangerous tyranny.

UPDATE: Excellent, thorough analysis of the Greek debt situation is up on ZeroHedge: Subordination 101: A Walk Thru For Sovereign Bond Markets in a Post-Greek Default World. Well worth your time to read the whole thing as a primer on the potential pitfalls of all outcomes of the Greek debacle for global sovereign bond markets. Conclusion about the high stakes of the current standoff reads:

Finally, while we have no prediction of whether or not any of the above happens, one thing we are sure of: if the runaway central planners of the world believe they can legislate their way into an upper hand over the bond market, in ever more desperate attempts to avoid the day of reckoning, they will fail without any shadow of a doubt. Because demand for risk comes first and foremost from a sense of stability, of fair and efficient markets, and equitability: something which has long been missing in the stock market, and which may very soon be taken away, by force, from the bond market as well.

Which Country Has The Most Efficient Health Care System?

This is a raw measure, but useful for comparison purposes. I've taken the Healthy Life Expectancy of 25 countries and divided it by their % of Gross Domestic Product spent on health care. This yields a result equal to the number of healthy years purchased by each per cent of GDP spent on health care. Let's call it the Health Care Efficiency Ratio:

HCE Ratio = Healthy Life Expectancy / % GDP Spent on Healthcare

Healthy Life Expectancy (HALE) is a statistic devised by the World Health Organization, defined as the "average number of years that a person can expect to live in 'full health' by taking into account years lived in less than full health due to disease and/or injury." HALE is always less than full life expectancy, typically by 7-9 years. (To read more about HALE, click here.)

For example, Norway spends 8.4% of its GDP on health care, and Norwegians have a HALE of 73:

HCE = 73/8.4 = 7.8

In Norway, each per cent of GDP spent on health care purchases 7.8 years of healthy life.

The following ratios are taken from 2006 statistics; because of population aging and medical inflation, each is likely lower now.

1. Singapore 21.5 (73/3.4)
2. Republic of Korea 10.9 (71/6.5)
3. San Marino 10.6 (75/7.1)
4. Luxembourg 10.1 (73/7.2)
5. Ireland 9.7 (73/7.5)
6. Japan 9.6 (76/7.9)
7. Finland 9.5 (72/7.6)
8. Israel 9.4 (73/7.8)
9. Spain 9.1 (74/8.1)
10. United Kingdom 8.6 (72/8.4)
11. Norway 8.4 (73/8.7)
12. Sweden 8.3 (74/8.9)
13. Italy 8.2 (74/9.0)
14. Iceland 8.0 (74/9.3)
15. Netherlands 7.8 (73/9.3)
16. New Zealand 7.8 (73/9.3)
17. Australia 7.6 (74/9.7)
18. Belgium 7.6 (72/9.5)
19. Denmark 7.6 (72/9.5)
20. Canada 7.3 (73/10.0)
21. Germany 7.1 (73/10.3)
22. Portugal 7.1 (71/10.0)
23. France 6.6 (73/11.1)
24. Switzerland 6.6 (75/11.3)
25. United States 4.6 (70/15.3)

At first glance, the most interesting trend is the clustering of the Beveridge Model countries toward the upper center of the list (7, 10-14, 19). Three NHI model countries (New Zealand, Australia, and Canada) are in the bottom half, but the Republic of Korea ranks second. (The World Health Organization does not have statistics for Taiwan, which also uses the NHI model.) Bismarck Model countries are at the top and bottom, although it should be noted that WHO ranks France as having the best health care system in the world. The French get what they pay for.

Apart from Singapore's astonishingly efficient delivery of care, the most salient point is the high costs associated with having no model at all: It's no accident that the United States is at the bottom of the list.

Next, HealthMatters will examine what the top rated systems do to ensure efficient use of their health care dollars.

Quotable

"Man is man because he is free to operate within the framework of his destiny. He is free to deliberate, to make decisions, and to choose between alternatives. He is distinguished from animals by his freedom to do evil or to do good and to walk the high road of beauty or tread the low road of ugly degeneracy."

Martin Luther King, Jr., The Measures of Man, 1959.

And this is from my son:

Country Profile: Australia

Population 20,000,000 (primarily urban)

Form of Government Parliamentary democracy

Economic System Capitalist

Health Care Model National Health Insurance (Medicare)

GDP $890B

% GDP spent on health care 9.7

Per capita income $38,420 (2006, adj US $)

Health care expense per capita $3,528

Health care expense per capita normalized to income of 50K $4,591

Life expectancy (m/f) 79/84 (as of 2006)

Healthy life expectancy (m/f) 71/74

Overview

• Goals: Equity, efficiency, and quality
• Tax funded
• Ready access
• Generally cost-effective, good outcomes
• High level of public support
• Concerns about long-term sustainability due to rising costs
• Disagreements about funding and accountability between national and state governments
• Waiting lists for elective surgery
• Disparities in urban and rural care
• Continuing poor health of indigenous population

Structure

The Australian health care system is a mix of public funding and public and private care. The national government's role is limited to funding and formulating health policy on a population basis. States provide additional funding, provide public hospitals, and have great authority in administration of health policy. Localities are primarily concerned with providing environmental health services. The private sector supplies the majority of general practitioners and specialists, a number of private hospitals, diagnostic services, and supplemental insurance.

Because of the division-of-power structure of Australia's democracy, the national government and the state governments must achieve consensus in matters of health policy. (Australia has six states.) Clinical practice is largely self-regulated, although licensing and accreditation is required of most providers.

Financing
The public-private financing breakdown is two-thirds/one-third, with the national government paying nearly half of health costs, collected through general taxation and a mandatory Medicare levy of 1.5% of personal income. The majority of consumer expense is for uncovered pharmaceuticals.

Delivery

Treatment is largely free and unlimited, although public hospital services are prioritized. Two-thirds of Australia's doctors are general practitioners in private practice; in addition to providing primary and preventive care, these doctors perform minor surgery and serve as referral gatekeepers to the rest of the health care system.

70% of the hospitals that provide secondary and tertiary care are public. Combined with cost pressures, improvements in surgical technique and patient management has reduced the average length of stay in recent years. The chief complaint about Australian secondary care is about lengthy waits for elective surgery, a function of the prioritization of services.

Australia's national and state governments have combined to deliver a robust public health program that has had notable success in reducing coronary disease, the AIDS/HIV infection rate, cigarette smoking, and the mortality rate from traffic accidents. Australians enjoy a high level of immunization vaccination that has reduced the level of infectious disease, although not entirely.

Challenges
As with virtually all developed nations, Australia's health care system faces financial pressure brought about by budget constraints and medical inflation. Health care services in Australia are not well integrated, and debate is ongoing regarding the proper balance of public and private insurance. The health inequalities experienced by indigenous Australians are so protracted and severe that the World Health Organization calls them "intractable."

Overall
Australia has three basic goals for its health-care system: Equity, efficiency, and quality. Progressive taxation protects equity, although there are concerns that a two-tier system could develop. The mixed national-state governance compromises efficiency and also renders reform difficult. In recent years, quality has emphasized measurement of health outcomes, which have improved as reflected in Australia's long life expectancy.

WHO ranking 32 (US 37)

Click here to learn more about Australia's health care system.

Embracing Accountability - Starting Right Here (Part 1)

In common with much of Britain, my plans for the holidays were sacrificed to an untimely 'flu. Nasty. Very nasty. But now I gain strength daily and begin to address the backlog of social obligation - including this blog.

One of my frustrations with the bankers, central bankers, regulators and other worthies is their lack of reflection and shame regarding the errors of their past policies which have led to the crisis and the looting of global treasuries. There is no acceptance of personal or institutional responsibility and no public accountability.

Since it would be hypocritical to exempt myself from review, however modest my contribution as a blogger, I thought it might be good to start the year by reviewing what I wrote in 2008 and seeing how it stands up with today's perspective.

My first contribution to the blogosphere was Looting the Vaults at the Central Banks, published 15 May, 2008.

Any crisis now accelerates the trend toward greater public laxity, private excess and central bank secrecy. A crisis, real or manufactured, is most useful to increase the amount of public money clandestinely extended and diminish public oversight and administrative review of outcomes. This has been the pattern for at least 25 years, and may continue for some time to come before a taxpayer or creditor revolt ends the American spiral downwards towards bankruptcy and corporate tyranny.

It used to be the realm of conspiracy theorists to assert that policy makers in Washington were aligned with the military-intelligence complex in promoting international conflicts for profit or that the Federal Reserve was the tool of Wall Street banks in promoting irresponsible bubbles. Now it is accepted policy, defended openly in the media as right and inevitable, as providing an efficient means for America to meet the “threats” to security and financial stability in a changing world.

The danger of embracing the spin is that the productive economy shrinks from underinvestment and distortions as an increasing share of a slower growing pie gets diverted to government and the cronies who direct government policies.

I think I can safely say that I got that one right. The massive misallocation of public funds from taxpayers (present and future) to bankers in the US, UK and EU needs no further comment. Even in China, more and more credit is being diverted to large, speculative state-owned enterprises as productive, private, smaller companies are starved of credit.

Second up for review, is From Capitalist to Capital-less Economies, published 23 May, 2008:

For a time, the neo-classical economists appeared to have found a financial perpetual motion machine. As consumers, companies and governments borrowed more, they appeared to prosper more. Leveraging the accumulated equity in their homes, the consumers got bigger houses and bigger cars. Leveraging their fixed assets and future revenues, the companies got bigger balance sheets, bigger executive remuneration and bigger shareholder dividends. Leveraging their power of taxation and monetary creation, the governments got bigger militaries, bigger bureaucracies, bigger scope for patronage projects. The bankers intermediating all this debt got bigger too, with bigger bonuses for “loan origination”, bigger fees from M&A, bigger commissions and income from securities and derivatives dealing, and bigger influence with their supervisors to loosen any inconvenient accounting, reporting, audit, scope or expansion rules that might have impaired their freedom to keep the party going.

Free Market became the rallying cry of those who believed in perpetual motion. They passionately decried regulation as impairing the market’s freedom to allocate “capital” to the best likely return. They passionately decried taxes as diminishing the “capital” held by those who would reinvest it in growth. They passionately exhorted consumers, businesses and governments to borrow as much “capital” as they could possibly bear, and to err on the side of profligacy, so that more “capital” would be working to grow their revenues and balance sheets in the “free market”.

But the problem with this perpetual motion machine was that it was all the time grinding the seed corn. The “capital” it was pumping out was not the surplus of production over consumption, but the borrowed surplus of greater fools who believed in the hawkers’ pitch of perpetual motion and laid their meagre savings and accumulated assets on the barrelhead in faith the machine would return them multiplied.

Well, yeah. 'Nuf said. Only now, the government and central banks are forcibly appropriating what meagre assets may remain through public debt service which must be paid by either taxation or inflation. Either way, we are all poorer for the folly of excess leverage. Deflation in what you own; inflation in what you need.

As the third blog entry for back-validation, I offer Famine Futures: Deregulated Markets and Food Insecurity. The willful refusal of the political class to rein in speculation in essential foodstuffs is the more disgusting in many ways than their channeling of weath to banker cronies. Real people are really hungry, and it is going to get much worse.

Like so much that we have observed in the past eight years of the Bush administration, the origins of the current food crisis can be traced to the recycled policies of the Nixon White House. Henry Kissinger stated the premise succinctly in 1970: "Control oil and you control nations; control food and you control the people."

With credit, oil and food markets spiralling out of reach of the poor and straining the middle-class, it is worth exploring whether similar policies underpin similar problems. In each industry, a small handful of global companies control supply and a massive increase in ill-transparent speculation acting on pricing in exchange markets forces prices up regardless of the fundamentals of supply and demand. The risks for famine and political instability are huge. One doesn’t need to be a conspiracy theorist invoking the Trilateral Commission to feel that something is very wrong with policies leading to simultaneous crises in credit, oil and food that threaten not just the wealth but the wellbeing of most of the world’s population. . . .

Today global agriculture is dominated by eight multi-national corporations. The policies promoted by successive governments and international institutions including the IMF, World Bank and WTO have aimed at undermining local production, distributed commercial networks, and diverse local markets in favour of mass production, streamlined supply chains and concentrated global market pricing.

As with other areas of our lives, the policies of “free market fundamentalism”, as George Soros styles it, have not diminished risks but increased them. My children are hostages to food insecurity, as are yours and billions of others. A disruption in global food supplies or surge in prices that puts food staples beyond the reach of many low income or middle-class families cannot be offset from the back garden. The exposure of food to pricing in markets open to manipulation and excess speculation puts the lives of millions at risk.

With commodity prices still spiraling upwards, and riots leading to political instability, I wish I had been wrong.

So this week's back-validation is positive. I wrote well, and I wrote wisely. But nothing changed in 2008 except a few minds that were predisposed to question orthodoxy in any event.

I suspect this is the real reason why I find it hard to raise the pace and passion of 2008 today - although the 'flu was pretty awful. I can write, you can read, but who will change the world?

The National Health Insurance Model

The National Health Insurance model places a foot in both the Bismarck and Beveridge camps. Like the Bismarck Model, it is insurance-based; like Beveridge, it is single payer. The most familiar application of National Health Insurance to Americans is Medicare: Employer-employee contributions are used by the federal government as an insurance fund. The government in turn pays private providers. That's the essence of the NHI model.

Because the government is the sole payer, it can exert tremendous bargaining influence on the prices of medical services and drugs. That's why Canada -- whose Medicare system is the most well-known version of NHI -- has cheap drug prices that lure Americans north of the border even though it is illegal to purchase prescription medication abroad. NHI countries generally control costs by limiting the services they will pay for and by limiting the availability of certain services, thus creating the lengthy waits for non-acute secondary care.

Therein lies the essential tradeoffs of the NHI model; to achieve universal coverage with cost controls, the government

• strongly influences prices and therefore provider compensation
• limits the services covered by the national insurance
• limits the volume of selected services and procedures

Besides Canada, Australia, South Korea, and Taiwan have adopted the National Health Insurance model.

Preventable Deaths

Of the top five countries, France and Japan provide health care via the Bismarck Model, Australia uses National Health Insurance, and Spain and Italy use the Beveridge Model.

Getting Health Reform Right

Peter Berman, William Hsaio, Michael Reich, and Mark Roberts -- authors of Getting Health Care Right: A Guide to Improving Performance and Equity -- have consulted around the world helping countries design health policies and systems. (Hsaio was an instrumental figure in Taiwan's adaptation of National Health Insurance in 1995.) Over the years, the group has developed ten guiding principles for reformers:

1. Clarify goals and values. A health care systems is a means to a number of ends, and it's vital to articulate precisely what those ends are. Moreover, they must be achievable in a context that is both politically feasible and ethically sound.
2. Diagnose the root problem -- honestly. Work backwards from a problem until you've have identified its source, which might be anything from costs to corruption to apathy to ignorance of public health.
3. Build health systems, not just medical systems. A effective health care infrastructure is horizontal, based on prevention driven by funded and staffed subsystems for primary care, sanitation, nutrition, and education.
4. Plan based on your nation's history, culture, and needs. 
5. Remember: Experts don't know everything: Reflect on personal values and political strategies, and incorporate them.
6. Become a political animal. Reform is about more than policy. "Reformers need to embrace, not shun, politics."
7. Just do it. Reform won't happen in one fell swoop, and there will be setbacks. Focus on progress and keep plugging away.
8. Refine and refine. Fixing one thing might break another. Make refinements using the five "control knobs" of financing, payment, organization, regulation, and behavior.
9. Learn from mistakes. Accept that health care reform means two steps forward and one step back. Learn not only from your steps back, but from the errors of others.
10. Be proud of what you do. Rewards are few and far between, and the time required for meaningful change means that many reformers do not live to see the fruits of their labors. Look to yourself for validation and know that what you do is important.

For details, see PHC's Harvard Public Health Review article here.

Mitt Romney's Health Care Dilemma

Tonight, Mitt Romney promised his Iowa supporters that as president, his first act would be to pursue the repeal of "Obamacare." Romney's dilemma is plain: The Affordable Care Act  is also modeled after the Massachusetts Act Providing Access to Affordable, Quality, Accountable Health Care championed by then Governor Romney. In particular, Romney opposed mandated participation by employers in health insurance, insisting on individual mandates.

Romney's reasoning followed what was then traditional Republican logic: Requiring individuals to take responsibility for their health care eliminated free riding whereby the costs of uncompensated care are absorbed by the insured. Now, to be sure, there is plenty of free riding in American health care, and it goes beyond uncompensated care. For example, large companies use bargaining power to negotiate more favorable rates with insurers, who then pass the loss onto small businesses, the self-insured, and the uninsured. Moreover, since the self-insured do not receive a health insurance tax break, they subsidize the insurance of people with employer-provided insurance.

Senator Charles Grassley (R-IA) introduced employer mandates as an alternative to the Clinton attempt health care reform. According to Paul Starr in his book Remedy and Reaction, many Republican politicians supported individual mandates as recently as 2009. Since then, the party's desire to defeat President Obama and the ascendance of its libertarian wing has trumped a policy that has roots in the Eisenhower administration. As a result, Mitt Romney has been forced to repudiate a policy that he successfully effected in Massachusetts and that he once believed would help him run for president. If he can thread that needle, more power to him.

The Bismarck Model

Otto von Bismarck

In 1883, the reactionary German chancellor Otto von Bismarck, a Prussian autocrat through and through, proposed the health care model that came to be adopted by many European nations and that echoes decisively today in the American health care apparatus. Though no social reformer, Bismarck viewed universal health insurance as an effective tactic in his grand design for German unification, which trumped his conservative tendencies. What has come to be known as the Bismarck Model survived the German militarism of World War I, the unstable democracy of the Weimar Republic, Naziism, World War II and its aftermath, and eventual reunification. Its durability cannot be doubted.

Today, the Bismarck Model serves as the predominant means of guaranteeing universal coverage in Europe, used in Germany, France, Switzerland, Belgium, Netherlands, and others. (Japan is also a Bismarck Model country.) The implementation varies, but all mandate insurance in one form or another. In Germany, for example, employers and employees jointly fund insurance via withholding; in Switzerland, individuals purchase their own policies. Even so, Bismarck Model countries share common traits:

• Short waits, quality care, relatively low costs, and simplified administration
• Tight regulation of insurance which is often (but not always) sold on a nonprofit basis
• Claims paid without challenge
• No exclusion for pre-existing conditions
• Prices for most procedures fixed by the state
• Private hospitals and physician practices
• Generally high positions in the World Health Organization's overall rankings

There are, of course, tradeoffs. By eschewing a socialized system for which culturally most of them are ill-prepared, the Bismarck nations accept greater costs and less efficiency. (In health care, efficiency refers to performance measured against outcomes and costs.) While physicians receive a free education, have virtually no administrative overhead, and are rarely sued, they also earn less than their American counterparts. Moreover, despite state price fixing, cost issues are often addressed by raising premiums instead of controlling costs.

With the exception of veterans eligible for the VA system and active duty military personnel, most Americans under the age of 65 are either self-insured or have health insurance either as a benefit of employment. However, as indicated in the table above, the American approach to health insurance comes at a much greater cost than to countries operating under a pure version of the Bismarck Model. Lessons we can draw from these countries include:

• The importance of a universal mandate for insurance under the auspices of single program
• Consumer protections such as no exclusion for pre-existing conditions are feasible only with mandates
• Immediate payment of claims without challenge lowers administrative burden and the financial impact on patients
• Insurance regulation, nonprofit insurance, and a fixed price for procedures help control costs
• Privatized care can exist successfully in a regulated environment

Later, HealthMatters will look in detail at the approaches of various Bismarck Model countries.