The Beveridge Model

William Beveridge

Want is only one of the five giants on the road of reconstruction and in some ways the easiest to attack. The others are Disease, Ignorance, Squalor, and Idleness. 

-Social Insurance and Allied Service, a.k.a. The Beveridge Report (1942)

In 1940, Great Britain tottered on the edge of extinction. Its armies badly mauled by the Wermacht in France, its cities absorbing a ferocious shellacking from the Luftwaffe, and the United States still over a year from entering World War II, the British government in an act of supreme optimism began making plans for post-war life on the assumption that it would prevail over both Nazi Germany and the Empire of Japan.

There was little doubt that the aftermath of two world wars and an economic depression would wrought profound changes on British life. The working- and middle-class men who had fought the wars would insist on taking charge, and the heretofore dominant patricians admitted that they had a point. Prime Minister Winston Churchill appointed noted economist and social reformer Sir William Beveridge to define a paradigm for the brave new world; Beveridge's effort changed the face of Europe.

Social Insurance and Allied Service, published in 1942 and also known as the Beveridge Report, became the blueprint for the postwar British welfare state. A bestseller in its day, the report was distributed to British troops despite an aborted attempt by Churchill to suppress it until after the war. Wildly popular across the political spectrum, the post-war implementation of the Beveridge Report became a foregone conclusion.

While it focused mainly on social insurance -- what Americans think of as Social Security -- the report also articulated the right of anyone to receive health care on the basis of clinical need regardless of ability to pay, and gave rise to a health care system known as the Beveridge Model. While the term "socialized medicine" is often used carelessly and inaccurately, the Beveridge Model is in fact socialized medicine: A health care system owned and operated by government.

Today, the Beveridge Model is applied by Cuba, Denmark, Finland, Great Britain, Hong Kong, Italy, Norway, Spain, and Sweden. With the exception of Cuba, all are capitalist democracies that have decided to remove the profit motive from health care on the grounds that it compromises equity and efficiency.

While the model is implemented differently in each country, it operates on the basis of a set of one or more common characteristics:

• Health care is a human right, not a privilege
• Government ownership and operation of health care
• National government responsibility for delivery of equitable and efficient health care
• Full access to all regardless of ability to pay
• Primary care physician as gatekeeper to the rest of the system

One misconception about the Beveridge countries is that the costs of providing expansive health care for all residents have been prohibitive and bankrupting. The following table shows that Beveridge Model countries deliver health care efficiently and with great effect:

As a whole, Beveridge Model countries spend a lower percentage of GDP on health care than any other nation. Why? Because the Beveridge Model is tax-based and not insurance-based, the governments of those countries have great incentive to emphasize the biggest bang for the health care buck, that being preventive care. As a result, Beveridge Model countries tend to have robust public health programs (Finland is one of two countries to reverse the obesity epidemic plaguing the developed world) and a strong emphasis on primary care. (Seventy per cent of British doctors are PCPs as opposed to 30% in the United States.) Primary care contributes to better outcomes, increased use of preventive services, fewer hospitalizations, reductions in overall costs, fewer hospitalizations, and less use of emergency departments.

All approaches to health care have tradeoffs, and the Beveridge Model is no exception. Welfare state values that call for a high level of social services also mean higher taxes. The emphasis on efficiency often results in less choice for patients, and broad service offerings tend to concentrate in urban areas. While doctors receive free education, have little administrative burden, and are almost never sued for malpractice, they are also salaried and earn less than their American counterparts. Equal access and the emphasis on primary care can translate into long wait times for non-acute secondary and tertiary care. Finally, the imperative to hold down costs means that the newest technologies are not easily available.

Converting the United States to the Beveridge Model -- and there's little reason to believe that the American people want this -- means eliminating the health insurance business, making virtually all physicians salaried government employees, tightening the regulatory screws on pharmaceutical companies, and establishing wholly new government bureaucracies at the federal, state, and local levels. In the absence of a complete societal breakdown, American history suggests that this degree of systemic change requires a sustained nationwide mass movement of at least 8-10 years. Given the undesirability of the former and the unlikelihood of the latter, it's most productive to think of the Beveridge Model in terms of what can be gained from it.

So while opponents of socialized medicine can rest easy, there are nonetheless lessons to be drawn from the Beveridge countries:

• The value of a national health policy to provide guidelines and direction for federal response to national health issues
• The importance of a strong public health program (at all levels of government) to preventive health and reduced costs
• The key role of primary care, again in prevention and efficient allocation of health care resources

Later, HealthMatters will look in detail at the health care systems of Beveridge Model countries.

Repost from 06/06/08: Reagan and Obama - Reforming the Welfare State

In Britain a national election lasts just three weeks and spending by each candidate is strictly capped. Campaigning between elections is not permitted. Accepting so much as a hotel stay from a lobbyist is a resigning offence. As a result, our news is full of the American campaigns to make up for the deficit in newsworthy political conflict locally. I follow the American election, as does most of the world given the potential for good and ill that proceeds from it. Please indulge me in ruminating on one aspect of the Obama candidacy that intrigues me.

Ronald Reagan came to power on a popular backlash against the welfare state. It appears that Barack Obama may come to power on a similar backlash against the welfare state. The difference is the identity of the welfare claimants.

Ronald Reagan inflamed the public’s righteous anger against a stereotyped ghetto “welfare queen” who raised a brood of illegitimate, proto-criminal children on public funds. Barack Obama will inflame the public’s righteous anger against the corporate welfare queens who have raised a brood of profiteering executives and lobbyists in the generation since. Under Reagan and succeeding presidents, including Clinton, the K Street lobbying machine transformed Washington DC into a government by the lobbyists, of the lobbyists and for the lobbyists. Subsidies, market distortions, tax breaks, earmarks, selective protectionism, regulatory forbearance, cost-plus government contracts, relaxed accounting oversight, criminal and civil immunity, war profiteering and other policy depredations promoted a corporate welfare state beyond the dreams of ghetto avarice.

Ronald Reagan partisans demonised citizens who paid no taxes but claimed public housing, medical care and food stamps as their right. Barack Obama appears prepared to challenge corporations who pay no or nominal taxes (worth clicking through just for the graph) but claim government subsidies, earmarks and tax breaks as their right. Corporations have further stripped the US tax base by outsourcing or relocating jobs abroad, leveraged speculation rather than productive capital investment, and transfer pricing to avoid US tax. If Obama does parallel Reagan, both campaigns will tap a deep well of public anger against the perceived injustice of those who degrade the nation’s future prosperity while claiming too much from its taxpayers.

The bankers of Wall Street now toasting the Fed’s recent largesse from their Hamptons beach houses and yachts are the latest in a long line of American corporate welfare queens who have lobbied for and secured generous federal contracts, subsidies and regulatory forbearance. As noted two weeks ago in Looting the Vaults, more has now been lent to banks by the Fed under opaque new facilities than has been appropriated for the war in Iraq. Both the Fed’s new facilities and the war appropriations arguably benefit corporate welfare queens rather than serve the public interest.

The contrast between McCain and Obama on lobbyists alone is striking. Obama has banned contributions from lobbyists to his presidential campaign, even returning $500 donated by Thurgood Marshall, Jr. Instead, Obama has built a novel fundraising machine that reaches out to millions of working class Americans. McCain’s campaign relies almost entirely on wealthy contributors and lobbyists for finance. He has recently suffered a series of staff purges as high-ranking campaign officials - all of them lobbyists - were linked to large corporations and dictatorial regimes. Obama has committed to opening his fundraising events to the press pool. McCain insists on holding his fundraisers behind closed doors, no press allowed.

Obama as the presumptive Democratic nominee and party leader is preparing to drive the contrast home. Yesterday Obama enforced his opposition to special interest money on the wider party. Obama announced that from now on the Democratic National Committee will return cheques from lobbyists and political action committees, mirroring the Obama presidential campaign. This is a significant initiative in positioning the Democrats as the party to reclaim government from the corporate welfare queens.

The media pundits will use the reliable rhetoric of identity politics, religious strife, class war, patriotism and national security, but they are merely masking the fundamental policy conflict that divides the presidential candidates: Should government serve the people or the corporate elite? When Obama invokes Reagan, as he does very effectively in his elegantly crafted speeches, he is tapping the same vein of public outrage against a government promoting the comfort of those who contribute too little to the nation’s wellbeing.

A recession would clarify the public policy choices. When the economic pie is shrinking, fairness becomes a surer focus. The eyes of the hungry are watchful as the slices served get smaller.

Can Obama successfully challenge the K Street machine? He encourages us to hope, but we should be realistic. The K Street machine will not sit idly by as their unfettered control of the corporate welfare state is threatened by the upstart junior senator from Illinois who would not “wait his turn”.

Ghetto welfare queens were powerless to forestall the legislative and regulatory reforms that cut their subsidies. Corporate welfare queens are very far from powerless. We see new evidence of their power to claim public funds and direct public policy every day as the credit crisis closes off private finance options and squeezes profits. Whether the American public can elect enough reform-minded representatives to successfully challenge the corporate welfare queens may be the political test of this generation and may well determine whether the American economy recovers its powerhouse status.

Also on Thursday, Obama introduced legislation on the floor of the Senate to expose the corporate welfare queens hiding in the federal budget: The Strengthening Transparency and Accountability in Federal Spending Act of 2008 (pdf).

Is JP Morgan a welfare queen for the Fed subsidised Bear Stearns buy-out? Discuss.

Next week I promise to stick to economic and regulatory policy.

__________________________

Post Script on 22/12/08: JPM's paltry $37 billion subsidy from the Fed back in the Spring seems like chicken feed compared to the over $5 trillion the corporate welfare queens have looted from the Fed and Treasury since then. Worse, I am now sceptical that Obama will be any different to Bush in terms of restraining taxpayer largesse to corporate elites. He seems to endorse every bailout and stimulus, regardless of merit. We shall just have to wait and see what happens, but so far Obama is looking only marginally more fiscally sound than Bush.

How Much Money Do You Spend On Health Care?

The per capita annual income of the United States is $44,070. Of that, $6,174 goes to health care expenses, meaning that the average American spends 14.3% of his or her income on health care. This can come in many forms: co-pays, Medicare withholding, deductibles, out-of-pocket expenses, and tax subsidies for employer-based health insurance.

As a point of comparison, consider the averages of six of the Beveridge Model nations. (I've excluded Cuba, Hong Kong, and Norway: Cuba has a command economy and so is not comparable; Hong Kong is an outlier; and Norway's nationalized petroleum helps fund its social services.) As a group, Denmark, Finland, Great Britain, Italy, Spain, and Sweden have an average per capita income of $37,222. Of that, $3,031 goes to health care, meaning that the residents of these countries spend 8.1% of their incomes on health care (including the tax burden).

Six Bismarck Model nations (Belgium, France, Germany, Japan, Netherlands, Switzerland) have an average annual per capita income of $35,067, with $3,379 going to health care (9.6%). (Keep in mind that there are more than six Bismarck model nations.)

So, if the average American per capita expense on health care was 8.1%, as it is in Beveridge model countries, he or she would spend $3,570 on health care for a savings of $2,604 person. For a family of four, that's over $10,000 a year. For the economy as a whole, that's about $786B per year that is arguably being spent unnecessarily and unproductively.

If the average American per capita health care expense was 9.6%, as with the Bismarck model countries cited here, he or she would spend $4,230 annually for a savings of $1,944, or nearly $8,000 annually for a family of four and $583B for the economy as a whole.

Another way of looking at it is to compare per capita incomes before and after health care expenses:

United States: $44,070/$37,896

Beveridge: $37,222/$34,191

Bismarck: $35,067/$31,688

None of this is intended as an endorsement of either model. But it illustrates the impact that reducing the per capita health care expense from 14.3% to 10% would have: A family of four would have an additional $7,000 a year to save, buy food and clothes, travel, or enjoy family activities. Moreover, 10% is a completely reasonable goal: It's still higher than almost every other country in the developed world. 

Robert Paterson's Boyd 2008 Summary - Hope!

From Robert Paterson's blog on Boyd 2008:

* The goal for us all to work to is clear - that we have to build back into the system Resiliency. This means that each region has to work to become largely energy, food and financially self sustaining and that each region needs to network into the others. In effect we shift from an efficient machine to a resilient network

* That the leadership model is no longer the dominant hero but the ego-less servant

* That we cannot wait to be saved. We have to all do our part to make our place "Home"

Many are desperate that somehow President Obama save us and importantly turn the clock back. Take us back to consumer heaven of 2006. Even if he could, would this be the right thing to do? To take us back to a world that is a fantasy?

What got us to this place?

The Dark Side of a Mindset. The Machine/Institutional/Newtonian/Engineering Mindset that created most of the wealth of the 19th and 20th century tipped over into the dark side. Where not only did we give up all our power to institutions but gave the few that ran them the license to use these institutions for their own benefit.

So we spend nearly a trillion on defense but not on what the troops really need. We spend billions of health and America is on a par with Cuba. We spend billions on education and more than 50% of Americans are functionally illiterate. We spend billions on food and we eat crap. We see that the leadership of these institutions live in a bubble. The gap between the rich and poor has never been greater. The middle class is being squeezed. We don't make anything anymore. We make no progress toward energy independence.