The Value of Health
by Pippa Read
The recent Demos roundtable on the NHS rightly concluded that the most viable and progressive way of bridging the projected £40 billion funding gap was by improving value for money. In this era of economic austerity, anaemic levels of productivity simply cannot be accepted. President Obama would do well to learn from this when it comes to the overhaul of the US healthcare system, which this month enters its most important phase. Unless action is taken he risks creating a system which like the NHS achieves (almost) universal care, but does not tackle the deeper issue of cutting costs and providing value for money.
Obviously, ensuring near universal coverage is a key goal for American progressives. In the US, healthcare is normally linked to employment, with large companies offering excellent private health insurance packages. This is not something that the reforms will alter. What will change is the chance of health insurance for the unemployed or those on a very low income, those working for a small business or those with a pre-existing medical condition, who currently miss out on good healthcare.
Under the reforms, at least 30 million Americans will gain insurance. However, despite their very different funding mechanisms, the US system will, just like the NHS, come with an unsustainable price tag without deeper structural changes targeted at cutting costs.
The value for money problem is even more acute in America than the UK. Without the public purse as a break, health insurance costs routinely outstrip inflation and act like a leaden weight to the economy. The federal government and the states by no means escape, ploughing billions into limited, but still expensive, public healthcare programmes. The US government claims the reforms will make significant savings – $132 billion over 10 years.
But the beneficiaries remain limited to federal governments, small businesses and those on extremely small incomes – and these benefits will only apply in the short term. Average Americans will continue to pay crippling premiums and big businesses will continue to be weighed down by massive employer contributions. In the long-run, the newly insured could also suffer: subsidies to those on low-middle incomes, allowing them to buy mandatory insurance, will be meaningless if their own costs spiral beyond their means.
In terms of providing value-for-money, these landmark reforms are plagued by short-termism and fail to make the efficiency savings that would make US healthcare reform a success. Some Democrats have realised this and rather than dreaming wistfully of a system like the NHS that is open to all, are determined to contain costs to ensure meaningful long-term changes. Democrats need to think creatively and act decisively; they can’t simply settle for ensuring universality and hoping the rest will follow. Escalating investment offers little incentive for productivity and the NHS is, unfortunately, testament to this.