Research

America's other health care gap: Public perception vs. reality

Ask U.S. consumers about their satisfaction with the existing health care system, and up to 80 percent say major fixes or even a complete overhaul are overdue. But they may not understand the complexities of health care reform, says Marjorie Baldwin, economist and director of the School of Health Management and Policy at the W. P. Carey School of Business. Baldwin is one of a growing number of well-regarded economists who say there is a vast gap between public perception and reality when it comes to what's wrong with health care — and how to fix it.

2008-06-19

Ask U.S. consumers about their satisfaction with the existing health care system, and up to 80 percent say major fixes or even a complete overhaul are overdue. But they may not understand the complexities of health care reform, says Marjorie Baldwin, economist and director of the School of Health Management and Policy at the W. P. Carey School of Business.

Baldwin is one of a growing number of well-regarded economists who say there is a vast gap between public perception and reality when it comes to what's wrong with health care — and how to fix it. Bottom line: from the economist's perspective, the U.S. health care system is performing better in some areas, and worse in others, than commonly held beliefs might indicate.

Global dissatisfaction

Interestingly, Americans are not alone in criticizing their health care system. According to the Mayo Health Policy Center, when consumers in other countries with very different health systems — including Great Britain, Germany and the Netherlands — are asked the same satisfaction question, they give similar responses.

How can that be? Because "all countries wrestle with the same issues, and have the same basic goals: universal access to health care, with no one shut out; high quality care using the latest medical technology and of course, the lowest cost possible," Baldwin said. "You can have two, but you can't have all three at the same time." Baldwin's comments came during a workshop on the role of health care reform in the national election.

The workshop was part of the National Association of Women Business Owners (NAWBO) annual conference in Phoenix, Arizona, June 12-14. Eighty-two percent of NAWBO members recently polled said the cost and availability of health insurance for themselves and employees is "extremely/very important." Among survey participants, the only issue more crucial is the state of the economy.

But the U.S. already spends 15 percent of the gross domestic product on health care, more than any other country, Baldwin said. Do we want to spend this much or more? Can we spend more on health care when the price of everything from gasoline to college tuition is rising?

"We are more productive than many other countries. We are richer — perhaps we can afford to spend this much on health care," she theorized, noting that Americans have more income to spend on other things, even after paying for health care than Europeans. "Maybe we want to pay more for health care rather than change our lifestyle. If you have two cars, and a TV in every room, and every person in the family has a cell phone, maybe you're willing to spend more money on health care to buy more time to enjoy it all."

Someone else's money

We don't know if we're spending too much or too little on health care because consumers aren't spending their own money, for the most part. Americans are more concerned about spending/overspending with dollars that come directly from their wallets; insurance dollars, on the other hand, are another matter. "We don't worry about how much of the GDP we spend on dining out or buying cars, but we do worry about health care spending," Baldwin said, "largely because it appears someone else pays the bill."

Still, nearly 47 million Americans, or 16 percent of the population, did not have health insurance in 2005, according to the National Coalition on Health Care, based in Washington, D.C. While most health insurance is provided through employers, having a job is no longer a guarantee of coverage.

The pool of uninsured includes people with chronic health problems who simply can't buy insurance, as well as unemployed people who don't have access to employer-provided coverage. Baldwin also noted that nearly one-third of uninsured children and more than 40 percent of uninsured adults are in families with incomes above 200 percent of the poverty line — income levels where 75 percent of households do have insurance.

Finally, approximately 5 percent of Americans offered "low cost, employer-provided health insurance, and who don't have insurance through another source, like a spouse, choose against it. These are the risk-takers, the same people who max out their credit cards and drive too fast," Baldwin said. Her conclusion: without a government mandate, there will always be some people who are uninsured, no matter the cost of health insurance (although she said cost is, obviously, a hugely significant factor).

First the bad news …

One commonly held belief is that the U.S. health care system provides poor value at high cost, she continued. The U.S. spends $5,274 per capita on health care, almost twice as much as Canada, with $2,931. Great Britain spends even less, $2,160 per capita. More bad news: life expectancy is slightly lower in the U.S. than in the other two countries. However, these outcomes are not solely determined by health care.

Baldwin partly sources these "poor outcomes" to lifestyle, culture and other factors. She also counters that the U.S. is ahead in some areas, such as drug development. "Nearly 80 percent of global drug development occurs in the U.S., with only 16 percent coming from Europe," she explained.

Some reformers say bringing universal access, high quality, low cost health care to the U.S. is as simple as copying a single-payer, government-run program similar to Sweden's or Great Britain's system. "But there are long waits to receive health care there. For instance, in Britain, everyone is assigned a primary care doctor who handles referrals for specialty care. If your problem is urgent, you can see a specialist in one month; if it's not urgent, it may be up to one year," Baldwin said.

British lawmakers recently voted more dollars to the system, so that an outpatient procedure can be scheduled within three months, and a hospital visit within six months, she added. Certain drugs and treatments available in the U.S. may not be covered by the British system, she added. An example: Aricept, a drug for Alzheimer's disease commonly covered by insurance in the U.S. was initially not covered by the British national health plan.

High tech, high cost?

Another misconception is that advances in medical technology are unnecessarily driving up the costs of health care. Introducing new technology usually drives costs down, not up, but economists agree that health care cost increases are largely due to advances such as new drugs, improved surgical procedures, better lab tests and higher-tech tools. In the health care sector, technological development tends to increase costs because these new and better approaches allow more people to be treated.

A new tumor drug makes treatment possible for thousands of ill people who otherwise might be offered only palliative care. Using stents instead of bypass surgery for some cardiac patients means more people are living longer — still requiring care. Another example: the earliest antidepressants had serious side effects, mostly extreme sleepiness, so their use was limited.

Later versions had fewer, less serious side effects, and the number of people taking antidepressants jumped. Overall costs are rising, but per patient costs may be falling. Baldwin sums it up this way: "Things are not as bad as [filmmaker] Michael Moore says, but we still need to reform health care."

Making change

She's identified five changes to address some of the problems in the current system. First, equalize tax treatment for the purchase of health insurance, whether it's through employers or self-paid. Second, nationalize the health-insurance market so people are not bound by restrictions in their home state. Third, offer more high-deductible policies, so people are spending their own money for lower cost health care services.

Fourth, offer premium reductions for regular preventive care. Fifth, establish an individual mandate to purchase health insurance, with government subsidies for those who might be priced out of the market. Baldwin also is intrigued by other suggested reforms, like the universal health care "credit card" that would contain basic information about the consumer. Carried in one's wallet, it could be used to gather, store and share crucial information, and would be especially helpful during a crisis (say, in a hospital emergency room).

Regarding the national election, both presidential candidates favor some type of tax incentive for health insurance purchasers. John McCain favors insurance purchases across state lines and wants to end the tax advantage for employer-sponsored insurance. Barak Obama endorses ending tax breaks for the rich, and providing subsidies for two-income families. Obama also backs an employer mandate to provide insurance, but isn't specific about his plan.

Susan Shargel, head of NAWBO's health policy working group, spoke briefly following Baldwin. She urged consumers to visit both candidates' Web sites to read their health-care proposals. But be prepared for the candidates' plans to be overly optimistic, because as Shargel noted, "everything is promised [on their Web sites]. We need to see the realities."

Bottom Line:

• Many commonly held beliefs about the U.S. health care system reflect misinformation, or incomplete information, about how the system works.
• No developed country has created a health care system that provides universal access to high quality care at moderate cost.
• The U.S. health care system does some things extraordinarily well (e. g. drug development, cancer treatment) but is failing in key areas (e. g. large numbers of uninsured, disparities in treatment, information transparency).

Health Economics Faculty