By Dave Merrick
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Online only: The US health system vs National Health System

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Issue 386

This article considers the US health care system as it stands, and then considers what the Affordable Care Act and the Patient Protection Act, (known as Obama Care) will do to improve it.

We begin with two statistics, one the US establishment don’t mind talking about and a second one that they remain silent about. Both figures are provided by the World Health Organization (WHO) – first in 2000 and then in 2012. The first figure is that the US spends at least as twice as much as any other industrialised country on health care. The second statistic is that WHO ranked the US health care system 37th in the world.

US male life expectancy rates are on par with Chile and Slovenia, and lags behind that of Cuba. US female life expectancy rates are on par with Colombia, Cuba, Czech Republic, and Poland. How can a nation spend at least twice as much as any other and wind up with such a poor outcome? The answer is profit.

Cost inflation is built into the US health system (if you are insured that is). There are hundreds of health care providers, from drug companies to catering companies, to medical equipment companies, and the private hospitals and doctors themselves, all must take a slice of the total health spend in profit.

The admin costs of such a clumsy system are high, and there is a lack of economies of scale, brought about by bulk purchasing with a single payer and single provider. The insured population pays for this level of inefficiency and inflation, either directly from their pockets, or if they are insured by their employer, by reduced take home pay, holiday entitlement and so on.

The US ranks among the worst OECD countries for child health well-being. Although it has the highest national income per person, it ranks as the worst country for income inequality. This inequality is a major part of the explanation of why it has the highest index of health and social problems compared to other wealthy nations. This, in turn, pushes down the average performance figures.

Under the current system, credible estimates suggest that around 45 million people have no insurance at all. This is one in seven of all Americans. Many more are under-insured.


The Health Insurance Association of America describes Medicaid as a “government insurance program for persons of all ages whose income and resources are insufficient to pay for health care”. It is a means tested program, with each state having leeway to determine eligibility.

The official Medicaid web site states: “The Medicaid program does not provide health care services, even for very poor persons, unless they are in one of the designated eligibility group”.

There are a number of eligibility categories and within each category there are requirements other than income. These requirements include: assets, age, pregnancy, disability, blindness, income and resources, and one’s status as a US citizen or a lawfully admitted immigrant.


Medicare provides some level of health insurance to 48 million Americans – 40 million people age 65 and older and 8 million younger people with disabilities. On average, Medicare covers about half (48 percent) of health care costs. Medicare enrollees must cover the rest of the cost.

These costs might include uncovered services – such as long-term dental, hearing, and vision care – and supplemental insurance.

An Example of profit Driven Cost Inflation

Consider this New York Times headline from Sunday 4 August: “For Medical Tourist Simple Math: US estimate for a New Hip: over 78,000 USD (48,000 GBP), The Belgian bill 13,000 USD (8,000 GBP)”. The story runs as follows, an insured man is in such pain with arthritis that he can’t stand up, even to make coffee.

His insurance company refuses a hip replacement, he was an active sports enthusiast and the insurance company said he had aggravated a pre-existing condition – they often play very fast and loose with the “pre-existing condition” clause. The patient had to pay for it out of his own pocket, even when through a “well placed” friend he got the replacement body part (8,000 GBP), the hospital bill was a further 40,000 GBP, and this didn’t include the surgeon’s fee.

The total health care bill in the US is 1.6 trillion GBP. The makers of medical devices, in the words of the NYT, “Have proved particularly adept at commanding high prices”. The companies behave as a cartel, the actual price of manufacturing, for example a hip joint, is 214 GBP. There can be up to thirteen vendors between the manufacturer and the physician.

In Asia it would cost half of that, to manufacture, that is (100 GBP). Imports are kept out by protective legislation. Like car manufacturers they bring out a new model and charge a new price each year. The insurance companies don’t care because they take the money out of the patient’s premiums.

Because these new limbs are “this year’s model”, they are often untried and under-tested, many of them fail before the older more tried and tested models did before them.

These companies are huge – four out of five of the biggest are based in the US, the other is in the UK. To think who is “waiting in wings” for a privatised NHS is very scary – and these billion dollar outfits are for sure waiting in the wings.

What Does the Affordable Care Act and the Patient Protection Act Do?

The main provision of Obama Care is that all individuals not covered by an employer, Medicaid or Medicare, or other public insurance programs, must secure an approved private insurance policy or pay a tax penalty, unless the individual is a member of a recognized religious sect exempted by the Inland Revenue, or waived in cases of financial hardship.

State run and regulated Health Insurance Schemes will commence operation in each state, offering a marketplace where individuals and small businesses can compare policies and premiums, and buy insurance, (with a government subsidy if eligible).

Low-income individuals and families above 100 percent and up to 400 percent of the Federal Poverty Level will receive subsidies on a sliding scale if they choose to purchase insurance via an exchange (those from 133 percent to 150 percent of the poverty level would be subsidized such that their premium cost would be 3 percent to 4 percent of income).

The law expands Medicaid eligibility to include all individuals and families with incomes up to 133 percent of the federal poverty level. However, the Supreme Court effectively allowed states to opt out of the Medicaid expansion.

States that choose to reject the Medicaid expansion can set their own Medicaid eligibility thresholds, which are often significantly below 133 percent of the poverty line.

Firms employing 50 or more people but not offering health insurance will also pay a “shared responsibility requirement” (a fine) if the government has had to subsidise an employee’s health care. Very small businesses will be able to get subsidies if they purchase insurance through an exchange.

Full implementation date is 2014; some provisions have already been delayed to “give companies time to make the necessary adjustments”, for instance the limit on “out of pocket” payments by insured individuals, i.e., expenses that the insurance company won’t cover.

A report from the Congressional Budget Office (CBO) predicts that in the post-Obama care world of 2023, there will still be 31 million, non-elderly Americans uninsured.

Admittedly that is a significant decrease, considering that in 2012 it’s estimated that 45 million Americans lacked health insurance. However that number is nowhere near the initial promise of near universal health insurance.

Even with tax credits for policies purchased at the state marketplaces, many people will still be priced out of health insurance. It is still a significant outlay if you are living from paycheck to paycheck, and many simply will still not be able to afford it.

The US healthcare system, Obama Care notwithstanding, is fundamentally flawed, simply because it is private. It is greedy for profit and profit eats up expenditure without providing positive health benefits, it has built in cost expansion because of profit, and it is unequally and unevenly distributed, whilst remaining expensively inefficient.

The difference between the NHS and the US health care systems is the NHS collectivises risk, with a “single payer” national insurance system. The US system individualises risk with catastrophic consequences. While Obama’s reforms (as far as they go) are to be welcomed, and the disgusting attempt perpetrated by the Republicans to prevent its implementation should be resisted, our task is to defend the far superior system that our enemies at home wish to dismantle.

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