Universal coverage is good economics

Healthcare costs less and performs better when societies pull together. Unfortunately, Icelandic conservatives want American inefficiencies.

A house doesn’t cost less if fewer people use it. You could look for a cheaper house, but that comes at the cost of utility, comfort, or quality.

This line of thinking, simple as it is, is unfortunately rare among policy makers looking at health care, especially in the United States. Providing good health care is incredibly expensive, and there are only a handful of options for cost reduction. The most obvious is to share the cost with more people.

In a pathologically individualistic world, each person would only pay for exactly the health care they need, no more, no less. This would mean that the total availability of heath care service at each time is a function of how unhealthy the public is. A more unhealthy public would have better health care ─ because they’re paying more for health care, better equipment and facilities can be bought or constructed. The negative feedback loop in play would lead to a very unstable environment long term, with little investment capacity overall.

To smooth these fluctuations, insurance companies are formed by groups of citizens or shrewd businessmen, and invariably governments step in to cover at least certain baseline costs, as well as emergency care for those incapable of paying their own way.

This socialization of costs expands the base, lowering costs for all, but leaves the same inefficiencies in the system: The tendency is still to have multiple ivory towers, within each access to care is deeply stratified.

The United States has been stuck there for a while. Obama’s legacy is to have broadened the socialization base substantially, lowering costs enough for millions of people that they could finally allow themselves access to health care.

President Trump’s insistence on dismantling that system doesn’t just demonstrate a misanthropic attitude towards public health, but also an absolute failure to grasp the economics of public health care. The current bill being debated in the US congress is going to kill people, if passed. Americans need to understand that this is neither normal, nor reasonable, nor necessary.

There is a better way. There is a logical progression from quasi-socialized healthcare and collective insurance which leads to a point where everyone participates, implicitly or explicitly, in covering the costs of providing efficient and effective health care for all. These systems are referred to, cynically, as “single payer”, focusing on the transfer of money from state to health care providers, ignoring the more important aspect of universal coverage.

Current discussions in many American states about establishing statewide universal coverage are to be applauded. While risking leaving other states behind in the mires of expensive and inefficient private health care systems, competition of that form between states can be healthy. The proposals being discussed in California and New Jersey are of particular interest. Check them out, and support them.


But why am I, an Icelandic politician, opining on the state of health care in the United States? Because America sets an example for the world, and in Iceland I am involved in trying not to follow that example.

The Icelandic health care system provides virtually free universal coverage at a very high quality of care. Mostly state-run, it costs less than half of what the American system costs per capita, and ranks second in the world in a recent study published in The Lancet comparing access to health care for the last 25 years. The American system came in 38th.

OECD figures for healthcare costs per capita. More is worse, but should be considered relative to quality of service.

But it won’t last. Our conservative government has been moving aggressively to allow more private companies to benefit from public funding, while defunding the public system and asking patients to pay more themselves for both medical care and for prescription drugs.

This underfunded system is seeing lengthening waiting lists, causing those who can afford private care to buy themselves out of the wait by going to private clinics. But even then the state gets saddled with most of the bill, which is substantially higher than if only the public system had been involved.

Socializing costs does not have to mean privatizing profits. The efficiencies of public health care can benefit everyone. Adding more people to the house of public health can be a net win for all. But in an ill informed attempt to be more like America, the Icelandic government is undermining public health and public safety instead.

Having so far failed to convince Icelandic conservatives that they are wrong, it appears that it might be easier to promote the establishment of universal public health care in the United States.

Does that sound unduly defeatist? I hope not.

Either way, I’d like to suggest that the US take some lessons from the Icelandic health care system, when it was at its best, and from other good Nordic health care systems.

First off, everybody pays taxes. Our taxes are high, but they are still lower than yours in many cases, partially because of your oversize military, partially because our healthcare and education systems are way cheaper. The taxes cover our public healthcare system, and that’s that. If you get sick, the government picks up the check. It’s also worth noting that children’s daycare is also covered by taxes in Iceland, significantly lowering the cost of living for new families. Additionally, each child receives a small stipend from the state (“barnabætur”; a single parent with ~$42,000 USD/year and one child under the age of seven gets a stipend of ~$864 USD per quarter; not much, but it helps).

We do all this because it reduces costs elsewhere. Hans Rosling often pointed out that investments in healthcare had enormous returns for society, and he was right. Investing in keeping people healthy is a win-win for everybody in practice, because it turns out that when people can’t afford to be sick, they stay sick for longer, get sick more often, and have stress-related medical issues that shouldn’t exist in advanced democracies. This massively reduces productivity and work capacity, shortens life expectancy, and promotes chronic illness. Having free healthcare when needed leads you to need it less often. I can’t remember when I last went to a clinic.

Secondly, hospitals and clinics were run as independent state-owned units. These cooperated on driving down costs by close collaboration and purchasing drugs and other things as a block, through specialized state agencies.

This also means that most patients go to general practitioners and get referrals; going directly to a specialist is rare, thereby reducing the workload on the specialists, both driving down costs and making sure people get the treatment they need rather than the treatment they think they need.

Speaking of which, our public system is a lot less litigious than the American system, in part because there is a general understanding that everybody is doing their best. While mistakes do happen, they’re far less common than in the US. Part of that appears to be that profit motives drive quantity over quality. Unnecessary tests, costly procedures, and a tendency to optimize for greatest Medicare reimbursements, even when unnecessary.

For example, in the early 1990’s (as Michael Lewis observed in The Big Short; a very off-topic book, but the example is relevant), ophthalmologists did a lot of cataract procedures, which were reimbursed at $1,700 each, but when the reimbursement was dropped to $450 each, suddenly fewer people needed cataract procedures, and more people needed radial keratotomy. A doctor’s medical choices should be dictated by patient’s medical needs, not doctor’s desires for income. Malpractice suits are in many ways a response to greed.

A less litigious environment also means the costs are lower. The American Medical Association has observed that in many countries malpractice litigation costs less than half of what it costs in the US, where half of all malpractice payments go towards legal fees rather than compensating the patients. Europeans are somewhat bemused by American ambulance chasing. Sweden’s average malpractice award in 2004 was $22,000, but the US median award for 2005 was $400,000, with 21% of awards being more than $1 million.

(A more nuanced and more critical view of the difference between the American tort liability system and the Swedish no-fault system can be seen in this World Bank report: Medical Malpractice Systems around the Globe: Examples from the US- tort liability system and the Sweden- no fault system.)

As previously stated, this means the overall cost of healthcare in Iceland is less than half of what it is in the US. Our health care outcomes are much better too: we have a life expectancy at birth of 83 years. Americans can expect to live just over 79 years. 33.7% of Americans are obese, and only 22.8% of Icelanders, although we are high compared to the other nordic countries ─ Denmark has a 19.3% obesity rate. Other health outcomes are similar, simply due to better access to health care, access to medicines, etc. We’re not perfect, nobody is. But Nordic welfare states simply perform better when it comes to public health.

Some Americans will feel the urge to dismiss this as ‘communism’. But I assure you, Iceland has a thriving market economy, resurging at quite a clip from our banking troubles in the great recession — in fact, it might be doing too well at the moment, but that’s another story. We’re not ‘communist’. We are pragmatic. Some things belong in a free market, other things work better when the community pulls together.

It’s time for America to start setting a good example again. Otherwise I fear that my country may follow yours into the abyss.

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