Professor Alan Maynard OBE looks at the progress and pitfalls of healthcare reform in the USA

Winston Churchill is alleged to have said that Americans will try everything and eventually they get it right! Will this be the case with Obama’s hopes for health care reform?

About forty five cents in the US healthcare dollar is paid by government. Much of this is paid by the Federal government for Medicare, the programme for the elderly and chronic sick. The States use their own and Federal funds to provide a patchwork of medical care of generosity, varying from practically complete in Massachusetts to parsimony in Arizona for some of the poor through the Medicaid programme.

The millions who have fought in the military can also access Federally-funded care through the Veterans Administration.

Tax breaks: inefficient and inequitable subsidies
Most American employees have health insurance provided by their employers, although choice of benefit package is very limited and co-payments tend to be considerable. The employers of these folk get tax breaks. Such subsidies to the relatively affluent are inequitable and inefficient - but difficult to remove given the political clout of employers and their workers.

Subsidising the rich is accompanied by 45 million Americans who have no insurance, and another estimated 20 million who have very limited cover.

All Americans face the prospect of bankruptcy from high health care costs, because even if the have some form of public or private cover, the benefit package can be quite limited.

Limey lessons
Obama - like President Clinton - was elected to reform healthcare and improve cover for the excluded and the disadvantaged. Clinton failed. What advice should we limeys give Obama to help him achieve his objective?

The first thing to emphasise in any reform is that providers’ income is derived from individual’s expenditure on healthcare. Reform inevitably threatens the income of providers, and their concerns may prevent and pervert the course of reform.

Who are potentially the leading provider opponents of reform in health care? In the US, the health insurance industry is the primary potential loser from reform.

Obama has suggested that existing consumers and the ones enfranchised by the extension of insurance cover should be able to choose between the existing private providers and a new public insurer. The latter, best known as competition, threatens the private insurers who are keenly opposed to such a government agency.

Should Obama back down and leave the delivery of benefits to the currently uninsured to private providers, who will thus be better off? Or should he catalyse competition with a new public insurer? As ever the capitalists, the private insurers, are the enemies of capitalism and energetically oppose the “dead hand” of government reducing their profits!

‘The Americans already spend over 16 per cent of the GDP on healthcare, with average per capita expenditure twice that of the UK-NHS.’

Behind the desire for competition is the fear shared across the political spectrum that reform will worsen cost pressures. The Americans already spend over 16 per cent of the GDP on healthcare, with average per capita expenditure twice that of the UK-NHS.

If Obama pumps in more Federal money to ensure that the uninsured are covered for their healthcare, this has implications for the fiscal debt at a time when it is ballooning due to the banking crisis.

The Republican right are very critical of this cost risk - even though their recent President, George Bush, created a massive fiscal debt prior to the current economic downturn. Part of this fiscal laxity funded tax cuts for his affluent supporters at the top end of the income distribution.

Obama now wants to redistribute to the relatively deprived who vote Democrat and remove, or at least mitigate, the problems faced by those with little or no insurance cover. This poses two cost pressures: the immediate cost of providing cover and the medium-term effects of increased funding on inflation in the US healthcare systems.

Table manners at the healthcare feast
The right fear that these costs pressures will lead to increased regulation and in resisting this they seek to undermine Obama’s reforms. It is obvious in all health care systems that there is a lack of what Reinhardt has called “table manners at the healthcare feast”. With hungry snouts in the trough of citizen’s money, the insurers, the drug industry, the hospital industry and the labour force will seek to improve their lifestyles!

How can these capitalist pigs be best managed to ensure the delivery of high quality care to patients at a reasonable cost? The insurers have a poor history of cost control. It is they who though their passive funding of provider demands create cost inflation. They have failed to integrate cost, activity and patient outcome data to ensure value for money for their clients. In this they are just like NHS commissioners: feeble bank clerks keeping the providers in the style to which they are accustomed.

The American drug industry has been a major source of R&D and new drugs. However in common with its international counterparts, its performance in the last decade has been as feeble as the insurers. Few radical new chemical entities are coming to the market - but the industry still has to be kept funded, as we all hope for radical breakthroughs.

It is evident from the work of NICE and the Scottish Medicines Consortium that the QALY gain form new products subject to technology appraisal is marginal. Sadly, a public ever-anxious for miracle cures is sold these marginal benefits in a singularly exaggerated manner as the industry seeks to protect its profits.

In the US and Europe the challenge for government is to welcome innovation but demonstrate to the public that this must bring evidence of health gain at reasonable cost. The puffing of faith-based PR agencies has to be countered with the harsh realities of poor industry performance and the finite nature of all our lives.

Similar clinical variations
The US hospital industry, like that in the UK, exhibits large variations in clinical practice. The Brits beat themselves up about what they call “post code” rationing, whereby patients in different part of the country get very different volumes and types of care.

The Yanks lament the same problem, as epitomised by the Dartmouth Atlas, which shows how Medicare patients nationwide with similar “rights” to care get very different types and volumes of care.

Policymakers in both nations have clucked about this for decades, hoping against hope that its identification would lead to behaviour modification amongst providers. Hope springs eternal! But in the healthcare industry, hope is a poor substitute for evidence and incentives.

What changes behaviours?
As despairing policy makers seek the Holy Grail, they naively take on economic messages. Yup! Incentives change behaviours, as we all know.

However the history of performance-related pay (PRP) is not encouraging even when applied to UK-GPs. The GP quality outcomes framework changed behaviour but what health gain was produced by sloshing £1,000,000,000 in primary care coffers? PRP works, and with the bankers can undermine the world economy! It is a double-edged sword that has to be wielded with extreme prudence.

The conclusion is that apart from cash-limited budget controls as in the UK, cost control is very difficult and is likely to very problematic in the US with and without Obama’s reforms. So the choice for the American health capitalists is clear: control costs yourselves; or accept that someone else will have to protect taxpayers and premium payers from your inefficiency.

In the last 20 years, US capitalists have tried “managed care” and “consumer driven health care” with high co-pays. Neither have worked. Costs continue to escalate at rates two and three times that of the growth in wages and general prices. Such failures, of course, make them richer!

So what can we limeys tell the Yanks about health care reform? Not a lot! We share common problems in terms of inefficiency in the provision of health care by the “caring” hospital, drug and other professional industries. We share Obama’s desire to be comprehensive and universal in covering the population and guaranteeing access to healthcare.

But we recognise from our frustrating history of continually seeking to reform the NHS, that change affects the feeding opportunities of the provider pigs at the healthcare trough.

Hard bargaining in these political and economic processes is inevitable. A favourable outcome in the US can be prayed for; but the fear is that the President, with so much else on his agenda, will be diverted from this much-needed reform.