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posted on 09 August 2017

Health Care: A Universal Problem Without A Universal Solution

from STRATFOR

-- this post authored by Rebecca Keller

A hush fell over the floor as Sen. John McCain stepped to the center of the room and paused. Gasps and scattered applause soon broke the silence when McCain gave the thumbs down, dooming the latest Republican proposal to repeal parts of the Affordable Care Act. McCain's vote, along with those of Sen. Susan Collins and Sen. Lisa Murkowski, stopped the initiative to overturn the legislation - one of President Donald Trump's campaign promises - in its tracks early July 28. But it didn't stop the debate in the United States over health care. The issue has become such a fixture in U.S. politics over the past few decades that it seems like a distinctly American problem.

But the debate over health care is a global one. Throughout recent history, nations have grappled with the costs and benefits of developing their health care sectors. It stands to reason, after all, that healthy people are more productive people, so better health care should yield a healthier economy. On the other hand, the more money a country spends on the health of its people, the less it has to devote to other budget items such as defense or infrastructure. Each nation approaches the matter with its own set of priorities and constraints in mind. Demographics, economics, history and, of course, politics all help determine the shape of a country's health care system, from who pays for medical services to what services are available and what training is required to perform them. Though maintaining a robust health care system is a universal problem, it lacks a universal solution.

Reaching the Goal

The United Nations set a goal for its members to achieve universal health care coverage by 2030. As with most priorities articulated through multinational bodies, however, the resolution was light on details. Universal health care, by definition, refers merely to access: Countries agree to ensure that health services are available to all citizens at an affordable rate. The services included, and their financing, are left to the discretion of individual governments.

In much of the developing world, universal health care seems a lofty aspiration, regardless of the details. Governments in populous countries such as Nigeria and Indonesia struggle to guarantee their citizens consistent access to dietary staples, much less to health care services and facilities. What's more, the operating budgets of these nations often are too tight to prioritize the health care sector, leaving nongovernmental or international aid organizations to fill the gaps. Such groups generally focus on controlling diseases such as Ebola, polio or malaria, rather than on providing preventive care, and patients wind up shouldering most of the financial burden for treatment.

Health Care Expenditure as Percent of GDP in 2014

As countries progress in their economic development, their health care needs change. Outbreaks of infectious disease decline, and lifestyle-related illnesses, such as heart disease or diabetes, become more common, shifting the focus of the health care sector. Achieving and maintaining universal health care coverage has become increasingly important to China, for example, as the country continues its economic transition. Beijing already has made significant headway toward this goal, thanks in part to its economic and political structure, which lends itself to a publicly funded and controlled system. Three public insurance programs cover the vast majority of the population, though the quality of care varies across the country, most glaringly between its coastal and inland regions. (For migrant urban workers, moreover, obtaining health care is still difficult, despite the fact that they are technically covered.) Since maintaining social stability is paramount for China's economic transformation, President Xi Jinping is working to improve health care coverage in the interior, home to most of the country's rural population.

The changing demands of China's growing middle class, meanwhile, will force the health care sector to adjust. Quality of care will become more important as the economy advances. Furthermore, China will likely have to deal with an aging population before its economy fully develops, and its health care system, in turn, will face the higher costs associated with treating older patients before the sector has matured. Given the size of the market, and the changes that await it, China's health care industry will be ripe for international investment.

India, similarly, is looking to private investors to build up its lagging health care system in the face of rising demand. Much of the population is uninsured, the health care system is underfunded and overcrowded, and quality of care is inconsistent. But between its security goals and its economic objectives, India's government will likely have little funding left over to bolster the health care system. Recognizing that limitation, Prime Minister Narendra Modi's government - which is still trying to expand access to basic health services to prevent malnutrition and immunize the public - is emphasizing public-private partnerships to boost the sector. The country already has an established pharmaceutical sector, and medical devices and hospitals offer enticing opportunities for private investors. At the same time, innovations such as telemedical services, in which patients communicate with doctors virtually instead of in-person, could help India extend access to health care to more of its population despite its inadequate medical infrastructure.

The Price of Growing Old

India faces a difficult journey ahead to make health care widely available and affordable, but even countries with developed economies are encountering problems with their health care sectors. Japan is a prime example. Since the mid-20th century, the country has been home to a robust health care system. Insurance is compulsory in Japan. Consumers pay premiums on a sliding scale based on their income, while the government determines prices - and finances most of the country's health care spending. The system, coupled with Japan's economic success and its people's eating habits, have given rise to a healthy population with one of the world's longest life expectancies.

But this longevity, though a testament to the health care sector's efficacy, is also causing complications for the industry. Growth in health care spending is expected to outstrip gross domestic product growth in Japan, and the gap between the cost of health care and the money coming into the sector is widening. The system that worked well for a younger, healthy population is now struggling under the weight of Japan's elderly community. Inefficiencies in the sector have grown, at times overwhelming it. Hospitals run at a loss because of low reimbursement rates. And with no limit on their access to treatment, Japan's citizens go to the doctor more frequently on average than many other populations in the world.

Prime Minister Shinzo Abe set out to overhaul health care regulation as part of his Abenomics economic policy, but so far, the effort has met with little success. Retooling existing infrastructure to deal with the specific needs of Japan's aging population is the likeliest path to reform, albeit one that has been difficult to advance. Dedicating facilities to palliative care while optimizing hospital stays and doctor access, for example, could reduce costs without jeopardizing quality of care. Technology, namely robotics and automation, provides another way to reduce health care costs and improve efficiency. Even so, Tokyo may soon have to make the unpleasant choice between unpopular fiscal reforms and an unwieldy medical bill.

Life Expectancy at Birth

Cracks Form in the Socialized System

The European Union is facing problems of its own in its health care system, considered the industry standard for socialized medicine. Though each member has a slightly different take on the model, they all share the same core values: universal health care and a large welfare state. Throughout much of the 20th century, Europe's fast-growing economies and ample workforce sustained the system. Today, however, it faces serious challenges.

The social welfare model is crumbling as the European Union fragments. Falling birthrates and increasing lifespans, moreover, are shrinking Europe's labor market. As their economies languish, many EU members, especially those in Southern Europe, have begun relying on debt to finance their increasingly unsustainable welfare systems. And proposed solutions to this problem, such as drawing in more migrants to join the workforce, increasing the retirement age, raising taxes or cutting social spending, have met with public backlash. Instead of curtailing spending, Europe's early health care reforms will likely focus on incentivizing efficiency. Taking away what voters have come to expect from their governments would be a risky endeavor for Europe's leaders. Besides, the cracks already are starting to show in the long-standing socialized system as for-profit hospitals pop up across the Continent.

Health Care Expenditure per Capita in 2014

An Age-Old Debate

So where does this leave the United States in its seemingly endless debate over health care? Canada is often invoked as a counterpoint to the United States in discussions of health care, by virtue of the countries' proximity. Beyond their location, though, the two nations are poorly matched for the purposes of comparison. Canada's single-payer system works well in large part because of its small, relatively wealthy population. The country doesn't have to worry about the demographic pressures that threaten the Japanese and European health care systems, primarily because its comparatively open migration policy provides a broader tax base to make up for its aging population. On top of that, an overwhelming majority of Canadians report satisfaction with their health care system, according to a survey.

And therein lies the matter at the heart of the U.S. health care debate. The United States, like Canada, isn't under the demographic strain that looms over Japan (though aging baby boomers will add stress to the health care system). Instead, the disagreement in Washington boils down to access to care, cost of coverage, inequalities in the health care system, and the line between personal and governmental responsibility - age-old disputes in the United States. One could argue, in fact, that the rebellious and freedom-seeking American identity is what makes portions of the country's population suspicious of compulsory insurance. In the early 20th century, when the progressive movement and socialized medicine were gaining ground in Europe, employer-based sickness funds were still popular in the United States. The insurance system familiar to U.S. citizens today came about after World War II. A movement toward a single-payer system rose and fell in the 1970s, but, until recently, it was a historical outlier.

Some 40 years later, the United States remains the only nation in the Organization for Economic Cooperation and Development that falls short of universal health care coverage. And for the Trump administration, unlike many of its counterparts elsewhere in the world, achieving that goal isn't an official priority. Health care policy, in the United States and beyond, is a balance between internal stability and demographic, technological and economic trends. Reform is complicated, and the inertia of history hard to overcome.

"Health Care: A Universal Problem Without a Universal Solution" is republished with permission of Stratfor.

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