Illustration: Sarah Grillo/Axios
Democrats’ Medicare for All debate has turned into a referendum on the existence of private health insurance. But simply having private health insurance isn’t the weird thing about the U.S. system — the weird thing is how we go about it.
The big picture: Health care in the U.S. is yoked to employment — it's a form of compensation for workers, and then we use a smattering of public programs to fill in the gaps. Other rich countries, though, treat health care like a social program and organize their systems accordingly. And their way is cheaper and more effective.
About half of all Americans have health insurance through an employer, making it the single biggest source of coverage in the country.
- If you look at other rich countries comparable to the U.S., you’ll find plenty of roles for private insurance. But you won’t find such a close tie between work and health care very often.
- Most of those countries’ health care systems have better results than we do, for a lot less money. They’re also able to cover almost their entire populations.
How it works: If you get health insurance through your job, your employer probably pays most of your premiums. It doesn’t have to pay taxes on those benefits.
- That’s the single biggest tax break in the U.S. In 2018 alone, it allowed employers to avoid some $280 billion in taxes they otherwise would have owed, per the Tax Policy Center.
“One of the distortions in the market is the tax advantage. Whether employers want to be in this business, the evidence is mixed,” said Ashish Jha, the director of Harvard Global Health Institute.
- Some companies love being able to provide tax-free compensation, he said, while others, especially smaller businesses, are overwhelmed by the complexity of managing health benefits and would simply prefer to not have to take on that workload.
- Employers’ piece of the pie adds up to about 20% of total U.S. health care spending, according to federal data.
“In other countries [employers will] contribute, but not be responsible for providing the insurance,” said Irene Papanicolas, a health economist at the London School of Economics.
The closest comparisons to the U.S., among performing European countries, would probably be Switzerland and the Netherlands, Papanicolas and Jha said.
- Both of those countries have achieved universal coverage through private insurance.
- But the government tightly regulates what those plans cover, so even when a change in job might cause you to change insurance, the differences won’t be as great as they can be in the U.S., Jha said.
- Those countries, like most of Europe, also have stronger safety nets for people who are unemployed.
Between the lines: The Affordable Care Act tried to nudge the U.S. in this direction. It’s a regime of subsidized private insurance that you purchase on your own, which has to cover a specific set of benefits and abide by a standard set of consumer protections.
- The ACA, though, was limited to low- and middle-income people who didn’t have the ability to buy coverage through their jobs.
That fragmentation — one system for workers, another for the unemployed or self-employed, plus Medicare for seniors, Medicaid for low-income families, one for the military, another for Native Americans — contributes to our wasteful spending by driving up administrative costs.
Almost nowhere in that convoluted process does the U.S. do much to control health care prices — another big difference from similar countries, and obviously a big reason our system is so expensive.
- We also don’t use the power of government to break up monopolies or ensure that the market for things like hospital care are actually competitive.
- “We don’t regulate prices and don’t have competition,” Jha said.
The bottom line: “It’s not unique to have a public and private system, but to have so many public and private programs co-existing — I can’t think of any other county that has that,” Papanicolas said.