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It’s time to demystify the U.S. health care system, says the Montreal Economic Institute

Montreal, June 16, 2005 – Last week’s ruling by the Supreme Court of Canada reopens debate on the private sector’s role in health care, with the U.S. system often held up as a scarecrow. An Economic Note issued today by the Montreal Economic Institute looks at the leading myths associated with the U.S. health care system and shows that problems it suffers from are more closely linked to the perverse effects of regulations than to the “unbridled capitalism” that supposedly runs rampant in the market.

Large numbers of uninsured people?

The first myth examined by economist Norma Kozhaya is the notion that large numbers of uninsured people have no access to health care. The number of uninsured individuals is 45 million, but this is a minority (15.6%) of the total U.S. population of 288 million.

Being uninsured is often temporary, “caused by transitions such as job changes or family situations,” Ms. Kozhaya notes. As well, “a significant proportion of uninsured persons are among those who have the means to pay for private insurance but choose not to.”

Moreover, contrary to a widely held perception, even the uninsured have access to free health care provided by public hospitals, community health centres, university hospitals and so forth.

An entirely private system?

A second myth demolished by the author of the document is that of a fully private market where “unbridled capitalism” runs rampant. Even though the system is largely private, there exist extensive public health insurance programs: Medicare, for those 65 and older, and Medicaid, for low-income people.

According to OECD data, public health care spending per capita is higher in the United States (US$2,346) than in Canada (US$2,048), even at purchasing power parity. Among the OECD’s 30 member countries, the U.S. ranks ninth (at 6.6%), just behind Canada (at 6.7%), in the ratio of public health care spending to GDP.

Perverse effects of regulation

The U.S. health care market is, in fact, heavily regulated. This reality is partly to blame for the difficulties faced by many Americans in paying for private insurance, insofar as it holds back the market entry of less costly and more accessible insurance plans.

”The fact that insurance includes little in terms of co-payments (with fixed costs for services received) or co-insurance (with a portion of costs charged to policyholders) also helps explain the escalation of health care costs in the United States,” Ms. Kozhaya says.

She suggests that governments faced with applying the recent Supreme Court ruling avoid the traps U.S. authorities have fallen into in regulating private health insurance.

Titled Two myths about the U.S. health care system, this Economic Note is available on MEI’s Website.

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Information and interview requests: Patrick Leblanc, Director of communications, Montreal Economic Institute, Phone: (514) 273-0969 / E-mail: pleblanc@iedm.org

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