Your Good Health- Obama's Proposals for the American Health Service

Adulation today, a nightmare of an inbox tomorrow. Barack Obama doesn't have his troubles to seek, what with a global financial crisis and Iraq and Afghanistan to deal with. Yet there is one issue that may prove to be an even bigger challenge than these; and that is his proposals for American health care.

American health care, quite frankly, is a disgrace. America has the biggest GDP in the world, yet it is 41st in life expectancy, behind nearly all its Western European neighbours (Portugal is 42nd). Americans spend 15% of their GDP on healthcare and yet there are 67 million Americans uninsured. Drugs are prohibitively expensive, as I commented on in this post. Although there is a loose federal structure to healthcare in America, and Medicaid,(the state medical system)caters for the poorest, standards and access vary wildly.

Well, it won't be for much longer, if Obama gets his way. Here are his main proposals;

1.) Mandatory health insurance for children.
2.) Mandatory health insurance to be offered by employers to their workers. Small businesses will be exempt.
3. A set of national standards for medical insurance companies. At the moment, states have minimum requirements, but this varies a lot.
4.)Insurance companies will not be allowed to turn away people who are sick or old.
5.) The set up of a National Insurance Exchange, which will allow people on low incomes or who work for a small business, to purchase an individual plan, complete with tax credits to help them purchase the plan.

Now this looks like la-la land at first glance, doesn't it? Especially when the federal cost of this has been estimated at $1300 billion over the next ten years. But let's look at it another way.

America's GDP is $12,417 billion. 15% of that goes on health, which is $1,861 billion. But only half of that money is paid out by the government; the other half is what individual Americans pay. So the Treasury are in fact paying out $921 billion, or 7.5% of GDP, equivalent to the lowest percentage contributions in Europe. Barack Obama's plan is estimated to cost an extra $1300 billion over ten years, or $130 billion per year. So add that on and that takes you to $1061 billion per annum or just over 9% of the GDP. For that investment, the government will be able to add an extra 34 million Americans to the insurance books.

Next question; how are the insurance companies going to take all this? I think in the present climate, that they will actually take it quite well. Standardisation of rules will not go down well; neither will the insistance that they have to take on the old and chronically ill, thus increasing the risk. But in return, what they are going to get is far more customers and a captive market, at a time when many Americans will be opting out of medical insurance. The risk pool will be spread by the use of a National Exchange, which means that they can take on less profitable customers without too much loss.

How will Americans take it? In the land of the free market, spongeing off the state is seen as un-American. But the folk who would normally take this attitude, are struggling themselves just now, and will fall into the category of lower income earners who are eligible for tax credits. The ideal of pooling resources in a difficult time to create a public health service, will seem very attractive just now.

One group who will really like standardisation, will be public health officials. Standardisation at central government level will mean health data collection at central level. At present, this doesn't happen in America; there is no overall governmental body responsible for data collection and it makes it very difficult to plan for disease management. Do you remember how Annabel Goldie kept asking the government to establish a national methadone register? This was so that it was known how many people were on methadone, how many people had a drug problem, and therefore how important it was to set up drug rehab centres, instead of handing out methadone like sweeties. That is how important data collection is.

There are two groups that will not like these plans; employers and pharmaceutical companies. Many big employers do contribute to health plans for their employees at present, but Obama is planning to classify the employers' contributions as taxable income. This is a flaw in his plan, and it will arouse resentment. I think he should leave the contributions tax free, and take a lesson from what happened to pension plans in Britain when Gordon Brown decided to tax them at source and on maturity.

Pharmaceutical companies are really, really, really going to hate these proposals. Standardisation of insurance companies and the cost of premiums means more government involvement. More government involvement means more accountability for prices charged. More accountability for prices charged, means lower prices for drugs, and no more carte blanche. They are the group most likely to try and put a spoke in the wheel of these proposals; when Hilary Clinton tried to introduce health care reforms in 1993, they fiercely opposed her and succeeded in sinking them.

These reforms are a gamble. They are audacious, to coin Obama's phrase. But I think that if the insurance companies and pharmaceutical companies end up in opposing corners, instead of banding together, then he could get it through. And if he does, he could do more to combat inequality in America than all the civil rights movements before him. I wish him the best of luck and the American people the very best of health.