(This item originally appeared at Forbes.com on September 10, 2019.)
The current U.S. healthcare system is a monstrosity. Unfortunately, fixing it is not so easy as merely revoking the Affordable Care Act of 2010 (“Obamacare”) — as Congressional Republicans recently discovered in their attempts to do so. The U.S. needs some real fixes, not just going back to the dysfunctional pre-2010 status quo. Fortunately, a new book by economist Sean Masaki Flynn shows us a functional free-market-based alternative, that has been proven to provide one of the best healthcare outcomes in the developed world — including universal coverage — at a cost one-fourth of what we are now paying in the United States.
The book is The Cure that Works (2019). Anyone who is interested enough in public policy to be reading this review should buy it and read it.
The solution in Flynn’s book is based on a variety of good ideas that have been developed over the years. These good ideas, most of which originated in the United States but saw little or no implementation, were enthusiastically adopted by Singapore. Guess what: they worked! Singapore now has one of the best healthcare systems in the world, based on outcomes. It also has universal coverage for all citizens; and not only that, but all citizens receive the same level of healthcare service from the same hospitals and the same doctors. And, it costs 4.2% of GDP, compared to about 18% in the U.S., 10.5% in Canada, 11.0% in France, 9.7% in the U.K, and 10.6% in the OECD as a whole.
Let’s repeat that: Singapore, using a free-market-based system, has the best outcomes at less than a quarter of what the U.S. pays, and less than half of the OECD average.
To provide universal coverage, Singapore’s government subsidizes services for some lower-income people. This costs the government a total of 1.5% of GDP. Governments (Federal, State and Local) in the U.S. are now paying 8.5% of GDP, and obviously not providing universal coverage. What coverage they do provide (Medicare and Medicaid) is generally substandard, unlike Singapore’s solution which provides equivalent services for all.
That is an insane amount of winning.
I’ve adopted the theme of “twenty-first century capitalism.” The idea is to figure out what we have learned over the past century, and what constitutes “best practices” today regarding government administration. Mostly, I’ve focused on monetary, tax, tariff and regulatory policy. But, healthcare policy is a big part of our comprehensive solution, along with new alternatives to public pensions (Social Security).
For a long time, I was a lukewarm and reluctant supporter of single-payer-type healthcare solutions such as that of France. Despite their many flaws, they have produced better outcomes than the disaster we have in the United States. But, over time, and considering the pattern of corruption, criminality, tyranny, inefficiency and waste that characterizes anything the government gets involved in, I thought that some kind of free-market-based solution should produce much better outcomes. For one thing, I have an ugly feeling that “Medicare for All” in the U.S. would not replicate the mediocre but tolerably functional systems of other countries, but probably result in even higher costs and worse performance. Also, as Americans, I think we have a responsibility to show the rest of the world that a solution that embraces Liberty and Free Markets produces a better outcome.
I am beyond thrilled to discover that this is not just a hypothetical notion, but a proven fact.
Flynn describes Singapore’s system in great detail. It is rather complicated. Basically, it relies on certain core elements: “Health savings accounts” with mandatory contributions (a “provident fund” system similar to payroll taxes); high-deductible insurance systems with co-insurance; transparent pricing for all services, active shopping for the best value, and competition between service providers; government subsidy and backstop for lower-income citizens, providing universal coverage via the same network of hospitals and providers and the same level of service.
The idea is that free-market elements are used to keep prices low and to moderate spending. Because they are spending their own money (from health savings accounts), Singaporeans shop around for the best prices, which are always publicly available. The government even provides public price comparison information. Also, Singaporeans are actively engaged in deciding whether certain services are worth the price, thus eliminating overuse of services that emerges whenever the patient doesn’t have to pay for services.
Even low-income Singaporeans who are subsidized nevertheless shop around for the best prices, and spend their own money. The government pays a percentage of the cost, but these free-market elements keep costs down.
Insurance plans are age-rated. The young pay much less than the elderly. There is no subsidy of the elderly by the young.
Some specifics: in Singapore’s Medishield insurance plan, the annual deductible is S$2000 (US$1450). From S$2000 to S$3000, the copay is 20%. From S$3000 to S$5000, the copay is 15%, and above S$5000 it is 10%. For those between ages 21 and 30, the annual cost of Medishield is S$66. That’s about fifty bucks.
Hello Millennials: Fifty bucks a year! And you keep it even if you lose your job, or are self-employed.
If you are 86 to 91 years of age, you pay S$1,190 annually. These super-low costs are possible because price-shopping (and the competition between providers that results) keeps the cost low per procedure, and also, Singaporeans use fewer procedures (without any decline in outcomes) because the money comes out of their pockets. Patients themselves know very well if they are getting their money’s worth from healthcare spending. It’s their health, after all. They spend when they need to, and not when they don’t.
A heart bypass surgery in Singapore costs about US$18,000. These are free-market unsubsidized, unregulated prices. That is more than you would pay as a medical tourist at a high-quality hospital in Thailand or Malaysia. But, it is a lot less than the $130,000 you would pay in the U.S. Singapore’s doctors get paid a little less than in the U.S., but since Singapore’s income tax rates are much lower (this is possible in part because government healthcare spending/GDP is so much lower), Singapore’s doctors make about the same as their U.S. counterparts, on an after-tax basis.
Over time, Singapore’s health savings accounts have built up considerable balances. Today, existing balances are equivalent to five years of healthcare spending. Yes, Singaporeans have, on average, already set aside funding for five years of healthcare spending. Obviously, most people are not in need, which is why government healthcare subsidy spending is rock-bottom.
There is an element in Singapore’s success that Flynn doesn’t touch on, but that I think is important.
Singapore is teeny. The population of 5.6 million fits on an island of 725 square kilometers. This is not the size of a U.S. State. It is the size of New York City. New York City’s five boroughs have a population of 8.1 million in 783 square kilometers of land.
In other words, Singapore’s government healthcare administrators can take the subway to any hospital in Singapore, and learn firsthand, from patients, doctors and hospital administrators, whether things are working. Then they can make it back to their office by lunchtime.
I don’t think these kinds of results are possible via the U.S. Federal government. The Federal government might have a role to play in setting up the basic framework by which these programs can flourish. This might include FDA permissions for generic drugs, or a requirement that all service providers have public, unified (same cost to everyone) pricing.
Healthcare policy should be conducted at the State level — or even, as in Singapore and possibly New York City, at the municipal level. The Federal government should get out of healthcare completely. Let the States decide, and impose taxes appropriately. States that used Singapore’s system would find government expenditures dropping enormously, which of course means lower taxes, even without any Federal money.
Probably, some States (California and Massachusetts) would go with a France-style single-payer system, financed by France-style taxes. But, some States would try Singapore’s solution. One of them has already implemented some of these solutions, at least for government employees: Indiana. As Flynn describes, it worked there too. When people saw that a Singapore-style solution produces lower costs, and also lower taxes, they will either move to those States or insist that their own States adopt a similar policy.
Singapore’s system got started in the 1990s and didn’t reach its full development until the 2000s. This is new stuff, which is probably why you haven’t heard about it. The Cure That Works is required reading for anyone who is fed up with the present healthcare disaster in the U.S. I hope that includes: everybody.
