The Tragedy of the Ten-Million Acre Bill

President Franklin Pierce

I readily and, I trust, feelingly acknowledge the duty incumbent on us all as men and citizens, and as among the highest and holiest of our duties, to provide for those who, in the mysterious order of Providence, are subject to want and to disease of body or mind; but I can not find any authority in the Constitution for making the Federal Government the great almoner of public charity throughout the United States. To do so would, in my judgment, be contrary to the letter and spirit of the Constitution and subversive of the whole theory upon which the Union of these States is founded.

Franklin Pierce, in his veto of the 1854 Bill for the Benefit of the Indigent Insane

Though forgotten today and though issued by a one-term president whose name is synonymous with Oval Office mediocrity, the veto of the Bill for the the Benefit of the Indigent Insane became one of the most long-reaching vetoes in the history of the presidency. With it, Franklin Pierce derailed an early attempt to define a wide federal responsibility for the general welfare; the government would not seriously consider a broad role in this arena until forced into it by the social blight of the Great Depression.

Three times before, in 1848, 1850, and 1852, the great social reformer Dororthea Dix had petitioned Congress for a land grant that would fund asylums for the indigent insane. Three times, her request disappeared into the maw of conflicting interests and philosophies about the proper disposition of federal land. Only a few politicians considered her request from the moral angle. Finally, in 1854, she prevailed, only to see President Pierce veto the Bill for the Benefit of the Indigent Insane.

Pierce vetoed the bill on three grounds. First, he wrote, nothing in the Constitution authorized Congress to pass this kind of legislation. Second, however worthy the bill might be, enactment would open a floodgate of federal welfare legislation. Third, care of the indigent insane was properly the right and responsibility of individual states. Dix, of course, pursued the legislation in the first place because in her mind the states had abdicated their responsibility.

Dix used her powerful personality in the cause of social reform. Her organizing skills were limited, though, and she did not respond to Pierce's veto with a lobby or movement. Subsequent 19th C. progressives did not pursue health care reform of any kind even when they had the organizing ability. Because of the precedent set by Pierce's veto, the federal government did not significantly involve itself in social reform legislation until the New Deal (with of course the notable exception of the bills underlying Reconstruction).

And so Pierce, a president whom historians have described as "timid and unable to cope with a changing America," established the terms of a debate that resound today. In terms of promoting the general welfare, what is the proper extent of the federal role versus those of the states and private philanthropy? Or is the question itself disingenuous? In some matters, perhaps leaving the general welfare up to the states is a rationalization that accepts injustice in the interests of limited government and the advantages that brings to special interests.

For liberals and progressives, Dix's defeat taught a lesson that went largely ignored for 75 years: Congress is unlikely to pass social reform legislation out of a sense of moral imperative. Social reform legislation requires organization, a skill progressives finally mastered and applied during liberalism's great era stretching from 1933-1965. Today, despite the left's inability to mount a large-scale progressive movement, the lesson of 1854 is reflected in the efforts of thousands of community organizations across the United States. One of their members became president.

To read more about this fascinating episode in American history, see The Social Service Review, Vol. 36, No. 1, March 1962 (link unavailable).

Country Profile: Belgium

Population 10,400,000

Government Federal parliamentary democracy

Health Care Model Bismarck

GDP 395B (2010 est.)

%GDP spent on health care 9.5

Per capita income $37,900

Health care expense per capita 3,563 (adj.)

Health care expense per capita normalized to income of 50K 4,700

Life expectancy (m/f) 77/82

Health life expectancy (m/f) 69/73

Overview

• Goals: Increasing access, ensuring quality of care, sustainability of system
• Universal access
• Choice of provider
• Broad set of benefits
• Mix of public and private funding
• Economic efficiency of delivery comparable to other European nations
• Regulated at national level
• Preventive care and health promotion delivered at regional and community levels

Structure

The Belgian health care system is organized around a "principle of solidarity" that recognizes no distinction between rich and poor, healthy and sick, with no selection of risk. Based on the Bismarck concept of social insurance, the system covers more than 99% of the Belgian population with more than 8000 services. Treatment decisions are made by doctor and patient, and patients are free to choose their own doctor. 

Health policy decisions are split between Belgium's federal government, regions, and communities. The national government regulates and finances the system; among other responsibilities, regions and communities deliver public and preventive health and coordinate primary and palliative care.

Financing

Financing occurs through a combination of progressive taxation, social security taxes, a consumption tax, and out-of-pocket payments (20%). Six private, noncommercial sickness funds provide compulsory health insurance to all Belgians regardless of economic status, medical condition, or risk; a federal agency supplies a budget to the sickness funds. Patients make a co-pay to physicians or hospitals, which bill the sickness fund for the remainder. Occasionally, patients make an out-of-pocket payment.

Delivery
Although primary care is typically the first point of contact for a patient and the health care system, there is no formal referral system. Thus for many patients, the specialist is the initial contact. Ambulatory care practices are private and paid via fee-for-service.

Belgium offers two forms of hospitalization: general (acute, specialty, and geriatric) and psychiatric. Alternatives include day hospitals and long-term care facilities, as well as community services of the elderly and the mentally ill.

While communities have responsibility for most public health services, including education and preventive care, they have on occasion collaborated with the federal government to coordinate and finance public health activities such as immunization and breast cancer screening.

Generally, the federal government sets policy and sets targeted taxes. For example, Belgian taxes on cigarettes and alcohol are designed at the federal level to discourage consumption. However, Belgium's Flemish, French, and German communities establish policies for their particular health needs.

Challenges

Belgium's health care challenges are familiar: The elder population will double over the next 25 years, creating budgetary and capacity difficulties. Moreover, aggregate costs will rise as medical inflation continues to outstrip general inflation. As a result, the federal government and the community government will struggle to meet the commitments to access, quality, and sustainability. 

Overall

According to the Brookings Institution,

Devoting only half as much of its GDP to health as the United States does, Belgium has created a flexible, public-private partnership to pay for and deliver health care that preserves many of the attributes that Americans desire: universal coverage; comprehensive coverage of physician services, hospital care, and prescription drugs; free choice of primary physicians and specialists; and acceptable waiting periods for non-emergency services.

WHO Ranking  21 (US 37)

To read more about Belgium's health care system, click here and here.

To Live Longer: Don't Smoke, Eat Less, Exercise More

According to a National Research Council report, Explaining Divergent Levels of Longevity in High-Income Countries, life expectancy in the United States continues to increase, but at a slower rate than in the past. The most likely culprits are smoking and obesity; the latter may account from 1/5 to 1/3 of the reduced rate. According to the CIA World Factbook, the United States currently ranks 49th in the world in life expectancy. (Monaco, at nearly 90, is first.)

To learn more about life expectancy, click here.

In another study, Circulation: Journal of the American Heart Association reports that the costs of heart disease are expected to triple over the next twenty years. Combined costs in dollars and lost productivity are expect to rise from $445B today to $1.094T.

Principles of Efficiency

So why is it that other countries deliver health care with greater economic efficiency than the United States?

For starters, it would be hard not to: The United States doesn't really have a health care system. It's a more like a fragmented, uncoordinated apparatus linked by a loose and often contradictory regulatory framework and characterized by both overtreatment and undertreatment. An onerous administrative burden, health care driven by profit and not value, and the absence of several vital traits of an economically efficient system combine to give the United States the most expensive health care in the world, although by no means the best.

What are some of those key traits? Let's look briefly at two systems that are efficient, despite diametrically opposed approaches to universal access. The health care system of Finland (%GDP on health care of 8.5%, HCE of 7.6) is government-owned and -operated -- classic Beveridge Model socialized medicine. Singapore (%GDP on health of 3.4%, HCE of 21.5) is a public-private partnership funded by a combination of government subsidies, a limited NHI scheme, mandatory Health Savings Accounts, and out-of-pocket payments. Nonetheless, these two disparate systems have much in common:

• a national health policy formed by a democratic process and directed by the national government
• a commitment to universal access and care, regardless of ability to pay
• an emphasis on preventive health based on primary care and public education
• a strong government regulatory presence
• targeted policies and incentives aimed at bolstering efficiency within the model (Finland, for example, has a pharmaceutical policy that rewards use of generic drugs.)

As we'll see again and again, these are vital elements in the successful delivery of health care based on value, a results-driven approach that Michael Porter and Elizabeth Olmstead Teisberg, in their influential book, Redefining Health Care: Creating Value-Based Competition Based on Results, that produces both quality and efficiency. (Click here to for Porter and Teisberg's excellent web site.)

So, it turns out that the road to efficiency is straight enough. Obviously, negotiating the obstacles of special interests along the way is another story. 

HealthMatters will discuss each of these conditions in detail in later entries.

An Act for the Relief of Sick and Disabled Seaman

President John Adams

In 1798, President John Adams signed the United States' first health care reform law -- An Act for the Relief of Sick and Disabled Seaman. The law authorized the creation of a government operated marine hospital service and mandated that privately employed seamen purchase health care insurance. Attorney and health care journalist Rick Ungar explains the law here. Click here to read it in its entirety (believe it or not, the law is but a little over a page long).

Which Country Has The Most Efficient Health Care System?

This is a raw measure, but useful for comparison purposes. I've taken the Healthy Life Expectancy of 25 countries and divided it by their % of Gross Domestic Product spent on health care. This yields a result equal to the number of healthy years purchased by each per cent of GDP spent on health care. Let's call it the Health Care Efficiency Ratio:

HCE Ratio = Healthy Life Expectancy / % GDP Spent on Healthcare

Healthy Life Expectancy (HALE) is a statistic devised by the World Health Organization, defined as the "average number of years that a person can expect to live in 'full health' by taking into account years lived in less than full health due to disease and/or injury." HALE is always less than full life expectancy, typically by 7-9 years. (To read more about HALE, click here.)

For example, Norway spends 8.4% of its GDP on health care, and Norwegians have a HALE of 73:

HCE = 73/8.4 = 7.8

In Norway, each per cent of GDP spent on health care purchases 7.8 years of healthy life.

The following ratios are taken from 2006 statistics; because of population aging and medical inflation, each is likely lower now.

1. Singapore 21.5 (73/3.4)
2. Republic of Korea 10.9 (71/6.5)
3. San Marino 10.6 (75/7.1)
4. Luxembourg 10.1 (73/7.2)
5. Ireland 9.7 (73/7.5)
6. Japan 9.6 (76/7.9)
7. Finland 9.5 (72/7.6)
8. Israel 9.4 (73/7.8)
9. Spain 9.1 (74/8.1)
10. United Kingdom 8.6 (72/8.4)
11. Norway 8.4 (73/8.7)
12. Sweden 8.3 (74/8.9)
13. Italy 8.2 (74/9.0)
14. Iceland 8.0 (74/9.3)
15. Netherlands 7.8 (73/9.3)
16. New Zealand 7.8 (73/9.3)
17. Australia 7.6 (74/9.7)
18. Belgium 7.6 (72/9.5)
19. Denmark 7.6 (72/9.5)
20. Canada 7.3 (73/10.0)
21. Germany 7.1 (73/10.3)
22. Portugal 7.1 (71/10.0)
23. France 6.6 (73/11.1)
24. Switzerland 6.6 (75/11.3)
25. United States 4.6 (70/15.3)

At first glance, the most interesting trend is the clustering of the Beveridge Model countries toward the upper center of the list (7, 10-14, 19). Three NHI model countries (New Zealand, Australia, and Canada) are in the bottom half, but the Republic of Korea ranks second. (The World Health Organization does not have statistics for Taiwan, which also uses the NHI model.) Bismarck Model countries are at the top and bottom, although it should be noted that WHO ranks France as having the best health care system in the world. The French get what they pay for.

Apart from Singapore's astonishingly efficient delivery of care, the most salient point is the high costs associated with having no model at all: It's no accident that the United States is at the bottom of the list.

Next, HealthMatters will examine what the top rated systems do to ensure efficient use of their health care dollars.

Country Profile: Australia

Population 20,000,000 (primarily urban)

Form of Government Parliamentary democracy

Economic System Capitalist

Health Care Model National Health Insurance (Medicare)

GDP $890B

% GDP spent on health care 9.7

Per capita income $38,420 (2006, adj US $)

Health care expense per capita $3,528

Health care expense per capita normalized to income of 50K $4,591

Life expectancy (m/f) 79/84 (as of 2006)

Healthy life expectancy (m/f) 71/74

Overview

• Goals: Equity, efficiency, and quality
• Tax funded
• Ready access
• Generally cost-effective, good outcomes
• High level of public support
• Concerns about long-term sustainability due to rising costs
• Disagreements about funding and accountability between national and state governments
• Waiting lists for elective surgery
• Disparities in urban and rural care
• Continuing poor health of indigenous population

Structure

The Australian health care system is a mix of public funding and public and private care. The national government's role is limited to funding and formulating health policy on a population basis. States provide additional funding, provide public hospitals, and have great authority in administration of health policy. Localities are primarily concerned with providing environmental health services. The private sector supplies the majority of general practitioners and specialists, a number of private hospitals, diagnostic services, and supplemental insurance.

Because of the division-of-power structure of Australia's democracy, the national government and the state governments must achieve consensus in matters of health policy. (Australia has six states.) Clinical practice is largely self-regulated, although licensing and accreditation is required of most providers.

Financing
The public-private financing breakdown is two-thirds/one-third, with the national government paying nearly half of health costs, collected through general taxation and a mandatory Medicare levy of 1.5% of personal income. The majority of consumer expense is for uncovered pharmaceuticals.

Delivery

Treatment is largely free and unlimited, although public hospital services are prioritized. Two-thirds of Australia's doctors are general practitioners in private practice; in addition to providing primary and preventive care, these doctors perform minor surgery and serve as referral gatekeepers to the rest of the health care system.

70% of the hospitals that provide secondary and tertiary care are public. Combined with cost pressures, improvements in surgical technique and patient management has reduced the average length of stay in recent years. The chief complaint about Australian secondary care is about lengthy waits for elective surgery, a function of the prioritization of services.

Australia's national and state governments have combined to deliver a robust public health program that has had notable success in reducing coronary disease, the AIDS/HIV infection rate, cigarette smoking, and the mortality rate from traffic accidents. Australians enjoy a high level of immunization vaccination that has reduced the level of infectious disease, although not entirely.

Challenges
As with virtually all developed nations, Australia's health care system faces financial pressure brought about by budget constraints and medical inflation. Health care services in Australia are not well integrated, and debate is ongoing regarding the proper balance of public and private insurance. The health inequalities experienced by indigenous Australians are so protracted and severe that the World Health Organization calls them "intractable."

Overall
Australia has three basic goals for its health-care system: Equity, efficiency, and quality. Progressive taxation protects equity, although there are concerns that a two-tier system could develop. The mixed national-state governance compromises efficiency and also renders reform difficult. In recent years, quality has emphasized measurement of health outcomes, which have improved as reflected in Australia's long life expectancy.

WHO ranking 32 (US 37)

Click here to learn more about Australia's health care system.

The National Health Insurance Model

The National Health Insurance model places a foot in both the Bismarck and Beveridge camps. Like the Bismarck Model, it is insurance-based; like Beveridge, it is single payer. The most familiar application of National Health Insurance to Americans is Medicare: Employer-employee contributions are used by the federal government as an insurance fund. The government in turn pays private providers. That's the essence of the NHI model.

Because the government is the sole payer, it can exert tremendous bargaining influence on the prices of medical services and drugs. That's why Canada -- whose Medicare system is the most well-known version of NHI -- has cheap drug prices that lure Americans north of the border even though it is illegal to purchase prescription medication abroad. NHI countries generally control costs by limiting the services they will pay for and by limiting the availability of certain services, thus creating the lengthy waits for non-acute secondary care.

Therein lies the essential tradeoffs of the NHI model; to achieve universal coverage with cost controls, the government

• strongly influences prices and therefore provider compensation
• limits the services covered by the national insurance
• limits the volume of selected services and procedures

Besides Canada, Australia, South Korea, and Taiwan have adopted the National Health Insurance model.

Preventable Deaths

Of the top five countries, France and Japan provide health care via the Bismarck Model, Australia uses National Health Insurance, and Spain and Italy use the Beveridge Model.

Getting Health Reform Right

Peter Berman, William Hsaio, Michael Reich, and Mark Roberts -- authors of Getting Health Care Right: A Guide to Improving Performance and Equity -- have consulted around the world helping countries design health policies and systems. (Hsaio was an instrumental figure in Taiwan's adaptation of National Health Insurance in 1995.) Over the years, the group has developed ten guiding principles for reformers:

1. Clarify goals and values. A health care systems is a means to a number of ends, and it's vital to articulate precisely what those ends are. Moreover, they must be achievable in a context that is both politically feasible and ethically sound.
2. Diagnose the root problem -- honestly. Work backwards from a problem until you've have identified its source, which might be anything from costs to corruption to apathy to ignorance of public health.
3. Build health systems, not just medical systems. A effective health care infrastructure is horizontal, based on prevention driven by funded and staffed subsystems for primary care, sanitation, nutrition, and education.
4. Plan based on your nation's history, culture, and needs. 
5. Remember: Experts don't know everything: Reflect on personal values and political strategies, and incorporate them.
6. Become a political animal. Reform is about more than policy. "Reformers need to embrace, not shun, politics."
7. Just do it. Reform won't happen in one fell swoop, and there will be setbacks. Focus on progress and keep plugging away.
8. Refine and refine. Fixing one thing might break another. Make refinements using the five "control knobs" of financing, payment, organization, regulation, and behavior.
9. Learn from mistakes. Accept that health care reform means two steps forward and one step back. Learn not only from your steps back, but from the errors of others.
10. Be proud of what you do. Rewards are few and far between, and the time required for meaningful change means that many reformers do not live to see the fruits of their labors. Look to yourself for validation and know that what you do is important.

For details, see PHC's Harvard Public Health Review article here.

The Bismarck Model

Otto von Bismarck

In 1883, the reactionary German chancellor Otto von Bismarck, a Prussian autocrat through and through, proposed the health care model that came to be adopted by many European nations and that echoes decisively today in the American health care apparatus. Though no social reformer, Bismarck viewed universal health insurance as an effective tactic in his grand design for German unification, which trumped his conservative tendencies. What has come to be known as the Bismarck Model survived the German militarism of World War I, the unstable democracy of the Weimar Republic, Naziism, World War II and its aftermath, and eventual reunification. Its durability cannot be doubted.

Today, the Bismarck Model serves as the predominant means of guaranteeing universal coverage in Europe, used in Germany, France, Switzerland, Belgium, Netherlands, and others. (Japan is also a Bismarck Model country.) The implementation varies, but all mandate insurance in one form or another. In Germany, for example, employers and employees jointly fund insurance via withholding; in Switzerland, individuals purchase their own policies. Even so, Bismarck Model countries share common traits:

• Short waits, quality care, relatively low costs, and simplified administration
• Tight regulation of insurance which is often (but not always) sold on a nonprofit basis
• Claims paid without challenge
• No exclusion for pre-existing conditions
• Prices for most procedures fixed by the state
• Private hospitals and physician practices
• Generally high positions in the World Health Organization's overall rankings

There are, of course, tradeoffs. By eschewing a socialized system for which culturally most of them are ill-prepared, the Bismarck nations accept greater costs and less efficiency. (In health care, efficiency refers to performance measured against outcomes and costs.) While physicians receive a free education, have virtually no administrative overhead, and are rarely sued, they also earn less than their American counterparts. Moreover, despite state price fixing, cost issues are often addressed by raising premiums instead of controlling costs.

With the exception of veterans eligible for the VA system and active duty military personnel, most Americans under the age of 65 are either self-insured or have health insurance either as a benefit of employment. However, as indicated in the table above, the American approach to health insurance comes at a much greater cost than to countries operating under a pure version of the Bismarck Model. Lessons we can draw from these countries include:

• The importance of a universal mandate for insurance under the auspices of single program
• Consumer protections such as no exclusion for pre-existing conditions are feasible only with mandates
• Immediate payment of claims without challenge lowers administrative burden and the financial impact on patients
• Insurance regulation, nonprofit insurance, and a fixed price for procedures help control costs
• Privatized care can exist successfully in a regulated environment

Later, HealthMatters will look in detail at the approaches of various Bismarck Model countries.