Solving The American Health Care Crisis



* This summary was written in 2007. Contents, figures, data, and events have been updated in the published book.

The fundamental premise of Solving the American Health Care Crisis is that most American decision makers are in a state of denial. Many of them consistently claim that the United States has the greatest health care system in the world. That claim is hard to support when America spends over 16% of its gross domestic product (GDP) on health care, while more than 47 million Americans have no health insurance and millions more are under-insured.

Other wealthy nations like Japan, Australia, Canada, and rich European nations spend between 8 to 11% of their GDP on health care and enjoy superior service and universal coverage. America is the only rich country that does not provide universal health care coverage to its population.

Surprisingly, Americans, the citizens of the wealthiest country in the history of the world, have a lower life expectancy rate, higher rates of heart disease and cancer, and an infant mortality rate that is twice as high as other rich industrialized nations. Even Cuba has a lower infant mortality rate than the United States according to the CIA World Factbook.

Per dollar, America spends much more and gets much less in return, than other affluent Western nations do, when it comes to health care spending. It is time for American policymakers to stop bragging about their health care system and to start acting on their hollow promises to find real solutions to the health care crisis. Health care spending is expected to reach nearly 20% of America's GDP within the next 10 years, which is unsustainable.

The above facts are well known amongst policy makers, but are not really known amongst the general population in the US.

The book compares and contrasts the health care systems of other industrialized countries to that of the United States. Several critical issues facing the American health care system are described. Finally, universal health care plans that are cost effective and are financed either publicly or by both public and private institutions are presented as possible solutions and the feasibility of implementing them is discussed. These plans take into consideration the best practices of the health care systems of other affluent nations in the world, and include the implementation of information technology, which should have a major role to play in cutting costs and making any health care system more efficient and cost effective.

Major problems and issues relating to the American health care system

 According to Tommy Thomson, ex-secretary of Health and Human services (HHS), the number of un-insured will reach 54 million by the year 2010, and health insurance coverage by small businesses will decline from 74% in 2005 to 60% in 2015.

The key issues that emerge from the rising cost of health care and its affordability and accessibility are:

  • Americans have a lower life expectancy, higher rates of heart disease and cancer, and an infant mortality rate that is twice as high as other rich industrialized countries. Even Cuba has a lower infant mortality rate than the US according to the CIA World Factbook.
  • America has the most fragmented health care system amongst the rich industrialized countries, with diverse entitlement programs managed at federal and state levels. This contributes to a lot of paperwork and bureaucracy. On average, over 30% of the funds disappear in administration costs, compared to less than 10% in other rich countries.
  • Over 47 million people are un-insured and millions are under-insured.
  • The cost of health care is rising at least twice as fast as the rate of economic growth.
  • Major companies and municipal governments are passing more of the cost of health care to their employees. Most companies and local governments will not be able to meet their obligations to health care to retirees.
  • Many small businesses, especially in the service sector, do not even provide health insurance to their employees.
  • Most companies and city governments have not set aside enough money to meet health care obligations to retired employees.
  • More and more companies will shift their manufacturing to other countries, as they will not be able to sustain health care costs for their employees.
  • There is a steady rise in bankruptcies amongst individuals as well as companies due to the cost of health care. There were over a million bankruptcies filed by individuals in 2005 who could not afford to pay their health care costs.
  • The cost of prescription drugs is rising even faster than the general rise in health care costs.

What has brought about this situation in health care and why is the cost rising so fast? The main reasons are listed below.

Major problems and issues relating to the American health care system

Bureaucracy and paperwork

There has been a quantum leap in the amount of paperwork required to carry out the daily tasks of health care in the last twenty years. The increase is over 1,500%, a mind-boggling number. Charts presented by the Bureau of Labor Statistics confirm these figures.


Nearly 50% of health care spending in the U.S. is publicly funded by federal, state, and county level governments through various entitlement programs such as Medicare, Medicaid, the Veterans Administration (VA). The result is a compartmentalized and fragmented system. This is also true in the private health care sector, with over 1500 health insurers handling the private insurance market, each offering unique health policies that have different deductibles.

There are a great many problems related to eligibility for entitlement programs and insurance plans as well, all of which have contributed to more bureaucracy and paper work.

The prescription drug program

Medicare Part D is far too complex and it only adds to the federal budget deficit. This program has several major flaws:

  1. The fact that the federal government is prohibited from negotiating with pharmaceutical companies for cheaper drug prices for patients, yet the Veterans Administration negotiates directly with the pharmaceutical industry about the price of each drug
  2. The ban on importing prescription drugs from Canada, imposed by the Department of Health and Human Services, unless they are approved by the FDA
  3. The coverage gap or 'doughnut hole' in prescription drug coverage

Advertisement and drug companies

The prescription drug advertising budgets of pharmaceutical companies, in particular those of American companies, have increased at a phenomenal rate in comparison to research and development budgets. They increased from $5 billion in 1995 to nearly $20 billion in 2005.

Another problem is that many drug companies hype their advertising campaigns for prescription drugs by pitching misleading information, sometimes to the point of ridiculousness. Basically, drug companies have become Pill Pushers—trying to create demand for pills where there is not even a disease. Many companies provide extensive research grants and gifts to doctors in various universities and institutions so that researchers can vouch for the credibility of their drugs.

Major drug companies get an easy ride from the media for their absurd advertisements because it is difficult for them to criticize companies that bring them substantial revenues.  Ted Koppel of News Night, soon after leaving the show, indicated that many advertisers wanted to influence the content of the reporting.

Lobbyists and their influence on officials and legislators

There are at least two lobbyists in health related fields for each elected official in Washington. Health care is one of the biggest lobbying issues, with over $300 million spent in 2005. Money talks! The amount of money spent by lobbyists to influence Congress and the executive branch is not helpful in drafting legislation related to health care in America.

Health insurance and insurance policies

Employees of county, state, and federal governments, and of large companies and small businesses, have all seen premium rates for health insurance rise by double digits since the year 2000. This rate has slowed down in the last few years but will still remain at least twice the rate of inflation in the foreseeable future. Top executives of health insurance companies received exorbitant salaries and remunerations from their companies, according to a report in the Economist on June 12, 2004.

Over 1500 health insurers handle the health insurance market. The diversity of private health insurance is amazing and in this respect no other rich country in the world provides so much choice in policies with varying deductibles. Insurance companies can also deny health insurance to sick people, and many times bureaucrats in this industry, instead of doctors, determine what kind of treatment and drugs a patient should receive.

Insurance policies are written by corporate lawyers, and are not easily understandable by the average person.

Doctors, lawyers, and malpractice lawsuits

The fear of being sued leads doctors to practice "defensive medicine," i.e., ordering excessive tests, avoiding risky procedures, and referring patients to see other expert doctors. This kind of "defensive medicine" is becoming routine, leading to higher costs in health care and a waste of the American health care system's resources.

There are too many groundless lawsuits, with over 60% of the attorneys of the world residing in the United States. Litigations have increased the cost of malpractice insurance, inducing many doctors to leave their medical practices altogether.

Problems and issues relating to long-term care, emergency rooms, and mistakes made in the delivery of health care.

Although America has some of the finest hospitals in the world, contributes to high quality research, and has competent and highly skilled doctors and nurses, nearly 100,000 patients die each year because of mistakes made by hospitals staff. America also lies at the bottom of the league amongst the rich industrialized countries of the world in regard to long-term care.

Myths and misconceptions

The United States is unique amongst the rich nations, in that it has a fragmented, inefficient, and bureaucratically wasteful system that excludes over 47 million uninsured people from health care. There are many myths and misconceptions amongst the American population – some of these are:

  • America has the best health care system in the world.
  • Socialized medicine is bad.
  • Anyone in America has access to health care by going to the emergency room.
  • Many people come to the United States for health care.
  • Americans will not accept health care rationing as people have in other countries.
  • Immigrants (legal and illegal) are crowding emergency rooms, thus increasing the cost of health care for everyone in America.

Why is it not possible for the richest and most powerful country in the world, with the finest brains and institutions, to devise a universal health care system that is simple and cost effective? Is an ideology more important than the physical security of an individual? Why can't America learn from some of the best practices of health care systems in other rich countries, and create an even better system? Is it the pride of a nation that has so far failed to look at systems that are not American? Why not start fresh and create a new system, instead of trying an incremental approach to a fragmented health care system? Why is there a lack of vision, when some policymakers and politicians are aware that the current health care system is unsustainable? Where is the will of these people? Why not use the best practices of information technology to cut down on the costs of health care? The main question is, is it the basic right of every person in the United States to have health care security, rather than to have a health care system based on privilege? Why not apply a simple, logical, and wise approach to finding appropriate solutions? The answers to these questions are there! I am certain that within the next couple of presidencies a new and more cost effective universal health care system in America will emerge.

In making the right choices and decisions, we must know all the important facts about the health care system and use the wisdom of the many who care, in order to provide universal health security to all the people of America.

Cost Effective Solutions to the American Health Care System

Consideration of all the points discussed previously is necessary in order for a rich and large country like America, or the fifty individual states, to provide decent health care with modern medicine for its entire population.

There are only three possibilities on which a universal health care system can be based.

  1. A system that is privately funded

  2. A system that is a combination of private and public funding

  3. A system that is only publicly funded

Number one is not an option, as the health care system will become money driven, with ever escalating health care costs. The system will become unsustainable in a short period, even in the richest and most capitalistic economy in the world. Hence, numbers two and three are the only options, as long as the health care system is not fragmented and it covers all the population in America. I am convinced that a cost effective American health care system will evolve as long as politicians and policy makers do not clutter up their search for solutions with their ideologies. They will have to swallow their pride too, and confess that they have repeatedly misled the population by claiming that America has the best health care system in the world. They have to transcend preserving their personal power, suppress their egos, and take a good look at the best practices of the health care systems of the other rich nations. They must do this in order to develop and implement a health care system that provides adequate and quality health care for all people. America has to start with a fresh approach to developing a health care system, one that is superior and more cost effective than existing systems in the world. America has the means to develop a newer and better health care system, from scratch, because it has the finest health institutions and hospitals. It also has brilliant minds and doctors who are wise and ethical, and it has a bureaucracy for processing information already in place. Sadly, despite this, the current health care system has not only become money driven, it has
become antiquated as well.

As a starting point to developing a new, simple, and cost effective health system, the President and Congress could set up a commission of about ten people of integrity and character, who are wise and ethical, and give them a clear mandate to include all the existing problems and issues, as well as considering the following:

  • The health care system must be as simple as possible, cover the whole population of America, and cater to patients needs.
  • Health care should be based on need rather than on ability to pay, but there can be limits on what 'basic health care' is covered. Any person can pay top-up insurance to cover an emergency, waiting list, or any other special requirement that may not be immediately available or is rationed under the 'basic health care' provided.
  • The commission members should study the health care systems of other rich countries and evaluate the best health care practices amongst them.
  • The commission should ask why America spends 40–50% more per person than other rich countries do, and gets much less in return.
  • The commission should also study the viability of a health care system that either is publicly and privately funded, or solely publicly funded. Either one of these systems could be applied to the whole United States, or to the individual states.
  • The commission should consider an electronic medical card for each resident of the United States, which contains the complete medical history of the person since birth. Such a card would cut down on medical mistakes as well as on paperwork, thereby reducing costs in the health care system.
  • Emphasis on disease prevention should be of the highest priority in a truly comprehensive study by the commission members.

The commission should be given time to develop cost effective health care policy suggestions with input from all sections of American society. They should look closely at systems in other rich countries that have been in place much longer than America's while costing 50% less. They should also question such things as why the Singapore health care system has an infant mortality rate of only 2.3 per thousand while in the U.S. it is nearly 6.9.

Each state could then develop a health care system from the policy suggestions recommended by the commission, for its residents to vote on.

Prevention and regular physical examination: Prevention of disease or illness is a necessary part of evolving a new and cost effective health care system, especially for people over forty years of age. It is important that federal, state, and city governments spend adequate money to educate people on the importance of a healthy diet, eating at regular times, essential daily exercise, and making an effort to reduce stress and conflict in their daily lives.

In order to get a 'prevention psyche' into peoples minds, a massive advertising and media campaign— far larger than the anti-smoking and seat belt campaigns—must be conducted by federal, state, and county authorities. At the same time, all unhealthy drinks and foods should be removed from school and college vending machines. This is one of the most important issues under any system, one that can dramatically lead to better health and at the same time dramatically cut health care costs.

In the Scandinavian countries of Norway, Sweden, Finland, Denmark, and Iceland, people over forty are encouraged, sometimes by mandatory rules, to have regular physical check-ups. Most of the people in these countries comply. Failing to recommend strongly something similar in the United States is hard to understand.

Role of information technology (IT): In the United States, paperwork, inefficient communications, and bureaucracy riddle the health care system. In some estimates, it costs as much as 20–30% of the total health care expenditure of over 2 trillion dollars, while these costs are less than 10% of the total expenditure in the health care systems of other rich countries in the world. Extensive use of information technology can cut down the cost of health care. All office work—including billing, diagnosing, prescribing, and other areas—can be much more efficiently organized by effectively using IT technologies.

There is also a need to incorporate a confidential electronic network of health information for each patient in the health care system, thus eliminating unnecessary paperwork and cutting down on medical errors. In an efficient IT health care system, patient records would simultaneously be available to all appropriate health care providers—and only to health care providers.

Medical tourism: Extensive use of medical technology is essential in testing, treatment, procedures, and operations on a patient. The cost of this technology is becoming almost prohibitive in the American health care system. Many of the economically developing countries like Mexico, India, and Thailand offer these treatments at costs that are less than 1/10 of those in the United States.

Medical tourism can be broadly defined as the provision of cost-effective private medical care, in collaboration with the tourist industry, for patients needing surgical and other forms of specialized treatment that they cannot afford where they live.

It would also be necessary for federal and state governments to take appropriate steps to regulate, or even legislate, some of the most important issues mentioned below, in order to cut the cost of health care and make it efficient.

  • Subsidize health care for those who cannot afford it: the elderly, sick, and other vulnerable groups.
  • Eliminate fragmented entitlement programs, i.e., Medicare, Medicaid, the Veterans Administration, and others financed and managed by federal and state governments. A universal health care system will substantially cut down the waste and cost involved in running these diverse and fragmented entitlement programs.
  • The role of private insurance companies must be restricted, with limited policies and deductibles, and insurance companies should not be able to pick and choose their clients.
  • Solutions must be found to restrict frivolous lawsuits.
  • There should be controls placed on the pricing of prescription drugs, as well as on the aggressive advertising of them by pharmaceutical companies.

Different Approaches to Health Care Reform

Massachusetts and California were the first states in America in which both the state Assembly and the state senate passed universal health care bills in 2006. Below, the universal health systems of both states are briefly summarized.

Universal Health Care bills of Massachusetts and California

The Massachusetts Health Care reform Plan mandated that everyone in the state must purchase health insurance by July 1, 2007, when it was enacted into law. The plan requires the participation of both individuals and companies, and it includes a requirement that employers with more than 10 employees must either provide health insurance coverage for their employees or pay a "fair share" contribution of up to $295 annually, per employee, in to a special fund. Massachusetts enjoys a strong foundation of employer sponsored insurance, and is also supported by expansive Medicare and Medicaid entitlement programs, which has made it easier for the state to achieve universal health care coverage. There is preservation of the safety net for people who cannot afford health insurance.

The Massachusetts universal health care plan is basically a combination of private and public funds but it will require a major overhaul of regulations on how insurance companies deal with health policies.

The Californian Universal Health Care bill SB 840 is basically a publicly funded health care system that includes all the residents of the state. Both the state senate and Assembly passed the bill, but Governor Schwarzenegger returned the bill without signature in September 2006 and so it was not enacted into law.

The California bill envisages that all federal, state, and county monies will be reallocated to the state Health Care Fund, supplying one-third of the needed funding. The remaining funds would come from state health care taxes that would replace health insurance premiums now paid to insurance companies, and from co-pays and deductibles paid to health providers. Premiums would be based on the incomes of individuals and families and would be in proportion to wages. Basically it is a single-payer health care system that is very similar to the health care systems of Scandinavian countries. This system would be cost effective, as it would eliminate much of the paper work. The complete bill was posted at

The California universal health care bill SB 840 and the Massachusetts Health Care Reform Plan are two ways to create universal health care. Another way would be to create a universal plan that has similar types of services as those mentioned in the 'Benefits' section of SB 840 plus 'top up' insurance, which would include other benefits as required by the patient.

Summation and Action

Martin Luther King Jr. stated in one of his speeches, "Of all the forms of inequality, injustice in health care is the most shocking and inhumane." The inequality of health care has steadily increased as more and more people are uninsured and underinsured. The
steady rise in bankruptcies—over half of the bankruptcies filed in America are because people are unable to pay their medical bills—is a shocking state of affairs for a rich country like America.

The United States of America is number 1 in obesity, 37 in infant mortality rate, and tied at 54 with Fiji for fairness in health care, yet it is spending over 16% of the GDP on health care—the highest per person by far in the world. What has gone wrong? Certain politicians and policy makers need to wake up, and not bury their heads in the sand by creating a health care system that is money driven. Incremental changes to the current health care system will only lead to higher costs and less care for the entire population.

It is time to act. A new health care system must be implemented, one that is inclusive and fair, and provides for each and every person in the nation. Knowledge, facts, and lessons learned from the experiences of people in America, and in other nations, are out there. Action must be taken on the most important domestic issue of all, creating a universal health care system.

Let there be no 'fear factor.' Everyone should be able to visit a doctor and seek treatment without worrying about money. It is time for politicians and decision makers to leave their ideologies and egos behind, and to implement a universal health care system that provides basic health security for everyone.

Copyright © 2010 Umang Malhotra. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of the author is strictly prohibited.


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