The centerpiece of the case against Obamacare is the requirement that everyone buy some kind of health insurance or face stiff penalties--the so-called individual mandate. It is a way of moving toward universal coverage without a government-run or single-payer system. It might surprise Americans to learn that another advanced industrial country, one with a totally private health care system, made precisely the same choice nearly 20 years ago: Switzerland.
Switzerland is not your typical European welfare-state society. It is extremely business-friendly and has always gone its own way, shunning the euro and charting its own course on health care. The country ranks higher than the U.S. on the Heritage Foundation's Index of Economic Freedom.
Twenty years ago, Switzerland had a system very similar to America's--private insurers, private providers--with very similar problems. People didn't buy insurance but ended up in emergency rooms, insurers screened out people with pre-existing conditions, and costs were rising fast. The country came to the conclusion that to make health care work, everyone had to buy insurance. So the Swiss passed an individual mandate and reformed their system along lines very similar to Obamacare. The reform law passed by referendum, narrowly. The result two decades later: quality of care remains very high, everyone has access, and costs have moderated. Switzerland spends 11% of its GDP on health care, compared with 17% in the U.S. Its 8 million people have health care that is not tied to their employers, they can choose among many plans, and they can switch plans every year. Overall satisfaction with the system is high.
The most striking aspect of America's medical system remains how much of an outlier it is in the advanced industrial world. No other nation spends more than 12% of its total economy on health care. We do worse than most other countries on almost every measure of health outcomes: healthy-life expectancy, infant mortality and--crucially--patient satisfaction. Put simply, we have the most expensive, least efficient system of any rich country on the planet. Costs remain high on every level. Recently, the International Federation of Health Plans released a report comparing the prices in various countries of 23 medical services, from a routine checkup to an MRI to a dose of Lipitor. The U.S. had the highest costs in 22 of the 23 cases. An MRI costs $1,080 here; it costs $281 in France.
In 1963, Nobel Prize--winning economist Kenneth Arrow wrote an academic paper explaining why markets don't work well in health care. He argued that unlike with most goods and services, people don't know when they will need health care. And when they do need it--say, in the case of heart failure--the cost is often prohibitive. That means you need some kind of insurance or government-run system.
Now, we could decide as a society that it is O.K. for people who suddenly need health care to get it only if they can pay for it. The market would work just as it works for BMWs: anyone who can afford one can buy one. That would mean that the vast majority of Americans wouldn't be able to pay for a triple bypass or a hip replacement when they needed it. But every rich country in the world--and many not-so-rich ones--has decided that its people should have access to basic health care. Given that value, a pure free-market model simply cannot work.
In the campaigns for president, it seems that the conservatives have changed their tunes on requiring mandate for everyone to be included in health insurance. Zakaria observes,
Catastrophic insurance--covering trauma and serious illnesses--isn't a solution, because it's chronically ill patients, just 5% of the total, who account for 50% of American health care costs. That's why the Heritage Foundation, a conservative think tank, came up with the idea of an individual mandate in the 1980s, proposing that people buy health insurance in exactly the same way that people are required to buy car insurance. That's why Mitt Romney chose this model as a market-friendly system for Massachusetts when he was governor. And that's why Newt Gingrich praised the Massachusetts model as the most important step forward in health care in years. They have all changed their minds, but that is about politics, not economics.
When listening to the debate about American health care, I find that many of the most fervent critics of government involvement argue almost entirely from abstract theoretical propositions about free markets. One can and should reason from principles. But one must also reason from reality, from facts on the ground. And the fact is that about 20 foreign countries provide health care for their citizens in some way or other. All of them--including free-market havens like Switzerland and Taiwan--have found that they need to use an insurance or government-sponsored model. All of them provide universal health care at much, much lower costs than we do and with better results.