Chris Conover of Forbes reports that the point of the healthcare system is not so much about spending as little money as possible as it is to offer consumers good value for the money that they are spending on care. The U.S. certainly spends a lot on health care, but it is, “a misconception that Americans spend ‘too much’ on health care simply by observing that U.S. health spending is a higher fraction of GDP than in any other country.”
The RAND Health Insurance Experiment (RAND HIE) found that for the average patient, there was virtually no difference in health outcomes between the free care group and those in cost-sharing plans. Therefore, choosing between Canadian-style free care and American-style cost-sharing is a flip-of-the-coin proposition.
Conover states that RAND researchers observed that the free care plan was far more expensive than the cost-sharing plan by a whopping 60%. The most cost-effective cost-sharing plan wasted only 4% while free care plans wasted an astounding 31%. Free care plan participants spent an average of $1,645 more per year on health care and of that amount, 82% or $1,347 was waste. In addition, RAND researchers used sophisticated methods to determine that the average person in a cost-sharing plan would be willing to pay only $127 per year in insurance premiums in order to get rid of the out-of-pocket risk.
Spending $1,347 of society’s resources to eliminate a $127 risk is foolish. These findings are clear and yet people like Bernie Sanders still advocate for free health care. Senator Sanders calls his plan “Medicare-for-All” but that’s a contradiction since Medicare contains a non-trivial amount of cost-sharing and in his plan, there is no provision for cost-sharing for any of the comprehensive benefits. What's worse is that clinicians would have to accept whatever amount the government decides to pay as payment in full.
No system is perfect, they all have their set of challenges and percentages of waste. However, shifting to a free care plan would not solve our present problems and it would not get rid of waste, it would simply place that burden away from consumers and onto taxpayers. Senator Sanders’ proposal for comprehensive free care for all Americans would create more problems and take us far away from maintaining a world-class health care system.
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