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The Staggering Price of Universal Health Care

The cost of health care is a concern for all Americans, whether you are an employee or the head of a multinational corporation. The cost of insurance and medical services are ramping up at a steeper rate every year.  In 2013, the annual health care cost per person was $9,121 or $2.88 trillion for the entire country, but by 2016, this cost had ballooned to $10,348 or $3.34 trillion for the nation. That is almost a 13 percent increase in just three years.

Needless to say, inflation in health care at this pace is unsustainable. Experts predict that health care costs will grow at least one percentage point faster than the overall economy. That may not sound like much, but, at that rate, health care will consume almost one-fifth of the U.S. economy by 2026.

This means ultimately, that more American households will be spending more of their income on medical expenses, leaving less money for other needs.  Not only will this help stifle economic growth by curbing purchases of consumer goods, buy it is likely to set off a wave of bankruptcies.

That is why more policymakers like Senator Bernie Sanders are pushing for universal health care. Universal health care would guarantee access to medical services for all Americans, and it would be paid out of additional taxes on businesses or households. This would effectively eliminate health insurers and make the U.S. government the single payer for all health care.

Why Health Care Costs So Much

There is no doubt that the United States pays the most for health care of any nation, although it doesn’t use more than other nations.  It just pays more for the same services. Per person, the U.S. spends almost twice as much as countries like the United Kingdom, Germany or Japan.

It turns out that there is really no justification for these higher prices.  Physicians are paid more; prescription drugs cost more; and we spend way too much on medical paperwork. The average income of a primary care physician in the U.S. is about $60,000 more than in Germany and $130,000 more than in Sweden.  We also spend almost twice as much for the same drugs.

This is partially justified by the high cost of medical education, but other nations get more quality for less money.  The U.S. ranks last or near to last in a variety of care quality standards among more developed nations.

American doctors often recommend an expensive mix of treatments for patients.  This is partially due to the natural tendency to practice defensive medicine to avoid lawsuits, but it is also related to the lack of pricing knowledge among physicians. Most physicians don’t know the cost of services because of the byzantine billing system which charges different payers different prices for the same service. So they often prescribe the most expensive course of treatment even if cheaper alternatives are readily available.

This is related to the inordinate amount of red tape involved in the U.S. health care system.  Because providers charge different payers like uninsured patients, insurers and government agencies differing rates, most physicians and hospitals must often hire additional staff just to organize billing. In turn that raises costs for all patients.

On top of those administrative costs are additional costs associated with having private insurers. More than 90 percent of Americans have insurance either through a private or public insurer. That sounds pretty good—and it is—but compared to the U.K. or Canada which has universal health care, it comes up short. Instead of one administrator that pays all medical bills, there are dozens that must independently negotiate prices, complete paperwork and collect fees from policyholders.

Health Care Reform
Gustavo Frazao/

Finally, the U.S. government has a standing policy of limited regulation of the health care industry.  For example, Medicare is barred from negotiating prices with drug manufacturers which essentially allows them to charge the government any price they want.

The Problems with Universal Health Care

In theory, having a health care system that covers all Americans sounds wonderful, but there are numerous problems with implementing it. Some obstacles include rationed care, burgeoning governmental bureaucracy, and, of course, a huge tax burden. Even if more Americans wanted to adopt universal health care, it would be virtually impossible due to these many problems.

Universal Healthcare

The biggest problem with universal health care is the cost. A new study by the Mercatus Institute projects that the federal government would spend almost $2.8 trillion per year for the next ten years if such a system were introduced. However, the report goes on to say that eventually it would yield major financial benefits including savings of $300 billion annually by 2031.

The government would have to pay for this new program in either two ways: raising taxes or borrow.  Neither of these solutions is especially appealing for a public that is unhappy about current taxes and the rising debt. It would also pose some major budgetary problems considering how poorly existing federal health programs like Medicare and Medicaid are doing; both programs are enormous drains on federal resources.

Like any other federal program, universal health care would take time to implement.  As you can see from the rollout of Obamacare—which had enormous administrative problems at launch—there would be many unforeseen issues that would need timely solutions.

There would also be some issues with access to health care.  If everyone can see a doctor, then wait times will increase substantially.  This will put an enormous strain on medical professionals, causing many to burnout, which is already a serious problem. Ultimately, this is likely to lead to rationed care, which limit access to medical services.

Finally, the loss of a free market for health care may stifle innovation.  If everyone gets care, there is no incentive to produce better products or services.  A lack of rewards for improved products would lead to stagnation in research, development and entrepreneurial projects.  This may also lead to a downgrade in the quality of medical professionals, as qualified candidates seek more lucrative professions.

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