Dr. Sean Flynn has a background in behavioral finance not healthcare economics. His mother began med school when he was young which developed not only education but also interest in the medical/healthcare world. He is now an author and educator in the world of economics with a passion for helping the United States implement a better healthcare system.
Medicine has become a tough profession in recent years with the increase in production-based pressure, long hours, and the lack of desire to work so close with the government. There are many areas in which the medical and healthcare system can improve here in the United States and this article will attempt to bring some of those possible solutions to light.
The United States spends more on healthcare per-capita than any of country in the world at 18% of our GDP. The average for other countries is around the 10-12% range. Singapore, however is able to operate their healthcare system at a mere 4.2%. Less than a quarter of the US! Based on these numbers, there seems to be one of two issues. Either the US is so affluent that we can manage spending such a fortune on healthcare, or there are major inefficiencies within our current system. The latter seems more likely.
Singapore is at the top of the chart when it comes to healthcare outcomes. They are currently 5th in the world in longest life expectancy. The US ranks closer to 50th for life expectancy. Singapore has better healthy years of life. They have lower infant mortality and lower maternal mortality. Even though, objections might arise because of the more oppressive government in Singapore as opposed to the US, many practical changes they have made could correlate to our country. Additionally, Singapore’s system is one of the easiest to scale up because it is decentralized and market based. The bureaucratized system in the US does not scale up well.
Research has been done by economists at the University of Virginia showing that when a country’s economy is growing at a faster rate than average, mortality rates actually increase. This may seem surprising because more wealth would appear to improve quality of life or standard of living, but the opposite may be true. Wealth by itself appears to correlate to better life experience/quality but the process to gain wealth may be causing negative impacts on the overall well-being of a society. I say that to illustrate the idea that the United States has problems in it's current system that money may not be able solve. A fundamental shift in the process may be necessary.
Around 1940 the insurance billing system overcame the cash-and-carry method which was prominent in the early 1900’s. With the decentralized medical system that was present in most rural communities the town doctor would know his or her clients well and the living situation of their families too. That allowed for more personal healthcare transactions and adjustable billing for individuals.
What we have now is called the Third Party Payer system where the hospital/doctor’s office will be billing a third party insurance company for the medical work done on the patient.
As governments do in times of crisis, the US nationalized everything at the onset of WW2. The war caused a redirection in production from consumers toward military assistance. Civilians still got paid but there was much less to buy. This decrease in supply raises demand and consequently the price of nearly all goods. That is basic economics. To help alleviate the possible inflation which could ensue, our government put price control in place. They put wage control in place as well. If there is wage control, how does one company incentivize workers to move and work for them? Henry Kizer, who was a ship builder on the west coast at this time, happened to stumble upon the answer. The answer was free healthcare! In 1952, law was passed that essentially locked company-paid healthcare in place. That is largely why we have the system we have today.
They operate under what they call the 3M’s. Those are Medisave, Medishield, and Medifund. But what exactly does that mean?
This is essentially mandatory retirement savings. Citizens in Singapore have 25% of their gross income that goes into the retirement savings fund every year. The idea behind this is not new. In fact, the US invented this style of saving with Social Security in 1938. In 1958, Singapore expanded their plan from just retirement saving to healthcare savings as well. Approximately 7% of the gross income supplies this account. An example of how this has benefited Singapore is with the “baby boomers” generation. Most countries are trying to play catch up financially as the older population needs medical assistance while Singapore has been saving since these baby boomers began working in their late teens and early 20’s.
Medishield is the high deductible insurance system which is meant to shield people from disaster if a major medical issue were to come up. This component of Singapore’s healthcare system is also a way to help incentive patients to “shop around” so to speak. The first $2,000 in expenses is paid buy the individual and then they pay 10% of anything beyond that. By having this model, people are always motivated to pick their medicine or medical procedures on a cost-benefit analysis scale because there is always skin in the game, financially. In countries where everything is completely free, people have no motivation to pick a cheaper option. They also are less inclined to research the outcomes of various medical procedures in junction with one another.
This last segment of the Singapore healthcare system is a safety net against procedures that are still too high for families. An example would be a rare form of cancer that costs multiple hundreds of thousands of dollars to treat. This is a societal trust fund so to speak where people can apply for grants if they absolutely cannot fund their own medical expenses. It sounds very familiar to grants awarded to students at a university if they need help paying for education. Also, over 99% of those grant applications are awarded!
The healthcare system we have is like going to a restaurant and ordering a meal without knowing the price. Almost nobody would do that, but we are forced to do it medically in the US because citizens have time sensitive medical needs. In Singapore, there are bulletin boards and papers up on the walls that lists out the prices of various medical operations/procedures. That way, citizens know exactly what they are getting and how much it is. In layman's terms, this is capitalism in the healthcare system. Capitalism in any regard leads to higher quality at lower prices!
Ways we have seen this work in the United States is with elective medical procedures. Because these types of procedures are not covered by healthcare insurance, the medical professionals offering the services are competing with each other for the best quality at the lowest prices. It would behoove us as a country to take that practice for elective medical procedures and translate it into the entirety of the healthcare system
It is also important to understand human behavior behind why a system like Singapores is helpful and why all humans could benefit from it: not just the United States. People are bad at saving and they often procrastinate. When people are forced to be wise with their money, not only do they have money, but they are have options. Howard Vernon said that our freedom can be measured from the number of things we can walk away from. By that definition, a more capitalistic healthcare system like the one mentioned above grants more freedom to the people. Although I am young, I have yet to find someone who opposes freedom!
