America’s Healthcare Policies are Sick

Original Article

If you were to ask most Americans whether or not the United States has the lowest infant mortality, I suspect the large majority would give you a resounding “yes.” That’s why it’s startling to realize that the U.S. actually ranks 46th in the world. The top three countries are Singapore at 2.3 infant deaths per thousand, Sweden at 2.75 and Japan at 2.8. The U.S. infant mortality rate – 6.3 per thousand births – is higher than Cuba, Portugal, Slovenia and Iceland.

On life expectancy, we don’t do any better; indeed, we rank 45th in the world.

With respect to healthcare spending, however, we are absolutely tops! A robust 15.4 percent of our GDP goes for healthcare. That’s the highest of any country in the world.

An Out-of-Control Bureaucracy

In that context, I believe it’s just plain silly for the folks in Washington D.C. to consider spending an additional $600 billion for healthcare. Why throw money at an ineffective and bureaucratic system that is totally out-of-control? Why not figure out how to get it under control before deciding to drown it with more borrowed money from the Chinese or, even worse, further taxing the rich and thus retarding investment that might have a chance of turning around our economy?

When you’re in the business world, and one of your competitors is doing something really smart, and it’s not patent-protected, you study it closely and figure out how you can make it work for your company as well. Why don’t we do that in healthcare?

We should.

So, what countries seem to be handling healthcare most effectively and efficiently? Well, there’s one nation that has the lowest infant mortality rate in the world as well as the third longest average lifespan for its citizens – and it spends only 3.7 percent of its GDP on healthcare. That country is Singapore.

Singapore has a very unique system that requires the individual to be responsible for his or her own health; even more importantly, it makes people responsible for managing the spending associated with their medical care.

Singaporeans participate in a mandatory savings program that sets up a “Medisave” account for each individual. The individual is required to pay a small percentage of his or her income each month into that account, and employers also make a contribution. For individuals who are unemployed, there is a government subsidy. Singaporeans also engage in a “Medishield” program, which is a national catastrophic illness insurance plan. Premiums for the Medishield program are small, because it is government subsidized; as a result, the premiums are paid for out of an individual’s Medisave account.

Choice and Competition

Most significantly, when individuals in Singapore feel the need to go to a physician, they select the doctor based on the quality of the care they believe they will get and the cost associated with going to that physician. In essence, physicians compete for the patient’s business. Individuals select carefully since it’s their Medisave account money that’s used to pay for the chosen physician.

Individuals cannot take money out of their Medisave accounts except for medical use. On the other hand, these accounts grow steadily over time because the government invests these funds for the individual in a safe and modestly performing investment fund.

What’s important here is that the money is not the government’s. It’s the individual’s money and, at retirement age, people actually have access to these funds. That’s why individuals use the funds wisely.

In contrast, no one has any interest at all in controlling health care costs here in the United States. Physicians, for example, have little incentive for keeping their rates low. Actually, doctors are eager to try all kinds of remedies and procedures on an individual because cost is not an issue; either the patient has insurance or some government program can usually be tapped. As for the very poor, they often just go to a hospital emergency room and get free care.

The insurance company is in the same situation. The more the system is used, the greater the opportunity that insurers have to make additional profits. The same is true for hospitals. They like patient flow because it means revenues and profits.

The individual loves to get all those tests and fancy new drugs from their doctors to try to get over their illness as soon as possible. And all kinds of state-of-the-art technology is used to quickly figure out what may be wrong with an individual.

Spending Less and Accomplishing More

You would think that the healthcare system in the United States – backed by incredible spending and such a vast set of sophisticated procedures and test methodologies for diagnosis – would yield better results than what’s been achieved in Singapore; especially when Singapore spends virtually one quarter of what the U.S. spends.

But this clearly isn’t the case.

As Congress takes up healthcare reform this spring and summer, I think it’s essential that members of the House and Senate go slow and hold back on writing another big check for a bloated and ineffective government program that probably won’t improve the quality of life for our citizens. Instead, they would do well to examine how Singapore helps people take care of themselves in a sensitive and cost-efficient way.

Robert J. Herbold is Managing Director of The Herbold Group and retired COO of Microsoft Corporation. He currently serves on the Board of Trustees of the Heritage Foundation and the Board of Overseers of the Hoover Institution Stanford University. He is also a Board member of the Discovery Institute.

Robert Herbold

Robert J. Herbold, retired executive vice president and chief operating officer of Microsoft Corporation, is the Managing Director of Herbold Group, LLC, a consulting business focused on profitability. Herbold serves on the Board of Directors of Weyerhaeuser Corporation, Agilent Technologies, First Mutual Bank, and Cintas Corporation. Also, in 2002 he was appointed by President Bush to the President's Council of Advisors on Science and Technology.