Ezra Klein on the Singapore health care miracle
By Scott Sumner
Ezra Klein has a good essay on the Singapore health care system. He starts off with the conservative case for the Singapore system, quoting the AEI:
What’s the reason for Singapore’s success? It’s not government spending. The state, using taxes, funds only about one-fourth of Singapore’s total health costs. Individuals and their employers pay for the rest. In fact, the latest figures show that Singapore’s government spends only $381 (all dollars in this article are U.S.) per capita on health–or one-seventh what the U.S. government spends.
Singapore’s system requires individuals to take responsibility for their own health, and for much of their own spending on medical care.
Most of the essay is spent partially (but not completely) debunking the conservative view. For instance:
According to the World Bank, in 2014 Singapore spent $2,752 per person on health care. America spent $9,403. Given this, it’s worth asking a few questions about what Singapore’s model really has to teach the US.
Are Singaporeans really more exposed to health costs than Americans? The basic argument for the Singaporean system is that Singaporeans, through Medisave and the deductibles in Medishield, pay more of the cost of their care, and so hold costs down. Americans, by contrast, have their care paid for by insurers and employers and the government, and so they have little incentive to act like shoppers and push back on prices. But is that actually true?
I doubt it. The chasm in total spending is the first problem. Health care prices are so much lower in Singapore that Singaporeans would have to pay for three times more of their care to feel as much total expense as Americans do. Given the growing size of deductibles and copays in the US, I doubt that’s true now, if it ever was. (It’s worth noting that, on average, Singaporeans are richer than Americans, so the issue here is not that we have more money to blow on health care.)
I think he’s overstating the case here (I find that even many of my small health expenses are heavily subsidized) but there is some truth to what he says here. And I think this points to the necessary first step in health care reform—getting costs down. Indeed Klein’s basic argument is that the Singapore system is actually a pretty effective health care regime, but it would be hard to implement in America because the cost of health care is so much higher here.
But this leads to what I see as the one major blind spot in Klein’s article:
Singapore’s system is probably better designed in terms of how consumers spend their own money. But the lower overall prices make them much less exposed to health costs than both patients and employers inside the American system — which suggests to me that Americans have at least as much incentive as Singaporeans to try to use their power as consumers to cut costs.
The fact that that hasn’t worked is, I think, a reason to believe we’ve gotten the lesson of Singapore’s health system backward. Singapore heavily regulates both the pricing and provision of medical care to keep costs low (as do all other developed countries) and then, working off that baseline of low costs, has Singaporeans pay out of pocket in order to keep them mindful of how much they’re spending.
Unless Klein doesn’t consider America to be a “developed country”, the statement is flat out wrong. In America the government heavily regulates both the pricing and provision of health care to keep costs high. In America:
1. There are massive subsidies to employer provided health insurance. This leads to enormous consumption. My personal lifetime health care consumption has been at least doubled by various subsidies (including tax breaks), and it has not improved my health one iota.
2. There are huge regulatory barriers to the efficient provision of health care, at virtually every level of the system. It’s too difficult to become a doctor. Nurses are prevented from doing too many things. There are insurance mandates. There are restrictions against patients signing contracts making it more difficult to sue for malpractice. There are restrictions on importing foreign drugs, even foreign generics. There are barriers to the immigration of foreign doctors and nurses. I could go on and on.
My dream policy would start with massive deregulation, as well as the elimination of all tax deductions for health care, to get costs as low as possible. Then add mandatory health savings accounts to get costs even lower.
Klein also overlooks the fact that the argument he uses against conservative supporters of the Singapore system applies equally well against progressive supporters of the European approach. He argues that since health care in America is so much more expensive than in Singapore, we probably pay almost as much out of pocket as they do, despite paying a lower percentage.
But that’s also true of socialized medicine. Thus our government spends about 8% of GDP on health care (out of a total of roughly 18% of GDP), whereas European governments spend about 8% of GDP on health care out of a total of 9% to 10%. So we are already spending roughly as much as in Europe. If a single payer regime were actually feasible in America, then our government should already be able to provide universal coverage out of the already existing health care programs. We should to be able to put all 325 million Americans on Medicare/Medicaid/VA, etc., without spending a dime more. Obviously that won’t work.
So our current bloated health care spending levels means that America is not able to choose either the Singapore or the European system, we are stuck with a far worse, system—the American health care system.
But if we insist on dreaming the impossible dream, then why not shoot for the best? And that’s clearly Singapore, not Europe. And the first step toward getting there is cutting costs, by doing things like replacing the tax deductibility of health insurance with a lump sum tax credit.