Actual UHC costs to individuals - a comparison

Great Debates
1

(Given the trend in other UHC threads, I expect this will generate considerable debate, so am placing it in GD rather than elsewhere.)

In light of the various threads addressing the issue of Universal Health Care for the US, and the frequent complaint of how this will “increase my taxes”, I would like to throw out some actual financial data from a resident of a country which already has UHC. I am inviting posters from the US, or other countries with UHC, to provide comparable data of total tax & medical costs, as a basis of comparison for determining whether there would be a real increase in total tax **AND **health costs for the average person if the US were to adopt a government-paid UHC system like Canada’s, or like some other country’s.

As background, Canada has a tax-funded UHC system which covers basic and catastrophic medical care for Canadians. The provinces are responsible for providing UHC, which is partially funded by the Federal government as a method of ensuring portability of coverage between provinces and basic national standards of coverage. In Ontario, municipalities cover certain costs, such as ambulance and paramedic services, and some benefits for seniors and welfare clients. Outside of the national standards, provincial coverage varies in the details of what may be covered and for how much. Details of the Ontario Health Insurance Plan which I am covered under can be found here Apply for OHIP and get a health card | ontario.ca. The most significant areas which are not covered are dental care, prescription drugs, and eyeglasses, although low-income families and seniors have added coverage for these. The private health insurance industry in Canada has a thriving business covering all the little areas omitted from the provincial plans, and added medical insurance is a frequent (though significantly less costly to the employer) job benefit.

For myself, I am a reasonably healthy individual in my 50s, with some ongoing medical conditions which need a couple of monthly prescriptions, but no major costs. I have opted-in to an employer-provided group health insurance plan, which is about 90% paid by my employer. I have a family doctor whom I can make an appointment with for a routine visit, or I can walk into the office in an urgent situation and see, if not him, someone else in his practice group, within an hour or two. If I go to the ER, I will almost certainly have to wait for a while, depending on the urgency of my problem and how busy they are. The last time I needed ER services was about 25 years ago for a kidney stone attack, which took about half an hour from arrival to first doctor seeing me, and cost me, for ER, several days of hospital care, and operating room procedures under anaesthesia to extract the stone, exactly $0.

So, here are the dollar amounts for last year, 2008, rounded to the nearest $10:

Gross income: 78,700
Federal taxes: 10,550
Provincial taxes: 5,620
Municipal (property) taxes: 3,070
EI (federal employment insurance): 570
CPP (Canadian equivalent of SS): 2,050
Estimated 5% federal & 8% provincial sales taxes (something of a WAG - who bothers to track this?): 3,250
Health insurance premiums paid by me: 120
Health insurance premiums paid by employer (included in gross income): 1,210
All other health costs, including over-the-counter medicines: 500

Total tax load plus direct health costs: 26,940
Total tax/health costs as a percentage of gross income: 34%

So, would anyone else care to provide their own info (or at least a gross/net percentage) as a comparison so we can see which of us is actually paying more? Based on the huge amounts some US posters have reported for their health insurance costs, I suspect I am getting the better deal, but would be interested in actual figures to prove or disprove this.

2

One figure I know is that 45% of Quebec’s budget is for medicare. My Quebec taxes, on an income of about $100,000, were something like 13K and my federal tax was about 10K. (There is an arrangment whereby Quebecers get a 16.5% rebate on federal taxes and Quebec provides certain services that are provided by the federal gov’t elsewhere.) What percentage of federal taxes go to health care, I do not know. Quebec also has compulsory drug insurance, although you may get a private plan if you prefer. Until I hit 65, I used my employer’s plan, but after that the cost got too high and I went onto the provincial plan (which is partly paid for by a separate tax, not large enough in my case to cover the costs). As in Ontario, neither eyeglasses nor dental care is covered (but my complementary health insurance provided by my ex-employer pays for a lot of the dental care). Interestingly, Quebec taxes, but the federal gov’t doesn’t my ex-employer’s contribution to this complementary health insurance.

As far as I am concerned, it is worth every cent. Because, when I am sick I see a doctor/go into a hospital, whatever is needed, without thinking about the cost or having any money change hands. And if a doctor recommends treatment he doesn’t have to fight with an insurance company to get it authorized, the way my daughter-in-law in NYC does. She spends an inordinate amount of time arguing with insurance companies (and this a rarely-accounted cost of private insurance).

3

Wait, 34% is your total tax load, right? You can’t then say that 34% of your income is going to health care. Hell, you’ve got CPP and EI premiums in there. Those are manifestly not contributing towards health care. Figure out what portion of your federal taxes go to transfer payments to provinces, add that to your provincial taxes, then figure out what portion of that sum is spent on health. I’m going to WAG it at somewhere just under 10% of your gross income (5600 prov income tax + 2000 PST + let’s say 3400 of your fed taxes to the provinces is 11k, about half of which will be spent on health. So 5.5k plus your premiums and direct costs for another 2k, comes to 7.5k. That’s very rough, but certainly closer to what you’re spending on health than your total tax burden.

4

I know that much of my taxes go to non-health costs, but my intent here is to bring some actual dollar amounts to the issue of whether UHC will actually be more costly than the present situation for US posters who are complaining about their taxes going up. Including all taxes at all levels is also an attempt to cover the differences between which level of government or insurance pays for what in which state/province. A lot of the comments on tax increases seem to be considering only federal taxes in isolation.

If you’re in the US and your complaint is that you will pay more **in taxes **if the government provides some form of UHC, how does your current tax load **plus **health cost load compare to somewhere where they already have UHC and thus have much lower individual health costs? Given the thousands of dollars in health insurance, co-pays, rejected claims, uncovered items and other medical costs some posters mention, I am interested in seeing whether I actually have more after-tax/after-medical income available than US posters.

5

In Japan your healthcare charges are only paid by the head of a househould and are
based on a) your annual income, b) the value of any property you own, and c) the number of people in the household. There are standard deductions and fees that are the same for everyone. It’s a national system, but the percentages and the like vary by the municipality. My city doesn’t include property value, for example.

I’ve only been to the doctor’s twice in my 6 years living here, so have little practical experience with the system. Looking through my health plan guide, I have to pay 30% of medical costs up to a certain monthly ceiling (looks to be about $800 for most people). The plan doesn’t cover checkups, cosmetic surgery and dentistry, childbirth (there’s a set fee for this), abortions done for economic reasons, workplace injuries, or traffic accidents.

As a full-time student who lives alone, my healthcare costs came out to be roughly 11% of my income (about $1,700).

Or they would have, but after getting the bill they informed me that income from scholarships wasn’t technically income, so my annual income was $0. Even so, I was on the hook for the standard fees which worked out to about $300.

I don’t pay taxes, so can’t comment there.

6

In 2010, the budget for the NHS will be £110B. The population of the U.K. is 61M, for a cost of £1800 per person.

7

Can’t we do the same thing by comparing percent of GDP spent on health costs? Of course the problem is that cross-country comparisons are flawed by different demographics and different population types (obesity, age), not to mention how much care people are getting for their money.

8

You can’t even do that because the service level is not the same between countries.

9

Unfortunately you can’t really compare cross-country, at least not when you are talking about the United States.

The United States pays more per capita for health care than Canada right now, this will continue to be true (and possibly even moreso) with Universal Health care. UHS is not why health care is cheaper in Canada than it is in the United States, health care is much cheaper in Canada because on average your doctors make half as much money, you have fewer expensive pieces of equipment (some of which cost over $500,000 per unit and have to be paid for by gross incoming revenue) and you on average run fewer tests.

It’s possible that our moving towards UHC will see some reduction in costs as economies of scale and bargaining power of the Federal government comes into play, most analysts do not predict that true savings will be seen until the UHC system has been running for some years, though–even those who strongly support the current legislation. However we’ll still not be anywhere close to Canada until we reduce the actual major expenses that lead to health care being so expensive–grossly higher compensation for our doctors versus your doctors, and what I think is arguably an excessive reliance on expensive medical equipment and tests.

Also breaking down on a per-individual basis is simply not useful. For policy decisions you don’t take one individual’s income and break down his expenses, you have to look at things in aggregate. Looking at a single individual does no good, some individuals may be under various programs like Medicaid, Veteran’s Health Administration and et cetera that would mean their personal costs even including taxes are very very low. Someone else is footing their bill.

10

I’m sure people will refute my statistical claims so here is some support:

“Scalpels and salaries: where do doctors cash in the most?” (Compares U.S. and Canadian salaries for specialists)(Link)

“How Much Do Doctors in Other Countries Make” (Link)

U.S. Health Care Spending: Comparison With Other Countries (Congressional Research Service Report–shows that we already spend far more than any other country)(Link)

11

Some interesting statistics from the CRS article I linked:

Specialists in the U.S. average $230,000/year compared to an average of $161,000/year in Canada. (Two countries average higher than the U.S: Australia and The Netherlands)

U.S. General Practitioners are paid higher than GPs in any other OECD country, with an average income of $161,000/year, compared to $107,000 in Canada.

Of countries that the report has data on for nurse income, our nurses are the highest paid.

We have 32.2 CT scanners/1,000,000 people and 26.6 MRI units/1,000,000. The only country higher is Japan.

We have 3x as many CT scanners per 1 million people than Canada and 5x as many MRI units.

Further:

The simple fact of the matter is, even if you make government the “single-payer” you have to find a way to reduce the disparity in cost before you’ll see U.S. health care costs per capita start to line up with those of other countries. This requires a lot of “willpower” from the government to impose its might on private industry.

There’s also the very real issue that U.S. physicians start their careers with something like 8x as much educational debt than their counterparts in other countries (and in some countries many physicians come out of school debt free.) When you have an immense amount of debt you need a high salary somewhere in the future to pay all of that back.

In 2004 we spent $6400/capita on health care in the United States. Interestingly 44.7% of that was publicly funded, and just looking at how much we spend per capita of public funds we almost spend more than many OECD countries like Canada that have far more comprehensive public health care.

We spent more in public funds on health care per capita than the United Kingdom (which has essentially fully nationalized health care.) Public funding is less than 50% of funding in the United States.

12

The U.S. also has the most obese population in the world by a significant margin (about 44% of Canadians are overweight or obese, vs 64% of Americans), and obesity contributes greatly to some of the most expensive medical issues.

Americans also do far more procedures - almost three times as many angioplasties per capita than Canada. Possibly because the U.S. treats such problems more aggressively, and possibly because being more obese, Americans have more circulatory problems.

America is also the place where people from around the world go for the most expensive procedures, which offloads them from their own country’s health care system. If you’re extremely rich and you need heart surgery or a new liver, where are you likely to go?

America also does far more elective surgery. This is a big item, and it’s also where most of the rationing takes place in other countries. In Canada, the wait for a hip replacement or an artificial knee can be measured in years. In some countries, if you’re at a certain age and you need a new hip, you just aren’t getting one.

So no, you can’t compare across countries, and it would be ridiculous to believe that Americans can keep the same level of service, bring 47 million more people under the health care umbrella, and somehow cut costs.

As for economies of scale - they don’t exist in health care. If anything, it’s the other way. Economies of scale happen when you have declining marginal costs - each additional person treated costs less than the last one. Health care is a service, administered by individuals to other individuals. The only place where economies of scale have an effect would be in absorbing the cost of R&D for medicine and procedures, and that’s really not a large factor.

13

This quote is perhaps more revealing than you mean it to be.

If the name of the game is reducing healthcare costs, then you should direct your energies towards removing the subsidy to employer-linked healthcare, higher copayments, tort reform to reduce defensive medicine, and more price transparancy and price competition. In fact you devote the majority of your post to taking down doctors’ salaries, which accounts for about 10% of national healthcare spending. The fact that you target doctors, who do in fact make a lot of money but also go through an expensive curriculum and represent the top of the national talent pool, seems to me more of a case of trying to stir up class envy against those better off, rather than a legitimate concern for cost containment.

If you feel this misrepresents not your motivation, feel free to prove so by looking at the reforms I outlined above, or others of your choosing, that can actually produce quantitative improvements in healthcare spending efficiency. Waah those people make a lot of money might be intuitively pleasing in a primitive in-group, out-group way, but as these numbers show, does not even begin to address the problem.

14

Mm, athelas if you knew much about me you’d know I’m not the poster who would be trying to stir up class envy. I’m a die hard conservative and truly believe some people’s services are worth very little and I have no problem with those people being genuinely poor.

Like any other product, health care has certain costs, equipment, labor et cetera. If you notice I spoke about both in my post.

When an average American hospital has significantly more units of equipment, a more expensive labor pool–that has to be looked at as a big reason that health care is so expensive. To pretend it isn’t is asinine, getting rid of “subsidies” for employer-sponsored health care most likely won’t reduce costs much if at all. That’s money that is being spent either way you cut it, whether it be the government spending it to provide their own coverage or people having to pay the difference out of pocket, or companies (who would most likely respond by cutting pay or dropping employees, which is neither here nor there but definitely relevant to any decision maker.)

The one thing I did neglect to mention (although if you read the CRS report it is in there) is that hospital administration costs are also higher in the United States than in other countries.

15

Fair enough. I still think however that your emphasis on physician pay is a distraction and a dangerous invitation to populism.

It would help to break the job-employment linkage and allow more competition between insurance companies. The incentive systems in healthcare today are all screwed up. Patients have to go with the insurer that their employer mandates, regardless of how they are treated. Insurers try their best to avoid paying for medical procedures, but it’s doctors who are harmed by this, not the patient. Doctors try to do as many procedures as possible, but it’s the patient, not the insurer, that takes the fall.

Basically, you have the patient, the insurer, and the doctor. In every combination, A gets to decide how much B screws over C, rather than having his actions feed back on himself. One of the reasons that there is so much equipment and some overuse, as you mention, is because nobody has a financial incentive to deny themselves care, however incremental the gain might be. In an ideal world I’d advocate for people directly paying for the vast majority of their own medical costs, with mandatory catastrophic insurance to help prevent bankruptcies. But seeing as medical “insurance” as the default payer isn’t going anywhere anytime soon, I’d settle for higher deductibles and more insurance competition. An effort to increase the amount of healthcare coverage is anathema to price containment, and it’s kind of amusing that UHC advocates believe that these two forces can be combined when in fact they are opposite goals along an ideal production possibilities frontier.