(Image: Berrett-Koehler Publishers; Edited: to)
The Great Society is a place where every child can find knowledge to enrich his mind and to enlarge his talents. It is a place where the city of man serves not only the needs of the body and the demands of commerce but the desire for beauty and the hunger for community. It is a place where men are more concerned with the quality of their goals than the quantity of their goods.”
- Lyndon Baines Johnson
There are two important reasons for having a strong social safety net, one based in sound economic policy and the other in our common humanity. So it’s no surprise that the countries that have strong social safety nets tend to have resilient economies and a higher quality of life.
Ultimately, social safety nets are about managing risk and unforeseen contingencies. On the one hand, there are the risks that we want people to take, such as starting a new business. On the other hand, there are unforeseen events that are so severe - like becoming paralyzed in an accident - that no one person (unless incredibly wealthy) could handle the expenses associated with them. In both cases, by setting up a social safety net that distributes the costs of responding to them across the wide spectrum of society, we minimize both the societal cost and the individual suffering.
I’ve started seven businesses in my life, five of them successful enough that my wife, Louise, and I could sell them off, take about a year of retirement (better to retire when you’re young was our philosophy), and have enough left over to start the next company. In most cases, when we started the business we had no health insurance, even though in every case we had children.
But we were young and healthy and so were our children (one was a home birth whom I “delivered,” although Louise would rightly point out that she did most of the work), and so we did take what, in retrospect, seem like pretty dumb risks: for the initial year or two of setting up a business, we would have no health insurance for ourselves or our employees. We simply couldn’t afford it, and so we went without it until the business started earning enough money to pay for it.
Of course, this being the era from the late 1960s to the 1990s, health insurance was heavily regulated by most states, usually offered by nonprofit companies, and relatively inexpensive, so our “stupid” periods weren’t usually particularly long or dangerous. But that is no longer the case. Employer-sponsored health insurance costs have skyrocketed in the past decade, far above inflation or workers’ wages.
According to a Kaiser Family Foundation report, “between 1999 and 2009, health insurance premiums rose 131 percent, a much faster rate of increase than general inflation (28 percent) or workers’ earnings (38 percent).” The report also had this shocking statistic about the amount spent by employers on group health insurance policies: “The amount grew over twenty-fold from $25 billion in 1960 to $545 billion in 2008.”1
When premiums skyrocket, the usual response from the insurance companies is that they are simply passing along the increase in health-care costs to the consumers. And the corporate media never ask whether the profits of these insurance companies are also suffering. In reality they are making out like bandits, as a 2009 report from Health Care for America Now shows:2 Profits at 10 of the country’s largest publicly traded health insurance companies in 2007 rose 428 percent from 2000 to 2007, from $2.4 billion to $12.9 billion, according to U.S. Securities and Exchange Commission filings. In 2007 alone the chief executive officers at these companies collected combined total compensation of $118.6 million - an average of $11.9 million each. That is 468 times more than the...average American worker made that year.
What we have in America today is a trend of higher profits for insurance companies, higher premiums for employers and employees, and an increasing number of small-business owners and entrepreneurs worrying about the health-care costs of doing business.
But in every other developed country (and many that are considered below that threshold, like Costa Rica), entrepreneurs don’t have to take such risks. And the result is that the United States is being hammered in the area of innovation by countries that have stronger social safety nets. The Economist magazine recently published a study sponsored by Cisco Systems titled “A New Ranking of the World’s Most Innovative Countries.”3
During the period the study was conducted, every country in the top 20, including number 19, Slovenia, had a national health care system that covered every citizen regardless of employment - except the United States. Japan, Switzerland, and Finland beat us out, and right on our heels were Sweden, Germany, Taiwan, and the Netherlands. The study noted, “The high rank for three small wealthy European states reflects the fact that their economic, social and political conditions favour innovation....The slippage of the U.S. confirms the gradual erosion in recent years of that country’s traditional position as the world’s technological leader— a trend we expect to continue.”
The country that brought the world Thomas Edison and George Westinghouse and Andrew Carnegie has now slid in innovation, in part because of our lack of a strong social safety net.
Praveen Ghanta, a Louisiana resident and a graduate of the Massachusetts Institute of Technology who runs the True Cost blog, notes that of the 33 acknowledged “developed” nations in the world, 32 of them have universal health care for all their citizens. The single exception is the United States. The other 32 countries have some version of universal health care: a single-payer system in which the government pays all bills; a two-tier system, where government provides basic coverage for everyone and nonprofit companies compete to offer high-end services to consumers; or an “insurance mandate” system, where the government requires everyone to have health insurance and insurers are barred from rejecting sick individuals (see sidebar).
Countries with Universal Health Care
The table on the facing page was developed in August 2009 by True Cost, a blog written by Praveen Ghanta. It shows that 32 of the 33 developed nations (those that ranked at 0.9 or higher on a 0-to-1 scale on the United Nations Human Development Index) have universal health care (UHC), with the United States being the lone exception. Note that universal health care does not imply government-only or even government-run health care, as many countries implementing a universal health-care plan continue to have both public and private insurance and medical providers.
Types of Universal Health Care
Single payer The government provides insurance for all residents (or citizens) and pays all health-care expenses except co-pays and co-insurance. Providers may be public, private, or a combination of both.
Two-tier The government provides or mandates catastrophic or minimum insurance coverage for all residents (or citizens) while allowing the purchase of additional voluntary insurance or fee-for-service care when desired. In Singapore all residents receive a catastrophic policy from the government coupled with a health savings account that they use to pay for routine care. In other countries, such as Ireland and Israel, the government provides a core policy, which the majority of the population supplements with private insurance.
Insurance mandate The government mandates that all citi- zens purchase insurance, whether from private, public, or non- profit insurers. In some cases, the insurer list is quite restrictive, while in others a healthy private market for insurance is simply regulated and standardized by the government. In this kind of system, insurers are barred from rejecting sick individuals, and individuals are required to purchase insurance to prevent typical health-care market failures from arising.