Costs of Health CareMyth: Health care costs in the United States, already high, continue to increase because of rising health care premiums
Fact: It is actually the other way around. Health care premiums are increasing because they are responding to the rising costs associated with providing health care services.
According to PriceWaterhouseCoopers’ analysis, Factors Fueling Rising Health care Costs 2006:
* Premium increases closely follow health care spending increases over time. From 1993-2003, premiums grew at an annual rate of 7.3 percent, while the cost of health care services grew at an annual rate of 7.2 percent.
* Poor quality health care and litigation also increase health care costs. A 2002 Juran Institute study estimated that poor health care quality accounts for 30 percent of all direct health care spending as a result of overuse, misuse and waste.
Another study estimated that the direct cost of litigation and defensive medicine increases health care spending by 10 percent.
Myth: Private health care plans spend too much on administrative costs and not enough on patient care
Fact: According to PriceWaterhouseCoopers’ analysis, Factors Fueling Rising Health care Costs 2006, only 6 cents of every health care premium dollar is devoted to administrative costs, while 86 cents is applied to medical care such as prescription drugs, physicians and hospitals.
Myth: Health care is free in government-controlled systems such as Canada, Germany, England, and France
Fact: Government-controlled health care is not free – it comes at a great cost through higher taxes, wait times and denials of coverage.
United States: In the U.S., a family of four with an employer-based PPO will have around $15,609 total this year in health care costs. Of this amount, $9,442 will be paid by the employer and the employee will contribute $3,492 in premiums and $2,675 on co-payments, equivalent to about 6 percent of average family income. 1
Canada: In Canada, while the percentage of taxes used to provide health care varies, it is estimated that 22 percent of taxes collected went to the health system in 2004. Several provinces, including Quebec, Ontario, Alberta, and British Columbia, also charge additional premiums. 2 Canadians also may spend money to receive private treatment for procedures or drugs that are not covered by the government system.
United Kingdom: Citizens of the U.K. pay 11 percent of each pound they make in weekly income (£100 - £670) for the NHS, plus an additional 1 percent for income over £670 a week. 3 Copayments for drugs are low, but many drugs are not covered, often because they are not considered cost efficient. In addition, anyone who uses their own money to buy powerful but expensive drugs not paid for by the NHS finds him or herself shut out of the system. According to BBC News, the NHS has imposed a policy that denies treatments to patients if they exceed £30,000 a year.
Germany: In Germany, coverage from a public sickness fund ranges significantly in cost, from around 12.2 to 16.7 percent of income, with the employee paying a bit under half. This year, premiums are to be standardized from the federal level and health care experts anticipate that they will be set to around 15.5 percent. 4
France: According to the OECD, the French pay 20 percent more in taxes than Americans. In France, employees contribute only to 0.75 percent of their salaries towards medical care, but also pay a 7.5 percent General Social Contribution, the majority of which is earmarked for the health system. This base coverage reimburses people for the majority of costs for doctor visits and for a portion of the costs of medications. On top of the government coverage, almost all French residents have supplementary coverage from a “mutuelle”, costing approximately 2.5 percent of salary.5
Netherlands: It is too early to reach firm conclusions on the cost of the Dutch health care system since it has been in place only two and a half years. In 2006, it cost approximately $2,590 for a family of four (children are free) to obtain mandatory coverage. However, 90 percent of Dutch people buy supplementary coverage from private insurers. Costs have increased since 2006 and may have been artificially low. Only time will show what the new system really costs.
Switzerland: Switzerland is one of the world’s most expensive systems and cost is a common complaint. The Swiss pay an average of $680 per month or around $8,167 annually for four people on the basic plan.6 Total health costs can add up to around 16 percent of income.7 Those who want supplementary coverage must pay more and costs can exceed $1,000 a month. Costs are rising at a steady pace and are not indexed to income, a burden for those in lower pay brackets.8
Myth: People living in countries with universal health care do not go bankrupt paying for their medical treatment
Fact: Not only do fewer people go bankrupt in the U.S. than critics claim, but people in other health care systems also incur high medical costs.
The claim that half of all American bankruptcies are associated with health care costs originates from a deeply-flawed 2005 study that artificially inflates the number of medically-linked bankruptcy through sloppy definitions and overly-broad categories.
In tax-funded systems like the U.K. and Canada, it is virtually impossible to declare medical bankruptcy. British and Canadian citizens do, however, incur large debts by seeking treatment out of the country or by paying for-life saving medications out of their own pockets. In both Canada and Europe, it is much more difficult and costly to declare bankruptcy than in the U.S. so fewer people are likely to do so. However, bankruptcy rates are rising.
In the Netherlands, many people struggle with health care costs. In 2007, 240,000 people failed to pay their premiums for at least half a year.9 Those who default on premiums lose coverage – but must be accepted by other insurers, creating a “merry-go-round” of debt.10
In Switzerland, the process of declaring bankruptcy is complex and often debts are restructured in lieu of bankruptcy.11 But bankruptcies are also going up, rising 8.2 percent in the first half of 2007 over the previous year. In 2006, 150,000 people lost health services because they had not fully paid their premiums. The cost of unpaid premiums is currently estimated between 300 and 400 million Swiss francs.12
1. 1OECD, “Taxing Wages 2006/2007: Special Feature: Tax Reforms and Tax Burdens,” (2008).
2. 2Ibid.
3. 3 Ibid.
4. 4 “Beiträge können kräftig steigen,” Süddeutsche Zeitung, 7 January 2008,
http://www.sueddeutsche.de/wirtschaft/artikel/401/151024/.
5. 5 David G. Green, Ben Irvine and Ben Cackett, “Health Care in France,” Civitas, (2005),
http://www.civitas.org.uk/pubs/bb2France.php.
6. 6 “Dallas Morning News Looks At Switzerland’s Health System.”
7. 7 Alice Dembner, “Soaring costs threaten universal coverage in Switzerland,” White Coat Notes, Boston Globe, 22 June 2007.
8. 8 Julie Rovner, “In Switzerland, A Health Care Model For America?,” NPR, 24 July 2008,
http://www.npr.Org/templates/story/story.php?storyId=92106731.
9. 9 “Kaer wil soepelheid wanbetaler met hoge schulden,” AD, 7 June 2007,
http://www.ad.nl/binnenland/article1422099.ece.
10. 10 Wynanand P.M.M. van de Ven, and Frederick T. Schut, “Universal Mandatory Health Insurance in the Netherlands: A Model of the U.S.?,” Health Affairs, vol. 27, no. 3, (2008).
11. 11 Karl Wüthrich, “Debt Restructuring Proceedings per the Revised Debt Prosecution and Bankruptcy Statute,” Wenger Plattner attorneys-at-law, September 1995, reprinted October 2001, available at
http://www.liquidator-swissair.ch/uploads/media/wp_nachlass_e.pdf.
12. 12 Luis Lema “Assurance maladie: on ne paie plus!,” Le Temps-Dossier, 29 September 2005,
http://www.letemps.ch/dossiers/dossiersarticle.asp?ID=164346.
