Morningstar Magazine - October/November 2017 - 46

Spotlight: HSAs

I hold a different point of view. I do not see
universal coverage as matter of rights, but rather
as a matter of economics, as I have discussed.
Therefore, I see nothing wrong with the existence
of a parallel system of care for the wealthy. In
fact, I would argue that having a parallel system
for the wealthy is good for everyone else
because it reduces the demand for services in the
main system and, thus, reduces wait times.9
The Models

Nearly all industrialized countries provide some
form of universal healthcare coverage, although
what is covered varies greatly between countries.
In some countries, mandated coverage can
be supplemented or replaced by private insurance.
The one big exception to universal healthcare
is the United States. The ACA was supposed to
fill the gap and provide coverage for the
47 million people who had no coverage. However,
27 million people still are not covered for the
reasons that I have discussed.10
There are four main healthcare models in the
industrialized world ( E X H I B I T 1 ):11
Beveridge
William Beveridge designed Britain's National
Health Service. In this system, healthcare is
provided and financed by the government through
tax payments, just like the police force or the
public library. Many, but not all, hospitals and
clinics are owned by the government; some
doctors are government employees, but there are
also private doctors who collect their fees
from the government.
In Britain, a patient never gets a doctor bill. These
systems tend to have low costs per capita, because
the government, as the sole payer, controls
what doctors can do and what they can charge.
Bismarck
Prussian Chancellor Otto von Bismarck invented

the welfare state as part of the unification of
Germany in the 19th century. This system
provides healthcare using private insurance
companies, called "sickness funds," which are
usually financed jointly by employers and
employees through payroll deduction. Health
insurance plans are not-for-profit and must cover
everybody. Doctors and hospitals tend to be
private in Bismarck countries. (Japan has more
private hospitals than does the U.S.) Although
this is a multipayer model (Germany has about
240 different funds), tight regulation gives
government much of the cost-control clout that
the single-payer Beveridge model provides.
National Insurance
This is the system used in Canada and a few other
countries such as Taiwan and South Korea.
It combines elements of both the Beveridge and
Bismarck systems. It uses private-sector providers,
but payment comes from a government-run
insurance program that every citizen pays
into. Because there is no need for marketing, no
financial motive to deny claims, and no profit,
these universal insurance programs tend
to be cheaper and much simpler administratively
than American-style for-profit insurance. The
single-payer tends to have considerable market
power to negotiate for lower prices.
Canada's system, for example, has negotiated
such low prices from pharmaceutical companies
that Americans have spurned their own drug
stores to buy pills north of the border. National
Health Insurance plans also control costs by
limiting the medical services they will pay for or by
making patients wait to be treated.
Employer Insurance
In the employer insurance system, people who
have full-time employment receive health
insurance from a private insurance company
as a benefit, although they may have to
pay for part of it. Depending on the policy, a wide
range of services may be covered. Coverage

can be in the form of traditional indemnity
insurance, a preferred provider organization (PPO),
or a health maintenance organization
(HMO). Under indemnity insurance, patients are
subject to deductions and must make copayments
when receiving services. A PPO works in
a similar matter, but deductions and copayments
are more favorable so long as the patient
stays with service providers in the PPO's network.
In an HMO, coverage is limited to service
providers who work for or are under contract
with the HMO.
The employer insurance system only covers people
with full-time jobs. In the U.S., this system is
supplemented with a patchwork of governmentsponsored systems and individual markets.
The government-sponsored systems include
Medicare and Medicaid, which are single-payer
systems, and the Veterans Administration system,
which is like the U.K.'s National Health Service.
Medicare is a federal program for Americans age
65 and older and for disabled Americans.
Medicaid is a federal and state program for poor
Americans. The VA system is, of course, for military
veterans. Taken together, there are more
people on Medicare and Medicaid than there are
full-time private sector workers.12
The employer insurance system combined with
the government-sponsor systems still leaves
tens of millions of Americans uninsured.
The ACA attempted to cover these individuals
with new state-level insurance exchanges.
But for reasons that I have discussed, many people
who are eligible for insurance in their state
markets are choosing to remain uninsured. Hence,
universal coverage continues to elude the
United States.
The Cost of Healthcare

An important consideration in healthcare systems
is how much they cost. One way is to compare
healthcare expenditures between countries is to
look at the percentage of gross domestic

9 I thank Mark Tordai for making this point.
10 Most of the people that gained coverage did so through the expansion of Medicaid. See "Why 27 Million People Are Still Uninsured Under Obamacare," Bloomberg.com. Oct. 19, 2016.
11 I base the descriptions of the Beveridge, Bismark, and national insurance models on the Frontline documentary "Sick Around the World," which aired in April 2008.
12 Jeffrey, T.P. 2012. "Medicaid and Medicare Enrollees Now Outnumber Full-Time Private Sector Workers," Oct. 12. CNSNews.com.

46

Morningstar October/November 2017


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