Global Competitiveness: How Other Countries Win

Republicans have long championed global competitiveness as an important political and economic goal, and the power of market competition as the royal road to get there. But, as two recent studies show, right under our noses are two little-noted facts that tell against that belief, most relevantly in the health reform debate.

One of them is that, by well-accepted standards of international economic competitiveness, every country that does best is also one that has both strong government-run or regulated universal health care systems and comprehensive welfare policies. The one exception to that pattern is the United States. The other fact is that nowhere in the world is there a health care system that controls costs by letting the market have its head.

The September release of the Global Competitiveness Report of the World Economic Forum for 2011–2012 (noted for its annual meeting in Davos), tells the competitiveness story. That report ranks the countries of the world for their competitiveness. Save for the U.S., every one of the top 10 are countries that have just those social policies most despised by American conservatives: Switzerland is first, followed by Sweden, Singapore, Finland, Germany, Denmark, the Netherlands, Japan, and the U.K. The U.S., once ranked first, has now dropped to fifth place. In addition to universal health care programs, the countries that rank highest for global competitiveness have notably strong social and welfare programs.

A recent study in the BMJ Quality and Safety, coauthored by one of us (Elizabeth H. Bradley), showed that the average ratio of social services to health care spending among most industrialized countries is 2:1, compared with 0:9 here. Social spending includes expenditures on housing, employment training, unemployment benefits, old age assistance, social security, and family support services. Furthermore, the countries with a higher ratio of social to health expenditures get better health outcomes, notably higher life expectancies and lower infant and maternal mortality rates. The evidence seems undeniable: good welfare policies produce healthier populations. 

Moreover, to rub it in a bit, those countries have much higher rates of personal taxation than our country, leading to a larger portion of their GDP going to government expenditures in (e.g., in 2008, 47.1 percent for Sweden vs. 26.9 percent for the U.S., and close to 50 percent for many of the other countries).

Representative Paul Ryan has become the Republican leader in singing the praises of competition in health care and the cutting of taxes. His latest foray in late September, following an earlier push for turning the Medicare program into a “premium support” plan – a variant in name only of government vouchers to purchase care – is a move well beyond Medicare reform. Taking up an idea once pushed by Senator John McCain, Ryan would eliminate tax breaks for employers who pay for their employee’s health care. Employer health care now covers some 60 percent of American workers. The net result would put the Medicare program and most other health care spending directly in the hands of consumers as supposedly savvy shoppers and insurance companies as competitive cost cutters.

It is a good thing he did not use the present competition of American insurers as an example of the power of choice and competition to lower costs. The Kaiser Family Foundation annual study of employer-sponsored health care found a 9 percent increase in family premiums for 2011, only 1 percent to 2 percent of which could traced to the addition of an increased age for young adults to stay on their parent’s insurance policies. The insurers are already competitive but they are also highly ineffective in keeping their prices down (not helped by the underlying costs of an expensive system).

Anyone who has recently priced health insurance plans can not fail to note how little they differ in offering similar benefits for comparable prices. The Federal Employees Health Benefit program, offering over 100 competitive insurer choices to government employees, while it saw a rare 3.8 increase last year in average premium costs, has historically been in the 7 percent annual cost increase range, and sometimes much higher.

More broadly, it is just about impossible to find more than a few examples anywhere in the world where competition has effectively controlled health care costs and generated better outcomes.

The only example market supporters can offer of late is the Medicare part D program for drugs. Competition has worked there, but considerably helped by the relative ease in effectively pressuring drug manufacturers to lower their prices, as can be seen in the great variations in drug prices for the same drug in different countries. And in any case controlling the costs of drugs, a single medical commodity, is a long way from controlling insurance company prices for entire health care systems.

The International Monetary Fund tried competition in developing countries in the 1980s and 1990s and failed. In 2006 the Netherlands led the way in Europe by enhancing the competition of insurance companies to better manage annual cost increases. That policy has also failed.

Most distressing, we continue to spend valuable time and political capital on jiggering the health care system to be more efficient and of higher quality. Many social programs are already languishing or targeted for budget cuts. Creative ideas about reforms of those programs are pushed aside and, ironically, even threatened by an increased focus on health care. A bypassing of social programs and a faith in competition as a cost-reducing, quality-enhancing, strategy is a mixture designed for failure. Health care itself will be hurt as will millions of Americans.

Daniel Callahan, co-editor of the Health Care Cost Monitor, is President Emeritus of The Hastings Center and the co-author of Medicine and the Market: Equity v. Choice. Elizabeth H. Bradley is a professor of public health at Yale School of Public Health and the director of the Yale Global Health Initiative.

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13 Comments

  1. Betsy says:

    Essays like this are so improntat to broadening people’s horizons.

  2. mary says:

    this is a good article. My problem is comparing apples to apples between private and federally funded health care programs.

  3. David L Rabin MD MPH says:

    This is an important commentary — nations with single payer health care systems know that it is futile to try to contain health care costs alone and thus provide social services and healthful environments as more cost effective means of promoting well being thus reducing chronic disease incidence and complications.
    Regarding Medicare Part D has appeared to be a private success but the reason is more to do with the rapid increase in the uses of generics then brand name drugs. The VA , the military and state Medicaid programs purchase drugs for as much as 40% less than private Part D insurers. These insurers also have more restrictive drug formularies then the government would have and average 7% in administrative costs. Making Medicre more cost efficient is essential. One way of doing that is to eliminate the costly private insurance programs within Medicare, (Parts D and Medicare Advantage) increase purchasing of equpment and supplies through bidding, and promote compassionate and less technology intensive end of life care (28% of Medicare expenditures are spent in the last year of life).

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