Testimony Before the Senate Special Committee on Aging


Mr. Chairman, distinguished Members of the Committee

My name is Michael Tanner. For the past 16 years I have been incharge of health care research for the Cato Institute inWashington, DC. Before that I served as legislative director forthe Georgia Public Policy Foundation and as legislative directorfor health & welfare with the American Legislative ExchangeCouncil. In all, I have spent more than 20 years studying theAmerican health care system and am the author of five books onhealth care reform, most recently Healthy Competition: What’s Holding Back American Health Care andHow to Free It.

As part of my research, I have investigated health care systemsin other countries, with particular attention to cost within thosesystems and the quality of care provided. The results of thatresearch is detailed in my Cato Institute study “The Grass Isn’t AlwaysGreener: A Look at National Health care Systems Around theWorld,” which I have attached to this testimony. The studylooks at a number of specific countries, but it is possible to drawsome broader general conclusions.

First, looking at the United States, there is no doubt that theUnited States spends far more on health care than any othercountry, whether measured as a percentage of GDP or by expenditureper capita. The United States now spends close to 16 percent of GDPon health care, nearly 6.1 percent more than the average for otherindustrialized countries.1 Overall health care costs are rising fasterthan GDP growth and now total more than $1.8 trillion, more thanAmericans spend on housing, food, national defense, orautomobiles.2

Health care spending is not necessarily bad. To a large degree,America spends money on health care because it is a wealthy nationand chooses to do so. Economists consider health care a “normalgood,” meaning that spending is positively correlated with income​.As incomes rise, people want more of that good. Because we are awealthy nation, we can and do demand more health care.3

But because of the way health care costs are distributed, theyhave become an increasing burden on consumers and businesses alike.On average, health insurance now costs $4,479 for an individual and$12,106 for a family. Health insurance premiums rose by a littlemore than 6 percent in 2007, faster on average thanwages.4

Moreover, government health care programs, particularly Medicareand Medicaid, are piling up enormous burdens of debt for futuregenerations. Medicare’s unfunded liabilities now top $50trillion.5Unchecked, Medicaid spending will increase fourfold as a percentageof federal outlays over the next century.6

But, while the US does not do a very good job of controllingcosts, we actually do fair well on many measures of quality. I amaware, of course, that not every survey recognizes this. Forinstance, there is the famous World Health Organization study thatranks the U.S. health care system as 37th in the world in terms ofhealth quality.
However, this study bases its conclusions on such highly subjectivemeasures as “fairness” and criteria that are not strictly relatedto a country’s health care system, such as “tobacco control.” Forexample, the WHO report penalizes the United States for not havinga sufficiently progressive tax system, not providing all citizenswith health insurance, and a general paucity of social welfareprograms. Indeed, much of the U.S.’ poor performance is due toreceiving a ranking of 54th in the category of “fairness.” The U.S.is actually penalized for adopting Health Savings Accounts andbecause patients pay too large an amount out‐​of‐​pocket, accordingto the WHO. 7 Suchjudgments clearly reflect a particular political point of view,rather than a neutral measure of health care quality. On the otherhand, the WHO report ranks the U.S. number one in the world inresponsiveness to patients’ needs in choice of provider, dignity,autonomy, timely care, and confidentiality.8

There are even difficulties in using more neutral categories ofcomparison. Nearly all such cross‐​country rankings use lifeexpectancy as a measure. In reality though, life expectancy is apoor measure of a health care system. Life expectancies areaffected by exogenous factors such as violent crime, poverty,obesity, tobacco and drug use, and other issues unrelated to healthcare. As the OECD explains, “It is difficult to estimate therelative contribution of the numerous non‐​medical and medicalfactors that might affect variations in life expectancy acrosscountries and over time.“9 Consider the nearly three‐​year disparity inlife expectancy between Utah (78.7 years) and Nevada (75.9 years),despite the fact that the two states have essentially the samehealth care systems.10 In fact, a study by Robert Ohsfeldt, JohnSchneider for the American Enterprise Institute found that thoseexogenous factors are so distorting that if you correct forhomicides and accidents, the U.S. rises to the top of the list forlife expectancy.11

Similarly, infant mortality, a common measure in cross‐​countrycomparisons, is highly problematic. In the United States, very lowbirth‐​weight infants have a much greater chance of being brought toterm with the latest medical technologies. Some of those lowbirth‐​weight babies die soon after birth, which boosts our infantmortality rate, but in many other Western countries, thosehigh‐​risk, low birth‐​weight infants are not included when infantmortality is calculated.12 In addition, many countries use abortionto eliminate problem pregnancies. For example, Michael Moore citeslow infant mortality rates in Cuba, yet that country has one of theworld’s highest abortion rates, meaning that many babies withhealth problems that could lead to early deaths are never broughtto term.13

On the other hand, when you compare the outcome for specificdiseases, the United States clearly outperforms the rest of theworld. Whether the disease is cancer, pneumonia, heart disease, orAIDS, the chances of a patient surviving are far higher in the U.S.than in other countries. For example, according to a studypublished in the British medical journal The Lancet, theU.S. is at the top of the charts when it comes to surviving cancer.Among men, roughly 62.9 percent of those diagnosed with cancer willsurvive for at least five years. The news is even better for women,the five year survival rate is 66.3 percent, two thirds. The nextbest countries are Iceland for men (61.8 percent) and Sweden (60.3percent for women). Most countries with national health care farefar worse. For example, in Italy, 59.7 percent of men and 49.8 ofwomen survive five years. In Spain, just 59 percent of men and 49.5percent of women do. And in Great Britain a dismal 44.8 percent ofmen and only a slightly better 52.7 percent of women live for fiveyears after diagnosis.14

It is notable that when former Italian Prime Minister SilvioBerlusconi needed heart surgery last year, he didn’t go to France,Canada, Cuba, or even an Italian hospital‐​he went to the ClevelandClinic in Ohio.15Likewise, Canadian MP Belinda Stronach had surgery for her breastcancer at a California hospital.16 Berlusconi and Stronach were following inthe footsteps of tens of thousands of patients from around theworld who come to the United States for treatment every year. OneU.S. hospital alone, the Mayo Clinic, treats roughly 7,200foreigners every year.17 Johns Hopkins University Medical Centertreats more than 6,000; the Cleveland Clinic more than 5,000. Oneout of every three Canadian physicians has sent a patient to theU.S. for treatment each year,18 and those patients along with the Canadiangovernment spend more than $1 billion annually on health care inthis country.19

Moreover, the United States drives much of the innovation andresearch on health care worldwide. Eighteen of the last 25 winnersof the Nobel Prize in Medicine are either U.S. citizens or workhere.20 U.S.companies have developed half of all new major medicines introducedworldwide over the past 20 years.21 In fact, Americans played a key role in 80percent of the most important medical advances of the past 30years.22 And,dvanced medical technology is far more available in the UnitedStates than in nearly any other country.23

The same is true for prescription drugs. For example, 44 percentof Americans who could benefit from taking statins, a lipidlowering medication that reduces cholesterol and protects againstheart disease, take the drug. That number seems low until comparedwith the 26 percent of Germans, 23 percent of Britons, and 17percent of Italians who could both benefit from the drug andreceive it.24Similarly, 60 percent of Americans taking antipsychotic medicationfor the treatment of schizophrenia or other mental illnesses aretaking the most recent generation of drugs, which have fewerside‐​effects. But just 20 percent of Spanish patients and 10percent of Germans receive the most recent drugs.25

This is not to diminish the very serious problems facing the UShealth care system or the need for health care reform. problemswith the U.S. system. Too many Americans lack health insuranceand/​or are unable to afford the best care. More must be done tolower health care costs and increase access to care. Both patientsand providers need better and more useful information. The systemis riddled with waste, and quality of care is uneven. Governmenthealth care programs like Medicare and Medicaid threaten futuregenerations with an enormous burden of debt and taxes.

In reforming our health care system, it may indeed be possibleto learn from the experiences of other countries, to see how theyare able control costs so much better than us, and to examine whatimpact those cost controls have on the quality of care.

Of course, there is no single model for national health caresystems in other countries. Indeed, the differences from country tocountry are so great that it is almost misleading to refer simplyto “national health care” or “universal coverage” as if there werea collective model for how other countries deal with health careand health insurance. Each country’s system is the product of itsunique conditions, history, politics, and national character. Thosesystems range from the managed competition approach of theNetherlands and Switzerland to the more rigid single‐​payer systemsof Great Britain, Canada and Norway, with many variations inbetween.

Some countries have a true single‐​payer system, prohibitingprivate insurance and even restricting the ability of patients tospend their own money on health care. Others are multi‐​payersystems, with private competing insurers and varying degrees ofgovernment subsidy and regulation. Some countries base theirsystems around employment, while others have completely divorcedwork and insurance. Some require consumers to share a significantpart of health care costs through either high deductibles or highco‐​payments. Others subsidize virtual first‐​dollar coverage. Someallow unfettered choice of physicians. Others allow a choice ofprimary care physicians but require referrals for specialists.Still others restrict even the choice of primary care doctors.

It is also important to realize that no country’s system isdirectly importable to the U.S. Americans are unlikely to acceptthe rationing or restrictions on care and technology that manycountries use to control costs. Nor are U.S. physicians likely toaccept a cut in income to the levels seen in countries like Franceor Germany. The politics, economics, and national cultures of othercountries often vary significantly from that of the U.S. Theircitizens are far more likely to have faith in government actionsand to be suspicious of free markets. And polling suggests thatcitizens of many countries put social solidarity and equality aheadof quality and choice when it comes to health policy.26 American attitudes arequite different. As pollster Bill McInturff notes, “Never, in myyears of work, have I found someone who said, ‘I will reduce thequality of the health care I get, so that all Americans can getsomething.’ ”27

Even so, it is possible to draw some important lessons from theexperience of other countries:

  • Universal health insurance does not mean universal access tohealth care. In practice, many countries promise universalcoverage, but ration care or have extremely long waiting lists fortreatment. Nor does a national health care system necessarily meanuniversal coverage. Some countries with ostensibly universalsystems actually fall far short of universal coverage, and mostleave at least a small remnant (1–2 percent of the population)uncovered. While this is certainly wider coverage than the UnitedStates provides, it shows the difficulty of achieving either trulyuniversal coverage or universal access to care.
  • Rising health care spending is not a uniquely Americanphenomenon. While other countries spend considerably less than theU.S. on health care both as a percentage of GDP and per capita, itis often because they begin with a lower base of expenditures. Buttheir costs are still rising, leading to budget deficits, taxincreases, and/​or benefit cuts. In 2004, the last year for whichdata is available, the average annual increase for per capitahealth spending in the countries discussed in this study was 5.55percent, only slightly lower than the United States’ 6.21percent.28 As theWall Street Journal notes, “Europeans…face steepermedical bills in the future in their cash‐​strappedgovernments.“29In short, there is no free lunch.
  • Those countries that have single‐​payer systems or systemsheavily weighted toward government control are the most likely toface waiting lists, rationing, restrictions on the choice ofphysician, and other barriers to care. Those countries withnational health care systems that work better, such as France, theNetherlands, and Switzerland, are successful to the degree thatthey incorporate market mechanisms such as competition,cost-consciousness, market prices, and consumer choice, and eschewcentralized government control.
  • While no country with universal coverage is contemplatingabandoning a universal system, the broad and growing trend incountries with national health care systems is to move away fromcentralized government control and to introduce moremarket oriented features. As Richard Saltman and Josep Figueras ofthe World Health Organization put it, “The presumption of publicprimacy is being reassessed.“30 Alan Jacobs of Harvard points out thatwhile there are significant differences in goals, content, andstrategies, there is a general convergence toward market practicesin health care among European nations.31 Thus, even as the U.S. debates adopting agovernment‐​run system, countries with those systems are debatinghow to make their systems look more like the U.S.

Looking at other countries and their experiences, then, canprovide guidance to Americans as we debate how to reform our healthcare system. National health care is not a monolithic idea, nor isit always as disastrous as its U.S. critics would sometimesportray. Some national health care systems dosome things well.

Yet, neither are those systems without serious problems. In mostcases, national health care systems have successfully expandedinsurance coverage to the vast majority, if not quite all, of thepopulation. But they have not solved the universal and seeminglyirresistible problem of rising health care costs. In many cases,attempts to control costs through governmental fiat have led toproblems with access to care, either delays in receiving care oroutright rationing.

In wrestling with this dilemma, many countries are looseninggovernment controls and injecting market mechanisms, particularlycost‐​sharing by patients, market pricing of goods and services, andincreased competition among insurers and providers. As Pat Cox,former president of the European Parliament, put it in a report tothe European Commission, “we should start to explore the power ofthe market as a way of achieving much better value formoney.“32

Moreover, the growth of the government share of health carespending, which had increased steadily from the end of World War IIuntil the mid‐​1980s, has stopped, and in many countries the privateshare has begun to increase, in some cases substantially. There iseven evidence of a growing shift from public to private provisionof health care.33If the trend in the U.S. over the last several years has beentoward more of a European‐​style system, the trend in Europe istoward a system that looks more like the U.S.

Therefore, if there is a lesson which U.S. policymakers can takefrom national health care systems around the world, it is not tofollow the road to government‐​run national health care, but toincrease consumer incentives and control. The U.S. can increasecoverage and access to care, improve quality, and control costswithout importing the problems of national health care. In doingso, we should learn from the successes‐and the failures-ofsystems in other countries.

Thank you and I would be happy to answer any questions.

1“OECD Health Data 2007: Statistics and Indicators for 30Countries.” Organization for Economic Cooperation and Development,July 2007.

2 C. Borger, etal., “Health Spending Projections Through 2015: Changes on theHorizon,” Health Affairs Web Exclusive W61: February 22,2006.

3 Uwe Reinhardtof Princeton University, for example, estimates that nearly half ofthe difference in spending between the U.S. and other industrialnations is due to America’s higher GDP. Uwe Reinhardt, PeterHussey, and Gerald Anderson, “U.S. Health Care Spending in anInternational Context,” Health Affairs 23 (May/​June 2004):11–12.

4 “EmployerHealth Benefits Annual Survey,” Kaiser Family Foundation, September11, 2007.

52007 AnnualReport of the Board of Trustees of the Federal Hospital Insuranceand Federal supplemental Medical Insurance Trust Funds(Washington: Government Printing Office, 2007).

6 JagadeeshGokhale, “Medicaid’s Soaring Costs: Time to Step on The Breaks,“Cato Institute Policy Analysis no. 597, July 19, 2007.

7 Edward Kelleyand Jeremy Hurst, “Health Care Quality Indicators Project: InitialIndicators Report,” OECD Health Working Papers no. 22, March2006.

8 Edward Kelleyand Jeremy Hurst, “Health Care Quality Indicators Project: InitialIndicators Report,” OECD Health working Papers no. 22, March2006.

9 “Health at aGlance: OECD Indicators, 2005,” Paris, OECD Publishing, 2005.

10 U.S. CensusBureau, 2000 Census.

11 Robert L.Ohsfeldt, John E. Schneider, The Business of Health:The Role of Competition, Markets, and Regulation(Washington AEI Press, 2006).

12InAustria and Germany, fetal weight must be at least 500 grams (1pound) to count as a live birth; in other parts of Europe, such asSwitzerland, the fetus must be at least 30 centimeters (12 inches)long. In Belgium and France, births at less than 26 weeks ofpregnancy are registered as lifeless. And some countries don’treliably register babies who die within the first 24 hours ofbirth. For a full discussion of the issue, seeMiranda Mugford,“A Comparison of Reported Differences in Definitions of VitalEvents and Statistics,” World Health Statistics Quarterly36 (1983), cited in Nicholas Eberstadt, The Tyranny of Numbers:Measurements & Misrule (Washington: American EnterpriseInstitute press, 1995), p. 50. Some, but not all, countries arebeginning to standardize figures and future data may be morereliable.

13 AnthonyDePalma, “SiCKO, Castro, and the 120 Year Club,” New YorkTimes, May 27, 2007.

14 ArduinoVerdecchia et al., “Recent Cancer Survival in Europe: a 2000–02period analysis of EUROCARE‑4 data,The Lancet Oncology, Available online August 21, 2007,http://​www​.the​lancet​.com/​j​o​u​r​n​a​l​s​/​l​a​n​o​n​c​/​a​r​t​i​c​l​e​/​P​I​I​S​1​4​7​0​2​0​4​5​0​7​7​0​2​450/a… Martin, “UK Cancer Survival Rate Lowest in Europe, DailyTelegraph, August 24, 2007. Of course it can be argued thatthese figures are skewed by aggressive US testing and diagnosticprocedures. In the U.S., we catch many cancers that would goundetected in other countries. These cancers are small or slowgrowing and would not kill the person suffering from it. That it isdiagnosed in the US, but not other countries, makes our survivalrate look higher. Jonathan Cohn, “What Jacques Chirac Could TeachUs about Health Care,” New Republic, April 10, 2007. Thatis a theory worth considering and it is likely that increasedscreening has an impact on the figures for slow growing cancerssuch as prostate cancer (the source of much controversy since RudyGiuliani raised the issue in his campaign). “Rudy Wrong on CancerSurvival Chances,” Washington Post, October 31,2007; David Gratzer, “Rudy Is Right in Data Duel about Cancer,“Investors Business Daily, November 6, 2007.

As, Robert Ohsfeldt and John Schneider concede in their book,The Business of Health “[Many] cancer survival rateestimates…do not adjust for cancer stage at diagnosis. Thiscould result in survivor time bias — those with cancers detected atan earlier stage would exhibit longer post diagnosis survivaltimes, even for cancers that are essentially untreatable.” RobertOhsfeldt and John Schneider, The Business of Health(Washington: American Enterprise Institute, 2007), pp. 23–24.However, survivor time bias is not as big an issue for cancers thathave faster metastasizing times or strike younger patients.

As Ohsfeldt and Schneider go on to note,

Survivor time bias, however, should not be asignificant concern for cancers that respond well to treatment ifdetected early. For such cancers, early detection makes asubstantive contribution to survival time — the longer survivaltime associated with early detection thus is not a spurious effectof early detection. An example is thyroid cancer. In the UnitedStates, virtually all females with thyroid cancer survive for atleast five years. The lower survival rates for thyroid cancer inEuropean countries suggest some underperformance in either earlydetection or post diagnosis management in these countries. Incontrast, the differences in survivor rates are less pronounced forcancers that are more difficult to treat, such as lungcancers.

Thus, it is significant that the U.S. advantage holds for othercancers, too, including breast cancer, colon cancer, and thyroidcancer among others. Moreover, there are many benefits to earlydetection and treatment beyond survival rates. Even for prostatecancer, early treatment can have a significant effect on thequality of life. And it could be that the U.S. simply has morecases of prostate cancer than other countries (diet could play asignificant role, for example. Kyung Song, “Study Links Diet toProstate Cancer,” Seattle Times, October 11,2007).

Finally, it should at least be mentioned that one of the mostcommon arguments for socialized medicine is that it would increasescreening and preventive care. Indeed, John Edwards actually wantsto make testing mandatory for all Americans. “Edwards BacksMandatory Preventive Care,” Associated Press, September 2,2007.

15 “WorldBriefing: Berlusconi has Heart Surgery in US,” New YorkTimes, December 19, 2006.

17 SteveFindlay, “U.S. Hospitals Attracting Patients from abroad,” USAToday, July 22, 1997.

18 The twoprincipal reasons for sending a patient abroad were the lack ofavailability of services in Canada (40 percent) and the length ofthe wait for certain treatments (19 percent),“Robert J. Blendon etal., “Physician’s Perspectives on Caring for Patients in the UnitedStates, Canada, and West Germany.” New England Journalof Medicine, 328, (April 8, 1993).

19 JohnGoodman, “Moore’s SiCKO Could Put Lives at Risk,” The MichaelMoore Chronicles, National Center for Policy Analysis,2007.

20 “NobelPrize in Physiology or Medicine Winners 2007–1901,” The Nobel PrizeInternet Archive,http://​almaz​.com/​n​o​b​e​l​/​m​e​d​i​c​i​n​e​/​m​e​d​i​c​i​n​e​.html.

21Pharmaceutical Manufacturers Association, “Facts about the U.S.Pharmaceutical Industry,” 2002.

22EconomicReport of the President (Washington: Government PrintingOffice, 2004), p. 192.

23 GerardAnderson et al., “It’s the Prices Stupid: Why the United States IsSo Different from Other Countries,” Health Affairs 22, no.3 (May/​June 2003): 99.

24 OliverSchoffski, “Diffusion of Medicines in Europe,” paper prepared forthe European Federation of Pharmaceutical Industries andAssociations,” 2002, cited in Daniel Kessler, “The Effects ofPharmaceutical Price Controls on the Cost and Quality of MedicalCare: A Review of the Empirical Literature,” June 2004.

25 OliverSchoffski, “Diffusion of Medicines in Europe,” paper prepared forthe European Federation of Pharmaceutical Industries andAssociations,” 2002, cited in Daniel Kessler, “The Effects ofPharmaceutical Price Controls on the Cost and Quality of MedicalCare: A Review of the Empirical Literature,” June 2004.

26 DanielCallahan and Angela Wasunna, Medicine and the Market: Equity v.Choice (Baltimore: Johns Hopkins University Press, 2006);Helen Disney, et al., Impatient for Change: European Attitudesto Healthcare Reform (London: Stockholm Network, 2004),

27 RobinToner, “Unveiling Health Care 2.0, Again,” New York Times,September 16, 2007.

28 OECD HealthData 2007: Statistics and Indicators for 30 countries, OECD, Oct.2007

29 Quoted inDaniel Callahan and Angela Wasunna, Medicine and the Market:Equity v. Choice (Baltimore: Johns Hopkins University Press,2006), p. 109.

30 RichardSaltman and Josep Figueras, “Analyzing the Evidence on EuropeanHealth Care Reforms,” Health Affairs, March‐​April1998.

31 Cited inDaniel Callahan and Angela Wasunna, Medicine and the Market:Equity v. Choice (Baltimore: Johns Hopkins University Press,2006), p. 91.

32 “ ‘CoxReport’ on Financing Sustainable Healthcare in Europe Presented toEuropean Commission today,” Press Release, February 13, 2006.

33 HansMaarse, “The Privatization of Health Care in Europe: An EightCountry Analysis,” Journal of Health Politics, Policy, andLaw 31 (2006): 981‑1014.