Finance, Management, And Sustainability Methods Of The U.S. Health Care System

The economic crisis brought an unprecedented attention to the issue of health system sustainability in the developed world. The discussion, however, has been mainly limited to “traditional” issues of cost-effectiveness, quality of care, and, lately, patient involvement. Not enough attention has yet been paid to the issue of who pays and, more importantly, to the sustainability of financing. This fundamental concept in the economics of health policy needs to be reconsidered carefully. In a globalized economy, as the share of labor decreases relative to that of capital, wage income is increasingly insufficient to cover the rising cost of care. At the same time, as the cost of Social Health Insurance through employment contributions rises with medical costs, it imperils the competitiveness of the economy. These reasons explain why spreading health care cost to all factors of production through comprehensive National Health Insurance financed by progressive taxation of income from all sources, instead of employer-employee contributions, protects health system objectives, especially during economic recessions, and ensures health system sustainability.

Health systems appeared after 1950, as Europe was healing from the 2^nd World War. With a political shift to the left [1], governments responded to public demands for affordable health services accessible to all. Until the 1970’s, health systems shared one concern: how to funnel an average 7 % of national Gross Domestic Product (GDP) collected through taxes and labor contributions into health care services. Two major types of public health systems emerged, named after their political instigators:

• Bismarck systems based on social insurance, with a multitude of public insurance funds, financed by employer-employee contributions, independent of health care provision. Examples are Belgium, France and Germany.
• Beveridge systems, where public financing and health care delivery are handled within one tax-financed structure, such as the National Health Service (NHS) in the UK and in some Nordic states. Finance, Management, And Sustainability Methods Of The U.S. Health Care System

Since then, there has been intense debate over the two generic types of systems, with the discussion centered on access, quality and cost. Financing was a “function of a health system concerned with the mobilization, accumulation and allocation of money to cover the health needs of the people, individually and collectively” [2]. In the 2000 report of the World Health Organization (WHO) we find that the purpose of health financing was “to make funding available, as well as to set the right financial incentives to providers to ensure that all individuals have access to effective public health and personal health care” Finance, Management, And Sustainability Methods Of The U.S. Health Care System. The definition was expanded in 2007 as follows: “A good health financing system raises adequate funds for health, so that people can use needed services protected from financial catastrophe or impoverishment associated with having to pay for them. It provides incentives for providers and users to be efficient” [3].

In both WHO definitions, the main concern was about raising adequate funds, sidestepping the implications for payers and for the economy. With recent recessions, however, universal coverage, a main pillar of social cohesion and welfare is endangered, with profound implications on equity^Footnote1 and financial protection. The willingness of society to disburse the necessary funds in developing countries has been discussed since the 1980s [4], and sustainable development remains pertinent in light of social, demographic and epidemiological changes [5]. In the developed world, however, the ability to finance society’s health care needs is a “child” of the 21^st century. The incidence of financing and health system viability has only recently become a major topic of health policy [6], not only in Europe [7] and the UK [8] but also in the US [9] and Canada [10].

The Organization for Economic Co-operation and Development (OECD) opened the debate on financial sustainability in 2013^Footnote2, along with other initiatives at a European Union (EU) level referring to “sustainable health care”^Footnote3. Non-profit organizations, patient advocates as well as the pharmaceutical industry organize workshops and conferences on “access to care” and “patient empowerment” [11]. The 2014 OECD Meeting, held on 24–25 April in Paris, aimed to identify and disseminate good practices in managing health care budgets^Footnote4, and a publication on the fiscal sustainability of health systems is under development. This shall examine drivers of health expenditure, policies to manage spending and improve value for money. Although these are mostly supply-side concerns, the request from the 2013 OECD Meeting was that the 2014 Meeting must also focus on “the politics of reform in health care”, including the issue of demand.

It is difficult to think of a more “political” issue than the source of financing health care. This fundamental, but rather overlooked, concept in the economics of health policy needs to be actively debated as sustainable development goals gain traction in post-2015 policy agenda. This paper discusses the implications of the way health care resources are raised, pooled and spent. Financial sustainability as a major health care issue in the 21^st century world is also discussed Finance, Management, And Sustainability Methods Of The U.S. Health Care System.

The debate on sustainability: new challenges in the 21^st century

The evolution of health financing during the last half century reveals a fundamental shift in core issues. After 1950, health systems were designed for populations expected to live for an average of 65–70 years. With retirement at 60–65 and near full employment, lifetime earnings and savings were more or less sufficient to finance a decent health system, while rising health expenditure meant welfare gains for all. In the 21^st century, average life expectancy rose above the age of 80, and health science and technology improved quality of life even at a very old age. Although desirable, the prolongation of life in good health costs, a reality that no democratic society can ignore for long.

The real political, economic and ethical question is the source of the required financing. Very rich countries^Footnote5 can still afford to rely largely on private health insurance despite the serious equity issues involved. Most developed and developing countries, however, finance their more or less developed welfare state through taxation and labor contributions. It is in these countries that globalization is bringing increasing economic inequality and economic uncertainty has caused a major debate on the sustainability of health financing.

Globalization and income inequality

Globalization has profoundly affected the distribution of income both among and within countries. The seminal work of Thomas Piketty in 2014 [12] showed that globalization favors capital relative to other sources of income, such as labor and rents. Increased capital mobility pulled many countries out of poverty, but the benefits favor the rich capital owning countries [13]. Globalization also increased income inequality within countries with top income brackets absorbing a larger share of national GDP [14]. Besides being a moral and political question, growing inequality is also an economic one since, beyond a certain point, it can be a source of significant economic ills [15]. For example, the failure to tax income reduces the effectiveness of welfare and safety nets and undermines the competitiveness of the economy [16]. This point is particularly important for developing countries now developing their health systems Finance, Management, And Sustainability Methods Of The U.S. Health Care System.