What can we learn about health care systems and the US from the muddle that America is getting into over Obamacare?

Donald Trump is not particularly interested in policy. When he promised to replace Obamacare – the current US health system – with something which would be better, he was responding to the conflicting demands of his supporters and certainly did not have a plan. It will be the Republican-dominated Congress which will lead the way with a bill for him to sign.

I read a detailed account of Republican ambitions and concluded that most could be attained by simply amending the title of the ‘Affordable Care Act’ to the ‘This is not the Obamacare Act’ and leaving the rest. Not that they will, for not only are the Republicans all over the place about what they want to do, they are also vulnerable to powerful (well-funded) interests who will want to manipulate the legislation for their private gain. It is not impossible that many Trump voters will find themselves markedly worse off.

Not that Obamacare is a good healthcare system; America still has the worse one in the rich world as measured by their health outcomes, despite having some of the world’s best hospitals and physicians; it certainly the most expensive. Its one merit is that Obamacare is better than the system that went before and, if the Republic extremists and their lobby groups have their way, the one that comes after.

It is hard for a New Zealander – or for that matter anyone else in the Western world – to appreciate how bizarre the American health system is. It arise from the inability of the progressive forces representing ordinary Americans to get their government to act in their interests.

Instead, the healthcare requirements of many Americans have been met by unions negotiating healthcare cover as a part of employment conditions. However, if you did not have a job, or were laid off and lost the accompanying healthcare cover, you had to pay for yourself. Yes, you could buy private health insurance, but what if you had a pre-existing condition which meant that insurance companies turned you away? What happens if the condition limits your ability to get a job?

Another complication is that an employment-based health system discouraged employment. Employers found that when it came to choosing placing a car factory between, say, the US or Canada, the latter was considerably cheaper because employers had to pay for the US workers' health insurance whereas the newly-employed Canadian worker was already getting it via the Canadian national health system. (Many US firms – some of them very big – would be bankrupt if they properly valued the costs of future health care and pensions in their accounts.)

Over the years the US Congress laboured to cover some of these problems (especially for the elderly) but Obamacare attempted to provide comprehensive health care in a way we take as normal in New Zealand. Despite being limited by the mishmash that was already in place and lobby groups seeking their self-interests – the advisers to Obama would have preferred a simpler, more comprehensive system – Obamacare has enrolled another 20 million Americans – over four New Zealand populations – who are at risk of losing the cover if the most extreme Republican proposals are adopted.

(Not quite an aside, but a long one. American workers were forced into this form of health care coverage because their government failed them. It is a ‘labour’ rather than ‘social democratic’ solution to the funding of the healthcare. New Zealand avoided it because we have a social democratic national health care system.

However, sometimes our left seeks labour rather than social democrat solutions to national problems, with the same difficulties of coverage. The living wage as a solution to poverty is an example. Not everyone has sufficient paid work for the living wage to sustain them so whatever its raising of some’s standard of living, others will be left behind, just as we see with the employment-based US health system.

Another major weakness is that when the living wage was first envisaged in 1908 it could, probably reasonably, be assumed that all households were much the same (over a life cycle) with an earning man, a woman working in the home and a number of kids – contraception was primitive. Nowadays there are a much greater variation of household forms. Many have one-and-a-bit or two earners; others have zero or just one earner with a greater diversity of dependents (children). And, of course, they are much more fluid over a lifetime.)

One cannot predict what will happen to Obamacare. It is a classic public policy problem, It is imperfect – probably all healthcare systems are imperfect from some perspective – so there are grumblers, some of whom supported Trump. But as in the case of Brexit, it is one thing to be agin the current system, it is a lot harder to replace it with a better one.

There are other things going on in Trump’s world on which I hesitate to comment upon because there is likely to be more revelations. In any case the US president has only considerable discretion in international affairs before Congress gets its oar in. So the abolition of Obamacare may not be the most important policy challenge the new president and Congress face, even if it is one of Obama’s greatest achievements. Even so, the Republicans risk incensing their voters. It is not an accident that they are talking about putting off the actual abolition date until after the mid-term elections in 2018.

New Zealanders observing US politics closely will be watching the twists and turns of the healthcare proposals although, as the opening sentences of the previous paragraph say, there will be other things to watch (while the economic directions remain a mystery). For our own health we may conclude that whatever our system’s defects, we are lucky to have a national health system with a unified funder and broad entitlement.

And yet, and yet. The squeezing of public funding here is undermining these strengths, pushing us towards an incoherent American version. The irony is that if the current policies continue, the unions and employees generally will start demanding employment based health cover – employers may get thoroughly pissed off.

Comments (2)

by Dennis Horne on January 24, 2017
Dennis Horne

All healthcare systems are open to abuse by patients and providers but in the US lawyers add another layer like mustard gas over a minefield.

by Charlie on January 28, 2017

Over and above the good points you make Brian, the US health system is terribly inefficient for some pretty basic reasons.

Obama was elected on the basis of "change you can believe in" but we knew that was a sick joke when he appointed Goldman Sachs people into his cabinet instead of making them face a jury. From then on, it was business as usual.

Both Republicans and Democrats take enormous amounts of campaign funds from pharmaceutical companies, health insurance providers and the trial lawyers association. If Trump can sort out the health system, it will be against the bankrolled politicians who dance to the tune of the lobbyists.

Back to those three fundamental problems:


The prices of drugs is based on a list price with discounting made essentially illegal. Americans pay many times more for drugs and medical equipment than we do, thanks to Pharmac. This is why Pharmac was such a stumbling block in TPP negotiations. The drug companis HATE Pharmac!


In essence there isn't any. Insurance companies are forbidden from operating over state lines, so they retain a nice little sinecure within their state and can charge what they like.


USA tort law is basically ludicrous. Ambulance chasing. No upper limit on claims. Claims for loss of dignity and whatever else you can invent. But the bottom line is the PI/PL insurance is very expensive for medical professionals (About 11 years ago I was talking to a surgeon from Florida who was paying 1.5 million dollars per year in premiums and he said that was typical). This has two effects: Firstly the cost is passed on to the patients. Secondly the doctors are forced to practice 'defensive medicine' whereby every conceivable procedure is thrown at patients to avoid claims of inadequate treatment. It's a country where a sore throat needs an MRI scan, just in case.

Best of luck to Trump in fixing this - but I don't see how it can be done.




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