Home Healthcare Articles Publicly funded medicine
Publicly funded medicine
Publicly funded medicine is a level of medical
service that is paid wholly or in majority part by public funds
(taxes or quasi-taxes). Publicly funded medicine is often referred
to as "socialized medicine" by its opponents, whereas
supporters of this approach tend to use the terms "universal
healthcare", "single payer healthcare", or National
Health Services. It is seen as a key part of a welfare state
(see Welfare State for an interpretation in UK terms).
Publicly funded medicine may be administered
and provided by the government, but in some systems that is
not an obligation: there exist systems where medicine is publicly
funded, yet most health providers are private entities. The
organization providing public health insurance is not necessarily
a public administration, and its budget may be isolated from
the main state budget. Likewise, some systems do not necessarily
provide universal healthcare, nor restrict coverage to public
Proponents of publicly funded medicine cite
several advantages: universal access to health care, equality
in matters of life and death, the reduction of contractual paperwork,
and the creation of uniform standards of care. One important
difference is the reduction in the percentage of societal resources
devoted to medical care (in other words public systems cost
less than private systems).
Opponents of publicly funded medicine also
cite several purported disadvantages of the system: a greater
likelihood of lower quality health care than privately funded
systems; less motivation for medical innovation and invention;
less motivation for society's most skilled people to become
doctors, because of the lower amount of monetary compensation.
Varieties of public systems
The majority of industrial societies have
publicly funded health systems that cover the great majority
of the population. For some examples, see the British National
Health Service, or medicare in Canada and in Australia. The
role of the government in healthcare provision is however a
source of continued debate where opinions diverge sharply.
Even among countries that have publicly funded
medicine, different countries have different approaches to the
funding and provision of medical services. Some areas of difference
are whether the system will be funded from general government
revenues (e.g. Italy, Canada) or through a government social
security system (France, Japan, Germany) on a separate budget
and funded with special separate taxes. Another difference is
how much of the cost of care will be paid for by government
or social security system, in Canada all hospital care is paid
for by the government while in Japan patients must pay 10 to
30% of the cost of a hospital stay. What will be covered by
the public system is also important; for instance, the Belgian
government pays the bulk of the fees for dental and eye care,
while the Australian government covers neither.
Public systems around the world
In Australia the current system, known as
Medicare, was instituted in 1984. It coexists with a private
health system. Currently, the tax levy system of funding Medicare
has led to a severe revenue shortfall, with increased costs
to patients. This has triggered reforms by the Howard government
to the scheme. Many critics claim that these reforms are in
fact a move away from the principle of universal health care.
Canada has a federally-sponsored publicly funded medicare system.
Each province may opt out, though none currently do. Basic services
are wholly public, with no fee for service allowed. Other areas
of health care such as dentistry and optometry are wholly private.
Cuba has a wholly government controlled system that consumes
a large proportion of the nation's GDP. The system does work
on a for profit basis in treating patients from abroad. Cuba
attracts patients mostly from Latin America and Eastern Europe
by offering care of comparable quality to a developed nation
but at much lower prices. While the government system is free
to all patients frequently pay out of pocket for drugs that
are in short supply in the public system.
In Finland the publicly funded medical system is funded by taxation
and every citizen has a state-funded health insurance. The system
is comprehensive and compulsory, like in Sweden, and a small
patient fee is also taken.
In France, most doctors remain in private practice; there are
both private and public hospitals. Social Security is a public
organization (actually, several of them) distinct from the state
government, and with separate budgets. It generally refunds
patients 70% of most health care costs, and 100% in case of
costly or long-term ailments. Supplemental coverage may be bought
from private insurers, most of them nonprofit, mutual insurers.
Until recently, social security coverage was restricted to those
who contributed to social security (generally, workers or retirees),
excluding some poor segments of the population; the government
of Lionel Jospin put into place the "universal health coverage".
In Ghana most health care is provided by the government, but
hospitals and clinics run by religious groups also play an important
role. Some for profit clinics exist, but they provide less than
2% of health services. Health care is very variable through
the country. The major urban centres are well served, but rural
areas often have no modern health care. Patients in these areas
either rely on traditional medicine or travel great distances
In Israel, the publicly funded medical system is universal and
compulsory. Payment for the services are shared by labor unions,
the military, and the treasury.
In South Africa parallel private and public systems exist. The
public system serves the vast majority of the population but
is chronically underfunded and understaffed. The wealthiest
20% uses the private system and are far better served.
In Sweden, the publicly funded medicine system is comprehensive
and compulsory. Physician and hospital services take a small
patient fee, but the services are funded through the taxation
scheme of the County Councils of Sweden.
In 1948, the United Kingdom passed the National Health Service
Act that provided free physician and hospital services to all
citizens. Most doctors and nurses are on government payroll
and receive salaries, a fixed fee for each patient assigned,
and enhanced payments for specialized treatments or skills.
The National Health Service has been amended from time to time,
but is largely intact. Around 86% of prescriptions are provided
free. Prescriptions are provided free to people who satisfy
certain criteria such as low income or permanent disabilities.
People that pay for prescriptions do not pay the full cost.
For example, in 2004 most people in will pay a flat fee of £6.40
(€9.64, US$11.76) for a single drug prescription regardless
of the cost (average cost to the health service was £11.10--about
€16.70, US$20.40--in 2002). (Charges are lower in Wales, and
the administration there is committed to their eventual elimination.)
Funding comes from a hypothecated health insurance tax and from
general taxation. Private health services are also available.
The United States has been virtually alone among developed nations
in not maintaining a publicly-funded health-care system since
South Africa adopted one after toppling its apartheid regime,
but a few states have taken serious steps toward achieving this
goal, most notably Minnesota. Other states, while not attempting
to insure all of their residents strictly speaking, cover large
numbers of people by reimbursing hospitals and other health-care
providers using what is generally characterized as a charity
care scheme; New Jersey is perhaps the best example of a state
that employs the latter strategy.
Parallel public/private systems
Almost every country that has a publicly funded
health care system also has a parallel private system, generally
catering to the wealthy.
From the inception of the NHS model (1948),
public hospitals in the United Kingdom have included "amenity
beds" which would typically be siderooms fitted more comfortably,
and private wards in some hospitals where for a fee more amenity
is provided. These are predominantly used for surgical treatment,
and operations are generally carried out in the same operating
theatres as the NHS work and by the same personnel. These amenity
beds do not exist in other socialized healthcare systems, like
the Spanish one, among others. From time to time the NHS pays
for private hospitals (arranged hospitals) to take on surgical
cases for which the NHS facility does not have sufficient capacity.
This work is usually, but not always, done by the same doctors
in private hospitals.
Even in the United States healthcare for the
elderly, also known as Medicare, is financed from taxation,
but often provided by privately owned hospitals or physicians
in private practice. Another example is France where Social
Security is a public entity which refunds patients for care
in both private and public facilities; the majority of French
doctors are in private practice. In some systems, patients can
also take private health insurance, but choose to receive care
at public hospitals, if allowed by the private insurer.
While the goal of public systems is to provide
equal service, the egalitarianism is thus always partial. Every
nation either has parallel private providers or its citizens
are free to travel to a nation that does, so there is effectively
a two-tier healthcare system that reduces the equality of service.
Since private providers are typically better paid, those medical
professionals motivated by remunerative concerns migrate to
the private sector while the private hospitals also get newer
and better equipment and facilities. A number of countries such
as Australia attempt to solve the problem of unequal care by
insisting that doctors divide their time between public and
Proponents of these parallel private systems
argue that they are necessary to provide flexibility to the
system and are a way to increase funding for the health care
system as a whole by charging the wealthy more. Opponents believe
that they are allowed to exist mainly because politicians and
their friends are wealthy and would prefer better care. They
also argue that all citizens should have access to high quality
healthcare. The only country not to have any form of parallel
private system for basic health care is Canada. However, many
wealthy Canadians go to the United States for care.
Also, in some cases, doctors are so well paid
in both systems that prestige is often more important to them
than remuneration. This is very much the case in the United
Kingdom where private medicine is seen as less prestigious than
public medicine by much of the population. As a result, the
best doctors tend to spend the majority of their time working
for the public system, even though they may also do some work
for private healthcare providers. The British in particular
tend to use private healthcare to avoid waiting lists rather
than because they believe that they will receive better care
Role of the free market
Whether the free market can adequately deliver
health care is the key question with regards to health care.
Perhaps the most commonly cited argument for
the superiority of a government to a free market system is the
example provided by the only free market system today in operation
in a major nation. The United States has the only mostly private
health delivery system in a developed country. It is below average
by almost every health measure such as infant mortality, life
expectancy, or cancer survival rates, while also being the most
costly system in the world. In 2001 the United States spent
$4,887 per person on health care. That is more than double the
rate of any other G7 country, except Japan which spends $2,627
per capita annually. Surprisingly, the United States also spends
a greater fraction of its national budget on health than such
nations as Canada, Germany, France, or Japan. However, these
statistics may not be the proper way to evaluate the United
States system, because they include people not covered by the
system. Those covered by the system get the best health care
in the world, which is expensive because the United States population
has high risks factors associated with a sedentary life style
and junk food in addition incremental improvements over the
most cost effective care come at ever higher costs, because
cost effective care has already taken the low hanging fruit.
Luxury isn't cost competitive but many find it desirable.
It is important to note that while the United
States is the most private of any system, there is a substantial
public component. Of every dollar spent on health care in the
United States, 44 cents comes from some level of government.
In addition, government also increases private sector costs
by imposing licensing and regulatory barriers to entry into
both the practice of medicine and the drug trade within America.
Private practitioners also face inflated costs through the government's
use of protectionist measures against foreign companies, to
uphold the intellectual property rights of the American pharmaceutical
industry. Neoliberal economists argue that the American system
is an only somewhat less public one and that no nation currently
operates a truly free market in the delivery of health care.
Some neoliberal economists also argue that
the free market is better able to allocate discretionary spending
where consumers value it the most. There is variation amongst
individuals about how much they value peace of mind and a lower
risk of death. For example, while a public-funded system, based
on cost efficiency, might decide to pay for a pap smear only
once every five years if the patient was not positive for the
human papilloma virus. In a private system a consumer can choose
to be screened more often, and enjoy the luxury of greater peace
of mind and marginally reduced risk. When evaluating the pool
of current medical spending available to fund cost effective
care for the uninsured, this discretionary spending might be
moved to non-medical luxury goods. Also, since current private
plans are not very good at limiting spending to cost effective
procedures and schedules, those consumers exploiting this will
view the transition to a public system as a reduction in their
compensation or benefits, and will question whether a society
that will allow them to buy a better car or a European vacation,
but not better health care, is truly free.
Most experts believe, however, that significant
market failure occurs in health markets, thereby making a free
market operate inefficiently. The consumers of health care are
vastly less knowledgeable than the medical professionals they
buy it from. An individual making rational choices about his/her
own health care is also unlikely, especially in a case of emergency.
The extreme importance of health matters to the consumer adds
to the problem of the information gap. This gives the medical
profession the ability to set rates that are well above free
market value. The need to ensure competence and qualifications
among medical professionals also means that they are inevitably
closely controlled by professional associations that can exert
monopolistic control over prices. Monopolies are made even more
likely by the sheer variety of specialists and the importance
of geographic proximity. Patients in most markets have no more
than one or two heart specialists or brain surgeons to choose
from, making competition for patients between such experts very
In theory when a government sets billing rates
it can negotiate with the professional societies with equal
heft and knowledge, reaching a total cost that is closer to
the ideal than an unregulated market. Doctors' salaries do tend
to be much lower in public systems. For instance, doctors' salaries
in the United States are twice those in Canada.
Markets also fail to provide an efficient delivery
for health care because prevention is such an essential component,
but one that most people misjudge. Screening for diseases such
as cancer saves both lives and money, but there is a tendency
within the general population to not correctly assess their
risk of disease and thus to not have regular check ups. They
are only willing to pay a doctor when they are sick, even though
this care may be far more expensive than regular preventative
care would have been. The one exception is when extensive publicity,
such as that for mammograms, is undertaken. Making regular appointments
cheaper, or even free, has been shown to reduce both rates of
illness and costs of health care. Conversely, placing the cost
of a visit to a GP too low will lead to excessive visits wasting
both a patient's and a doctor’s time. Thus while some experts
believe free doctor visits produce ideal results, most other
believe that forcing people to pay some fraction of the cost
of an appointment would be better.
An argument against public health care is that
the cost-benefit government decisions are influenced by factors
tangential to providing the highest quality healthcare. Advocates
of this view point to decisions by various boards based on value
judgments rather than efficiency. For instance, breast cancer,
which has a powerful lobby and a high visibility, gets more
money than lung cancer, which is often seen as self inflicted
due to smoking. In a free market system, assuming that one group
of patients is no wealthier than the other, they would both
be treated equally. However, in such a system, problems arise
with the treatment of illnesses that are more likely to affect
the poor than the wealthy (or vice versa).
Difficulties of analysis
Cost-benefit analysis of healthcare is extremely
difficult to do accurately, or to separate from emotional entanglement.
For instance, prevention of smoking or obesity is presented
as having the potential to save the costs of treating illnesses
arising from those choices. Yet, if those illnesses are fatal
or life shortening, they may reduce the eventual cost to the
system of treating that person through the rest of their life,
possibly dying of an illness every bit as expensive to treat
as the ones they avoided by a healthy lifestyle.
This has to be balanced against the loss of
taxation or insurance revenue that might come should a person
have a longer productive (i.e. working and tax or insurance-paying)
life. The cost-benefit analysis will be very different depending
on whether you adopt a whole-life accounting, or consider each
month as debits and credits on an insurance system. In a system
financed by taxation, the greatest cost benefit comes from preserving
the working life of those who are likely to pay the most tax
in future, i.e. the young and rich.
Few politicians would dare to present the big
picture of costs in this way, because they would be condemned
as callous. Nevertheless, behind the scenes, a responsible government
must be performing cost analysis in order to balance its budget;
it is not likely, however, to take the most purely cost effective
route. It may choose to provide the "best" health
care according to some other model, but the cost of this still
must be estimated and funded, and there is no uncontroversial
definition of "best".
In producing a definition of quality of healthcare
there is an implication that quality can be measured. In fact,
the effectiveness of healthcare are extremely difficult to measure,
not only because of medical uncertainty, but because of intangible
quantities like "quality of life". This is likely
to lead to systems that measure only what is easy to measure,
such as length of life, waiting times or infection rates, and
may reduce the importance within the system of treatment of
chronic, but non-fatal, conditions, or of providing the best
care for the terminally ill. Thus, it is possible for personal
satisfaction with the system to go down, while metrics go up.