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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 health facilities.

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 for care.
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 private systems.

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 from it.

    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 limited.

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.

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