Health Insurance in the United States

Health insurance in the United States is significantly different (and arguably less efficient) than that of other large, high income countries, including France, Germany, the United Kingdom, Japan, and Canada. Rather than using a single-payer, universal health care system, the United States relies on a number of market-based, private health insurance systems, which interact with the insurance-seeker on a number of different levels.

In most of Western Europe and in Canada, health insurance is administered by the government. This allows the government to act as an intermediary for the entire population, bargaining down the price of services and prescription drugs significantly.

For instance, identical drugs in the United States often cost two to three times as much as the same drugs from the same companies (mostly based out of the US) in Canada. This is because the Canadian government will not buy a drug if the price is too high, effectively forcing those on medication in the United States to subsidize Canadian and Western European drug prices. If the US government were to switch to a single-payer system, the prices in Canada and in the EU would increase and the prices in the US would decline.

Another inherent problem in the US health insurance is the inefficiency created by its structure. Contrary to popular economic principles, the administration of health care would actually be more efficient if it were done collectively, rather than privately; additionally, there would be considerably less restrictions, as patients could choose doctors, rather than being restricted to HMO and PPO referrals.

These inefficiencies manifest in the higher cost of insurance in the United States. While the cost of health insurance in most high income countries is around 7 to 9% of gross domestic product, costs in the United States have spiraled up to 16% of GDP, even though as much as 15% of the population is not covered by insurance; and a larger portion is inadequately insured.