Harvard Economics Professor Talks Broken American Health System

William C. Hsiao, an Economics professor emeritus at the Harvard School of Public Health, spoke about the problems with America’s health system and the potential benefits of a single-payer system during a HSPH webinar on Thursday.

After being featured in a popular Chinese-language health systems series by the School of Public Health intended to provide public health expertise to Chinese academics and researchers, Hsiao decided to discuss the U.S. health system again in English.

Hsiao began the webinar by stating he thinks the American healthcare system is “broken.” In 2019, America spent $3.8 trillion — around 18 percent of its GDP — on healthcare, representing an expenditure 50 percent larger per capita than that of countries like Canada, Germany, France, the Netherlands, and Switzerland. Despite this, the U.S. has “the worst health outcomes among all these nations,” according to Hsiao.

Hsiao said gaps in the American healthcare system exist in terms of insurance coverage and the quality of healthcare available. Hsiao also said he thinks the system is inefficient due to concerns such as high administrative expenses, over-treatment, and fraud and abuse.

“We’re wasting 30 percent of our spending every year,” Hsiao said.

Hsiao added that he thinks historical measures to improve the system — such as Medicare and Medicaid, Obamacare, and now Biden’s proposal of a public option — are just temporary solutions.

“The United States, by my analysis, has a system that cannot be sustained,” Hsiao said. “We have been putting Band-Aids on a rotten structure, and eventually, it will collapse.”

Hsiao spoke extensively about whether the United States should adopt a single-payer, Medicare-For-All system. According to Hsiao, the proposed system would alleviate the stress of the uninsured or underinsured by guaranteeing coverage under the same benefit package.

Hsiao further claimed that reducing administrative expenses under one set of rules, stopping duplicate treatments with one essential benefits package, and minimizing abuse and fraud with consolidated claim records would save the U.S. money in the long term. Using one model, the U.S. would potentially save 30 percent — $1.1 trillion a year, based on 2019 figures — from a single-payer system.

However, in an interview with The Crimson, Hsiao said the greatest roadblock towards reform is politics.

“Economists have technical answers, analytical answers based on evidence — but the constraint, what’s possible, is determined by political forces,” Hsiao said.

A system that would eliminate the need for private insurers threatens the private medical insurance industry in the United States, which holds political power, Hsiao said. To address this, Hsiao suggested looking to Germany, whose hybrid healthcare system relies on both private and public insurers. Those who earn under a certain salary are required to enroll in the “statutory” public program, whereas those who are wealthier can decide to buy their own private health insurance.

“Germany found a way to give a role to the private health insurance companies but still improve the system significantly,” Hsiao said.

Senator Bernie Sanders’ 2016 presidential campaign created a political movement centered on Medicare-For-All that has gathered momentum since, according to Hsiao.

“That first really became a political movement by Bernie Sanders in 2016, but that movement continued,” Hsiao said. “And this gathered momentum. That’s something new.”

Though Hsiao expressed frustration at the politicization of the U.S. healthcare system, he said he thinks “there is hope for the United States.”

Hsiao said he thinks people, burdened by the current system, will continue to push for healthcare reform, though some hospitals and insurers will fight back.

“People who have to pay find it very painful. The people who take the money say, ‘I’m doing fine.’”