The oft-repeated claim that, unlike in Australia, Americans are forced to present their credit cards to access healthcare belies the complex reality and the fact that they have been a long-standing, ubiquitous feature of accessing healthcare in this country.
The reality is that our health systems have been and remain very similar. Just because we all have the same green card does not make the Australian system superior or different. The green Medicare card provides a limited form of insurance. In some cases, it is an almost worthless affectation. The majority of Australians carry at least one additional card because they have private health insurance or need a card to cover out-of-pocket costs.
Both systems are associated with a mix of public and private care that can involve high out-of-pocket costs. The difference is that one national payer in Australia oversees and regulates the framework that allows these high patient costs. In the US, hundreds of payers administer these frameworks.
The most significant difference is scale, which makes the US unequivocally the most important market for health technology companies. It means they are willing to tolerate a lot because of the return. Australia has not and never will have that underlying appeal. The primary impact is that the US is the global powerhouse of healthcare innovation. Australia contributes to global innovation, but not in a material way. We are almost entirely the recipients of innovation driven by US commercial considerations.
In Australia, the demand for free or more affordable access to healthcare is essentially a political refrain, albeit one limited to specific settings.
Programs like Medicare and PBS were intentionally designed to provide people with a partial subsidy. However, particularly the debate over Medicare has become focused on the demand that people accessing care by general practitioners (GPs) must be free at the point of care, regardless of their ability to pay.
It makes almost no sense. No charge to visit a GP who refers a patient to a specialist or for a diagnostic, where out-of-pocket costs can be at least several hundred dollars, even allowing for Medicare rebates.
Millions of Australians are either skipping the referral or using their credit cards to fund access. It might be an intractable feature of our health system.
The US health system is a complex web of public and private payers and providers. Many would be surprised to learn that around six in ten acute care hospitals in the US are nonprofit. Heavily subsidised employer-based health insurance is a prominent feature of the US system, which many people struggle to understand until they discover that these premiums are effectively tax-free income.
Around 92 per cent of Americans have a form of health insurance. They are insured through a range of payers that offer a variety of products. Some of these products provide limited or partial coverage. However, they generally offer a range of coverage that would be equal to or superior to anything available in Australia.
The American health system undoubtedly fails working-age low-income people and families. This group significantly comprises the uninsured. That said, the proportion of uninsured Americans has halved since 2010. Over-servicing and complex supply chains do characterise the system.
How does Australia's health system perform for working-age low-income people and families?
US payers, government and private, are regularly criticised for denying claims and access to treatment. How is that different to what happens in Australia? The government, through its health technology assessment advisory committees, regularly rejects claims. Our health minister has admitted the system is responsible for preventable deaths.
People in countries like Australia and New Zealand, where the government plays a dominant role in healthcare, struggle to appreciate the complexities and cultural underpinnings of the US health system.
Following World War II, many countries, including Australia, New Zealand, and the UK, opted to implement major government-controlled and dominated healthcare systems.
The US took a different direction by focusing on private sector dominance with some complementary government programs. It exempted employer-funded health insurance from federal taxes. It means that the employer-funded health insurance premium of US$5,000 is tax-free income. While 67 per cent of Americans are privately insured, 55 per cent of these are covered by employer-funded insurance that is tax-exempt.
In Australia, the federal government raises billions each year through the Medicare Levy and Medicare Levy Surcharge, ostensibly to fund healthcare and encourage people to take out private health insurance. It also provides a means-tested rebate for some people with private health insurance. However, Fringe Benefits Tax applies to employer-sponsored private health insurance, effectively taxing it as income.
In the US, health insurance payments receive favourable tax treatment. The opposite is true in Australia. Which is fairer?
The range of insurance in the US undoubtedly creates significant product variability and patient experience. Some people pay much higher out-of-pocket costs for the same product.
Is it different in Australia? Not really.
Australia has high out-of-pocket costs for many services, particularly for specialists and specific diagnostic tests. However, while the variability might be less than what people experience in the US, it is not always the case. In Australia, accessing some publicly funded diagnostic tests, based on a GP referral, is free; however, it can take months to receive them, if they are available at all. Diagnostic tests provided privately have a significant cost but can be accessed relatively quickly, often with a credit card.
How is that different to what happens in the US?
There are no fees for public inpatient services in Australia's public hospitals. However, privately insured patients may face high out-of-pocket costs at both public and private hospitals, depending on their specific coverage. At its most perverse, patients admitted to public hospitals are coerced into providing their private insurance details. This enables the public system to generate private revenue from what are essentially public patients. It is an example of one part of the healthcare supply chain gaming another to access revenue.
Is that different to what happens in the US?
Comparisons between the US and Australian health systems are complex. However, in simple terms, the public debate in this country belies this complexity. The systems are often presented in simplistic terms of good and bad, with minimal consideration of the reality.
The US spends a higher proportion of its gross domestic product on healthcare, partly due to overservicing, but also due to the historic quirk of very rapid expenditure growth from the 1980s to the early 2000s compared to other countries, as well as the challenge of retrospectively imposing cost constraints. According to Peterson KFF, since 2005, annual growth in health expenditure in a group of countries, including Australia, Japan and some European countries, has consistently matched or exceeded that in the US.
The US has a lower life expectancy, partly reflecting high obesity and chronic disease prevalence, high infant mortality and rates of death by accidental poisoning, commonly known as overdose. A significant factor in its lower life expectancy is a murder rate that is eight times higher than in Australia and six times higher than in a group of comparable countries. The US reports around 20,000 murders each year. Around 17,000 of these deaths are gun-related, and most victims are males aged between 20 and 34.
Peterson KFF said that in 2023, the average life expectancy at birth for a US male was 75.8, compared to 80.3 in a group of comparable countries, including Australia. However, the average life expectancy for males aged 65 is only 13 months less in the US than in similar countries, reflecting what happens when you account for the impact of the high murder rate for younger American males.
Australia does not have high infant mortality or murder rates. However, the life expectancy at birth for Aboriginal and Torres Strait Islanders is more than ten years below the national average, and below the life expectancy at birth in the US. The average life expectancy for Aboriginal and Torres Strait Islanders living in remote areas is shockingly and shamefully low.
To highlight the broader challenge of making comparisons, according to the OECD, the US significantly outperforms Australia in some critical cancer screenings by around 50 per cent. The US performs well in cancer outcomes.
Does the US spend too much on healthcare? Or, do countries like Australia and New Zealand not spend enough? Is the truth in the middle?
It will undoubtedly come as a surprise to many that out-of-pocket patient costs account for a higher proportion of healthcare spending in Australia than in the US. That is, despite the never-ending refrain, Australians pay more out-of-pocket for healthcare than people in the US. You are arguably more likely to need your credit card to access healthcare in Australia.
According to The Commonwealth Fund, US households finance roughly the same share of total health care costs (28 per cent) as the country's federal government. Out-of-pocket spending for care or services represents approximately 10 per cent of total health expenditures. Out-of-pocket spending is around 40 per cent for dental care and 14 per cent for prescription medicines.
Compare this to Australia, where, according to the Australian Institute of Health and Welfare, around 30 per cent of total health system costs are funded from non-government sources, including households and private health insurance. The significant majority of spending by private health insurers reflects premiums collected from households. It means that households finance around the same share of healthcare costs in Australia as they do in the US.
The Commonwealth Fund found that out-of-pocket patient payments for care and services accounted for 16.5 per cent of Australia's total health expenditures, compared to 10 per cent in the US.
This difference is reflected in medicines spending, where Australian patients contribute a greater share than their counterparts in the US.
According to the health department's annual PBS Expenditure and Prescriptions Report, out-of-patient prescription costs for reimbursed medicines account for around 8.4 per cent of PBS spending. However, this does not include the $1.6 billion that patients pay for under co-payment prescriptions that attract no subsidy. Once rebates paid by companies are removed from the topline PBS expenditure, and their costs for under-co-payment prescriptions are added, Australians pay around 25 per cent of the total cost of their medicines, compared to 14 per cent in the US.
Which system is better for patients?
All this is not to argue that the US health system is superior to what we have in Australia, although in some ways it undoubtedly is, particularly when it comes to access, but that the differences may not be as vast as many believe. The need to pay or present a credit card at the point of care has been a long-standing and remains a ubiquitous feature of Australia's health system, because out-of-pocket costs can be high, and outcomes are variable across different patient groups.