Morningstar Magazine - October/November 2017 - 45

EXHIBIT 1

Comparison of the National Healthcare Systems Countries predominantly use one of four healthcare models.
Beveridge

Bismarck

National Insurance

Employer Insurance

Coverage

Universal

Universal

Universal

Primarily employees,
some groups covered by public
systems

Insurer(s)

Single-payer with opt-out for
private insurance

Multipayer private with
some public

Single-payer with no
opt-out for basic care; private
for additional care

Private with single-payer for
some groups

Funding

Tax deductions on salary

Premiums through tax
deductions plus employers'
contributions

Premiums paid by employers and
Tax deductions on salary;
employer contribution on private employees; single-payer systems
publicly funded

Service Providers

Both public and private service
providers and hospitals

Both public and private service
providers and hospitals

Private service providers; public
and subsidized private hospitals

Ownership and administration
of service practices and hospitals
vary by system

Advantages

Short wait times; many
private options

Short wait times; costs shared
by taxpayers and employers

Low out-of-pocket expenses

High-quality care for those
who have access; very high in
technical innovation

Disadvantages

Rural areas underfunded,
understaffed, underserved.

Costs rising due to changing
demographics

Long wait times for nonbasic,
nonemergency services; long
waits in emergency rooms

Many people uncovered; extensive
care can lead to financial
ruin; high per-capita expenditure

Countries
(with WHO ranking of
quality of healthcare)

2
11
18
23
32

Italy
Norway
United Kingdom
Sweden
Australia

1
9
10
17
20
25

France
Austria
Japan
Netherlands
Switzerland
Germany

30 Canada
58 South Korea

37 United States

Source: Morningstar.

pool contains people from all phases of the
lifecycle. In the first phase, people are generally
healthy, and what they put into the system
may exceed the benefits that they obtain. For older
people, further down the lifecycle, healthcare
needs are higher, so they may be receiving
benefits worth more than what they are putting
in. Each individual effectively has a lifetime
healthcare insurance policy.
In all industrialized countries except the United
States, intergenerational risk pools are achieved by
making participation mandatory. Countries
that have mandatory participation in its healthcare
system are said to have universal coverage.

The lack of universal coverage is what sets the U.S.
apart from the rest of the industrialized world.
As I discuss below, national healthcare systems
that have universal coverage can differ
from each other in almost every other respect.
Monopoly or Competitive Insurance Market?
In some countries, rather than having
private insurance companies, at least for basic
services, the government sets up a monopoly
single-payer.6 Proponents of single-payer
systems argue that a single-payer has lower
administrative costs and lacks the costs of
doing business of a private insurance company,
such as marketing costs. Proponents

of a competitive private insurance market
argue (1) the single-payer is a government
bureaucracy that like any other bureaucracy seeks
to maximize its budget and not allow any
budget cuts,7 and (2) competition drives down
costs and premiums.8
Opting Out
Many proponents of universal coverage consider
it a fundamental human right that should
be available to all people, regardless of income or
wealth. According to many who hold this view,
there should be no parallel system for wealthy
people where they can get better care by paying
more, as is the case in the U.K.

6 A number of states in the U.S. have attempted to pass legislation to create single-payer systems.
7 This is the public choice theory of professors James Buchanan and Gordon Tullock.
8 In the U.S., insurance companies cannot compete across state lines. Hence, there can be little or no competitive pressures to reduce costs and premiums. The ACA did not address this issue.

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Table of Contents for the Digital Edition of Morningstar Magazine - October/November 2017
