That's Right: James Medlock on Healthcare and the Welfare State (Part 1.)
An Interview with the Godfather of Twitter Social Democracy
There’s only one thing you need to know about James Medlock: he’s an enigma. A tireless advocate for the welfare universalism, the capacity of the state, and the virtues of taxation. Although sometime these positions are overshadowed by the preternatural aura produced by his pseudonymity, what matters to Medlock is evidence-based leftist policy. And that’s something that should matter most to us too.
(If you’re looking for a precursor on a list of his positions, here’s an excellent and well-sourced piece by Trevor Chow.)
(TNM: The Nordic Model; J.M: James Medlock)
T.N.M: Thank you so much for taking the time out to do this interview with us. You're a self-proclaimed "social democrat in the sheets, and market socialist in the sheets". We've all been acquainted with your ideological prescriptions, which I essentialize as: a large and universal welfare state, a concerted push for full-employment, and tax positivity. But for the purposes of this interview, we really wanted to get your thoughts on healthcare policy in particular. In service of that: what country would you say currently has the best healthcare system? Why?
J.M: So when it comes to healthcare debates in the US, I think we naturally talk about Canada and the UK a lot, because they're English speaking and familiar. And both systems have enviable elements (the fathers of these systems, Tommy Douglas and Nye Bevan respectively, are true welfare kings). But if we're looking for an archetypal healthcare system to learn from, I think Denmark's system is the better model. Canada has great free at point of service coverage for primary care and hospitals, but in terms of the overall share of health costs they socialize, they're actually on the low end of the spectrum because of limited pharmaceutical and dental coverage. This is a key metric because, in my view, the point of a health financing system is to spread costs evenly over the population, transferring net societal resources from healthy people to sick people.
Sickness is enough of a burden on its own, the least an egalitarian society can do is to make sure not to compound this with financial burden as well. So Canada’s low overall socialization of costs and high cost barriers to prescription drugs clearly takes it out of the running to be the ideal model. The UK’s National Health Service (NHS) sometimes gets a bad rap, but in many ways I think it’s actually preferable to the Canadian system. The Commonwealth Fund, a great source of comparative healthcare information, has often found them to be the best system in their rankings. The Beveridge model of healthcare, with an integrated system of publicly-owned hospitals tends to be more efficient than Canadian-style National Health Insurance model, where hospitals are in dispersed private hands (though the latter is still preferable to the Bismarck model of competing quasi-public insurers and private providers). But the NHS (at least as it currently exists) is very cautious and utilitarian in their coverage and funding. If you want to keep down health costs as a share of GDP while preventing cost-barriers to care, they’re a great model.
But I think the social democratic vision of the welfare state should be (as Esping-Andersen put it), “equality of the highest standards, not an equality of minimal needs.” And I think the Danish system comes closer to achieving this. They spend more as a percentage of GDP on healthcare, but they also manage to offer free at point of service coverage with some of the lowest wait times in Europe and expansive level of coverage.
T.N.M: Naturally the next question is: can you explain how the Danish healthcare system works?
Sure! So, as noted above, it’s a Beveridge style system, which is single payer + public ownership of hospitals. About 97% of hospital beds are publicly owned, and private health insurance spending accounts for a bit more than 2% of national health spending. The vast majority of care is free at point of service (including primary care, specialists, children’s dental, maternity care, etc), and out of pocket spending accounts for about 14% of national health spending, mostly for pharmaceuticals, adult dental care, and elective surgeries. Drugs administered in hospitals are free, and outpatient drug costs are capped at $550, with generous subsidies below that level. Pharmacists are required to default to the cheapest version of a prescribed drug unless specified otherwise (but patients can opt to pay the difference for more expensive versions). The system is mostly funded at the national level with a flat 8% income tax, and is administered at the regional level. In 2007 they moved towards greater centralization, going from 13 counties to 5 administrative regions, allowing for more specialization of hospitals in each region and consolidated administration.
One element that I think Denmark’s system is particularly interesting is how they handle provider choice. In the US health debates, “choice” is mostly discussed in terms of single payer “taking away” people’s choice of insurer. But this is a weird way of thinking about choice, because the function of insurers is often to constrain the choice of provider through restrictive networks. I think when people say they want choice, what they really mean is choice of doctor, not choice of who signs the checks to doctors. And provider choice is an orthogonal variable to the single payer vs multipayer debate. Broadly speaking, you could have a high choice/single payer system (Sweden), a low choice/single payer system (Finland), a high choice/multipayer system (Switzerland), or a low choice/multipayer system (Netherlands). But it’s not immediately clear that choice of provider is always desirable. In surveys, people consistently report that they would like to have provider choice, and also report being overwhelmed by choice and tend not to use it. And there’s some limited evidence that forms of gatekeeping can result in more efficient utilization of the health system and potentially make access more equitable. On the other hand, I’ve spoken to disability rights activists who are very wary of gatekeeping, and I can understand why. Doctors aren’t always great, and being able to get around an unhelpful GP to a specialist can be important. So the thing I like about Denmark’s system is they say, WhyNotBoth.jpg. Everyone is automatically enrolled in the “Group 1” coverage, which is free at point of service care, but your access to specialists is by referral from your GP. But there’s also a “Group 2” option, where you have to pay some nominal co-pays, but you get free access to specialists not constrained by gatekeeping. Only 2% of people choose this option, but it could be a meaningful benefit for those 2%. Meanwhile, for the vast majority of the population you still get the benefit of cost containment and better allocation of health resources (physicians may be more likely to be able to refer people to providers who have spare capacity).
Another important element of Denmark’s system is the overall abundance of supply. They have both more doctors and more nurses per capita than the EU average. Medical school is free, and like in most EU countries, it takes 6 years to complete rather than 8 years in the US and Canada. Occupational licensing in the medical field is more limited than in the US, and nurses are able to practice in expanded roles. They still struggle with getting doctors to work in rural areas (a common problem in many countries), but they’ve significantly expanded tele-health and expanded subsidies to attempt to address this.
Two other areas that I think are worth mentioning that often don’t get included when evaluating health systems. First, their long term care benefits are some of the most generous in the world, by a significant margin. Helping disabled and elderly people with basic activities of daily life is an essential function of the health system, and LTC costs are one of the biggest income shocks people face in their lifecycle (importantly, these benefits are disproportionately in-home services rather than institutional ones). The other thing is sick leave and cash disability benefits. The costs of sickness and disability don’t only come in the form of medical bills, but also in the lost capacity to earn income. So simply making care free is insufficient by itself, it’s important to provide cash on top of in-kind health services. Denmark’s generous sick leave and disability benefits, in which the first 4 weeks are covered by the employer, and an additional 52 weeks are covered by the state at over 80% wage replacement (in addition to permanent disability pensions for those unable to work again), set it apart from countries like the UK, which offers only 20% sick leave wage replacement for someone earning the median wage.
Part 2 is in the works and will be released shortly. Remember to subscribe to the newsletter, and our YouTube.
