Many problems in our society defy easy policy solutions. But the glaring failure of our jerry-rigged framework of health insurance to provide affordable quality care to all Americans is not one of them.

Every other rich nation—from Austria to Australia , Belgium to Britain , Norway to the Netherlands —does two simple things that have persistently eluded the United States : they ensure that all citizens have coverage against the financial risks of medical costs and they employ systemic strategies to keep those costs in check. The result is that all these countries spend much less than the United States does on health care—about half as much on average.

At the same time, all these nations cover all or nearly all their citizens—in stark contrast with the United States, where one out of three nonelderly Americans goes without insurance every two years.

Finally, virtually all of these nations have dramatically better health outcomes than the United States does. For example, analyses of “amenable mortality” (the odd term of art for deaths that could have been prevented with timely and effective care) find that the United States has the highest rate of preventable death before age 75 among rich nations—and that we’re falling farther behind. If the United States had the average rate of amenable mortality of the three nations with the lowest rates, more than 100,000 deaths would be prevented each year.

Why do we spend so much more to cover so much smaller a share of the population? The answer is not that other countries rampantly deny care. Waiting lists do crop up in some nations, but even countries without waiting lists spend much less than we do. Moreover, the United States has fewer doctors, hospital beds, and nurses per person than the norm, and Americans (while less healthy overall) visit doctors and hospitals less often and have shorter hospital stays. Even the prevalence of high-tech equipment like MRIs does not look exceptionally high. And the United States lags far behind other rich nations in the use of information technology to improve quality.

Instead, the main reason for higher spending in the United States appears to be the high prices charged for our medical goods and services. Add to this vast price disparity the very high administrative costs of our fragmented system, and it becomes easier to understand how the United States can spend so much more with so little evidence of superior care.

In 2007 a team of researchers at McKinsey undertook a comprehensive cross-national analysis of US health spending. Their conclusion was that the United States spent almost a third more than would be expected based simply on the nation’s per capita income—roughly $500 billion in extra spending a year—and that the modestly poorer health of Americans could not explain much of the difference. The principal reasons for the discrepancy, they concluded, were higher input costs, especially higher drug costs; higher profits and taxes due to the heavy reliance on for-profit providers and insurers; and higher administrative costs. “Despite higher costs,” the McKinsey team concluded, “the United States does not deliver objectively better quality and access for US citizens as a whole relative to peer countries.” ¹

The evidence that policy solutions exist doesn’t just come from abroad. Although the Medicare program is much maligned, it has simultaneously maintained coverage for elderly and disabled Americans while increasingly slowing the growth of its spending relative to private insurance. And despite Medicare’s comparative frugality, the program’s beneficiaries say they are happier with their coverage and have greater access to care than do privately insured patients, according to surveys.

Meanwhile, the Veterans Health Administration has used its integrated framework to create a model evidence-based quality-improvement program that delivers the highest quality care in the nation, as measured by adherence to established treatment protocols. In the rest of the American health care system, only around half of adults and children receive the care they should. The share in the VHA is over two-thirds.

In sum, the problem isn’t that health care poses inevitable wrenching trade-offs among costs, access, and quality. There are models both here and abroad that radically outperform our current nonsystem on all relevant dimensions. The problem, in a word, is politics: if real estate is about location, location, location, then health reform is about politics, politics, politics.

Health reformers have repeatedly sought to bring the United States into the company of nations that make health insurance a right of citizenship, rather than an emolument of employment, an entitlement of old age, and a grudgingly provided safety net for the poor. And again and again, they have run headlong into the vested interests and public concerns about change fostered by the United States ’ distinctive reliance on voluntary employment-based insurance. Over the past generation, this heavily subsidized system has gradually but inexorably crumbled, bringing more risk and anxiety into the lives of once-insulated middle-class workers. Nonetheless, the great challenge of reform remains how to deal with America’s eroding yet entrenched framework in a way that is sensitive to the easily ignited fears of well-insured workers that they will be asked to pay more for less.

Again, this is not a question of policy capacity; it is a question of politics. Thanks to uncontrolled medical inflation, the public sector in the United States already spends more on health care on a per-person basis than virtually any other nation’s government, despite covering only around a third of the population. There is little question that costs would be better restrained and coverage more secure if the public sector assumed a larger responsibility for providing insurance in the future. Indeed, America ’s long-term fiscal health depends almost entirely on the ability of the public sector to exercise control over medical costs.

And yet here fear rears its ugly head again, for the fiercest political conflicts of the past three decades have concerned taxes and spending. Expanding public coverage may be the most promising route to long-term cost control. But public coverage requires money, and money requires taxes, and taxes are politically poisonous—not least when they substitute for the much less visible drain on workers’ paychecks created by employment-based insurance.

It is important to note that Americans are much more receptive than conventional wisdom suggests to an enlarged governmental role in health care, including new taxes to support it. But this is before the fear-mongering has really begun. When the debate heats up, reformers will need to be able to fight fear with fear—the fear of government with the fear of losing private coverage, the fear of taxes with the fear of medical bankruptcy and debt. Recent surveys suggest that a substantial and growing minority of nonelderly Americans with private insurance—as many as three in ten—are distinctly unhappy with the cost and coverage of their insurance, and these concerns and the strains they reflect are clearly rising.

Reformers will also need to be able to fight fear with hope: with a clear, simple, and unthreatening vision that meets public concerns head on—a vision that may lack the intellectual satisfaction of a fine-tuned policy blueprint, but which provides the political satisfaction of actually having a chance of passage.

President Clinton’s ill-fated plan for health care reform—introduced in late 1993 and repudiated less than a year later—had too many moving parts and too many red flags: regional purchasing cooperatives spread across the country, efforts to encourage people to enroll in tightly managed HMOs, caps on private premiums if they grew too fast. President Obama resisted the temptation to embrace controversial policy details during the campaign, and he should resist it now.

The reforms that Obama called for during the campaign had three key elements: (1) lowering the cost of health insurance for workers who have it so employers can continue to provide good job-based benefits, (2) creating a new national insurance pool that allows those without such benefits to buy coverage as good as that which members of Congress receive, and (3) the creation of a new public plan modeled after Medicare that would be offered within this pool to provide a secure guarantee of coverage for those who now lack it and to drive down costs while improving quality. Those are still the right elements, and Obama should push for them quickly.

In particular, Obama should hold true to his campaign commitment to create a new public plan to compete with private insurance. This is the only realistic way to bring some of the cost discipline seen in other nations into American health care, while still preserving—and, indeed, greatly expanding—Americans’ ability to choose the health plans and providers they want.

The challenge is great, but it does not reflect a lack of workable, attractive alternatives to our current mess. It is a political challenge, and it requires reaching out to a public disillusioned with politics to help them understand that that their leaders and their government can do something to improve their lives dramatically.

Americans say they believe in government action to universalize health insurance. They say they want reform to be a top priority. They are enthusiastic about the idea of a public competitor keeping private plans in check. Similar sentiments helped bring health care to the top of the agenda in the early 1990s, and reformers are having their moment in the sun again. With fortune on their side and faith in the justness of their cause, they have a real chance of finally seizing the moment and bringing the United States into the company of advanced industrial nations that provide affordable, quality care to all their citizenry.

¹ Accounting for the cost of health care in the United States, McKinsey Global Institute, January 2007.

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