Rupert Cornwell: Out of America

The US spent $1.9 trillion on health last year. Even Bush can see it's not good value

Once upon a time the hybrid system worked, sort of. There are two state-run bits, Medicare and Medicaid, providing coverage respectively for the elderly and disabled, and the very poor (though Congress, mindful as ever of the disadvantaged, last week lopped $40bn off Medicaid spending). But most Americans get their health care through their employers. And here the system is truly coming apart at the seams.

Personally, I have no complaints. My wife works for Reuters news agency, and for the purposes of health care coverage I am a Reuters spouse. The bureaucracy can be stifling, but at the end of the day I pay just $10 per doctor's consultation or drug prescription.

Last year our son was treated for a heart condition. First there was a string of visits to consultants to establish a diagnosis, and decide that the best course was treatment at a specialist heart hospital. The procedure was cutting-edge, as was the price-tag - $35,000 - almost £20,000 - even though he did not spend a night in hospital. (I was told that in Britain the cost would have been barely a third of that.) But we could only be thankful; left untreated, the condition could have been life-threatening.

In short, if someone else is paying - or you're fabulously rich - there's nothing like American health care: the best doctors, state-of-the-art technology, and hospitals whose lobbies have the feel of five-star hotels.

But what chance of an uninsured child receiving the same care? Last year, health care consumed one-sixth of the entire US economy - to be precise $1.9 trillion dollars. This is slightly more than the gross domestic product of Britain and equal to almost $6,300 (£3,600) per person per year.

No other country devotes a comparable share of its wealth to keeping itself healthy. Yet it gets lousy value for money. More than 44 million Americans have no coverage at all, and 30 million more are grossly underinsured, adding up to a quarter of the population. Despite the enormous outlay, by most measures of health care - infant mortality, diabetes, life expectancy - the US is only in the middle among developed nations.

Costs, meanwhile, are out of control. Companies have been forced to cut back benefits and increase premiums. Old-established industry is especially hard-hit. One reason Wal-Mart, the world's largest retailer, has flourished is that it has skimped on health care benefits for its workers, enabling it to offer unmatchable low prices. Not so for many corporation that have been around a while. The so-called "legacy" costs of mandatory health care coverage for past and present employees are a big reason why Ford and GM are in such a mess. Much the same goes for the battered US airlines.

The problem is not new. Back in 1993 Hillary Clinton, then First Lady, devised an ambitious but horrendously complicated scheme to provide virtually universal coverage. It fell foul of an insuperable alliance of Republican politicians, insurers who would have been largely put out of business, and many ordinary Americans who couldn't understand it. But the deadliest thrust was the charge of "socialised medicine".

The buzz ahead of last week's State of the Union was that the President would be saying something important on the subject. In the event Bush devoted 161 words to health care. He offered the usual Republican nostrums: get rid of frivolous malpractice lawsuits and expand so-called health savings accounts by increasing tax incentives. But he might as well have gone after an elephant with a pea-shooter.

Something has to give, though it won't be easy. The vested interests against health care reform are huge, starting with the highly profitable insurance companies, bureaucratic monsters that account for 20 or 25 per cent of health care costs. Even arch-conservatives, however, are coming to a terrible realisation. Tax cuts, free markets and individual choice are wonderful things, but health care is not a business like any other.

It is not a perfect market where consumers (ie patients) are making rational decisions based on full knowledge of the facts. They are unsure, often fearful, sometimes panicked. Then there is the inherent conflict between the insurers, whose goal is to maximise profits by boosting premiums and narrowing coverage, and the moral duty of a country to ensure decent health care for all its citizens, rich or poor. The unfairness of the US system is an affront to these civilised values. Why, oh why, not Medicare for everyone?