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The United Nations and the Ghosts of Global Health Initiatives Past

September 23, 2015

On Friday, the United Nations General Assembly will convene in New York to discuss and approve the long-planned Sustainable Development Goals (SDGs). Taking the place of the Millennium Development Goals (MDGs), which end in 2015, the SDGs set new goals and targets for a wide variety of development issues from global poverty to healthcare over the next twenty years. With the Ebola outbreak still fresh in the public consciousness and both chronic and tropical diseases grabbing headlines, there has never been a better time to reassess and refocus global healthcare goals.

As the goals and targets of the SDGs are debated, however, health policy makers need more than just the words to achieve results. A recent study by Hudson Institute revealed that many global health programs failed to take into account the challenges of political will and transparency, the importance of local participation in design and implementation, and the vital role of the private sector with its diversity in financing, product development, and service delivery.

According to its own evaluations, the World Bank found that many of its health programs were poorly implemented, with unrealistic targets and limited impacts on health. The African Union’s 2001 Abuja Declaration, which required signatory nations to pledge 15% of their GDPs to healthcare, was upheld by just six countries due to a lack of political will. Similarly, in 2003, the World Health Organization’s “3×5” Initiative set out to treat 3 million victims of HIV/AIDs by 2005. In addition to not meeting its target, the WHO allowed 36 AIDS drugs to enter the African marketplace without evidence of bio-equivalency.

The UN’s final report on the MDGs never mentioned the contributions of the private sector or the diminishing role of official government aid in the changing landscape of global health. For example, during the first 12 years of the MDGs, Hudson Institute found that 29 companies contributed $94.8 billion in monetary and product donations, technology transfers, voluntary licenses, training of healthcare cadres, and infrastructure building projects. Merck & Company, together with the Bill & Melinda Gates Foundation, built Africa’s first pediatric AIDS hospital and outpatient clinics in Botswana. Eli Lilly and Company transferred its multi drug-resistant tuberculosis (MDR-TB) production technologies and technical support staff to companies in South Africa, India, Russia, and China.

Such public-private partnerships between government agencies and non-profit organizations, independent and corporate foundations, faith-based organizations, and volunteers have improved the lives of billions over the last 30 years. To meet the many targets included in the proposed SDGs, health care practitioners should take a careful look at not only what worked but how the world has changed. Private financial flows dominate the economic relationships between developed and developing countries, and private players deliver a large portion of health care services throughout the world.

Rather than regard the private sector as an “institutional conflict of interest,” a draft resolution at the 2015 World Health Assembly, the multilateral institutions undertaking global health initiatives must embrace the growth of civil society and the diversity, choice and prosperity that democracies and economic growth create in order to carry out the important health goals and targets of the SDGs.

Jeremiah Norris is a senior fellow and director, Center for Science in Public Policy, at Hudson Institute, Washington, D.C.

Global Health Initiatives: Pre-and Post-2015

May 14, 2015

The Center for Science in Public Policy at the Hudson Institute has a new in-depth review of global health initiatives pre and post 2015. With the Millennium Development Goals (MDGs) ending in 2015 and new Sustainable Development Goals (SDGs) on the way to take their place, we took a look at what worked and what didn’t in global health initiatives. We wanted to see if the new SDGs used any past take-home lessons for the post 2015 period.

There is no lack of global health initiatives over the last 35 years. From WHO’s dramatic agenda at Alma Ata in 1978, Health for All by the Year 2000,  to the African Union’s Abuja Declaration of 2001 where countries pledged to contribute at least 15% of their GDPs to healthcare, to WHO’s “3 by 5” HIV/AIDS program to cover 3 million people by the year 2005, to World Bank evaluations of its multi-million dollar health investments, and the more recent Lancet Commission recommendations for Universal Health Coverage, endorsed by well-known health and development experts, including former and current World Bank presidents, Lawrence Summers and Dr. Jim Yong Kim.

There are a lot of lessons learned in the new report – a diary of the last 35 years of global health initiatives and a virtual blow by blow description of how they came about and what they did and did not do. The following three lessons, from among many, are highlighted here:

Lesson One: Without the political will, good governance, and transparency of nation states who receive global aid, all the technology, affordable drugs, and new ideas of Universal Health Coverage won’t bring about the ambitious goals of the SDGs. From their own evaluations we found that many of the global initiatives of the WHO, World Bank, and others had either failed to reach their goals or didn’t set up proper evaluations in the first place to know if they had. And, despite the billions of dollars spent on these programs, one World Bank evaluation said, that little was known about what the Bank had “bought” for its investments. Dr. Chan, Director-General of WHO as far back as 2008 concluded: “As we have seen, powerful interventions and the money to purchase them will not buy better health outcomes in the absence of efficient systems for delivery.” The proof of this was the outbreak and response to the Ebola crisis in Africa. Despite all the global health aid over the last quarter of a century, there were no efficient health systems in place. Liberia was one of only six African countries to meet the Abuja Declaration goal of allocating 15% of its national budget to health and was unprepared to deal with Ebola.

Lesson Two: Without local ownership, in both the design and implementation of health care programs, we can’t expect local organizations and health care providers to make global initiatives work. WHO and the World Bank jumped into designing and executing large, complex global health programs starting in the 1990s. In an internal evaluation of WHO’s HIV/AIDS program which set out to treat 3 million people by 2005 and never achieved this goal, WHO’s critique was that the agency was not itself an implementing agency. It was in over its head, particularly with pre-qualifying anti-retroviral (ARV) drugs, staffing at local levels, and supply chain systems to move and store drugs. Indeed, the WHO had to de-list 36 of the ARV drugs it had pre-qualified for lack of proof of bio-equivalency. As membership organizations that are subordinate to the health officials of its member countries, these organizations cannot assume direct implementation responsibilities. The top-down design process requires a high level of government investment and, without local involvement and ownership, doesn’t work and continues to foster dependence on international aid.

Lesson Three: Avoid biting the hand that feeds you. The WHO must learn to accept how the world works now, and that government aid is now a minority shareholder. Governments still have important, but different, roles than before. With new players in the landscape of foreign aid and the growth of institutions and skilled professionals in developing countries, the new roles for donor and multilateral governments are to raise awareness, convene resources and facilitate talent and ideas attacking global health problems. Today, of all financial flows from developed to developing countries, 80% are private, including capital investment, remittances, and philanthropy. Most observers would regard this a good thing since means that local entrepreneurs, NGOs, businesses, and families are receiving private funds that they put to use to better their lives. Civil society is thriving and is empowered to take over its own endeavors. Developing countries are “business ready” and so forth. But, not so fast; at this year’s annual World Health Assembly, convening on May 18, a draft resolution, “Overarching Framework of Engagement with Non-State Actors,” is winding its way onto the agenda. The resolution is worried that, “The health landscape has become more complex in many respects. Among other things, there has been an increase in the number of players in global health governance.”

These “players” are the NGOs and foundations providing boots on the ground to save lives, the volunteers from all over the world helping AIDS orphans, the missionaries who have provided almost half of many African countries’ health care services over the years, and the companies that have given some $94 billion in product donations, research on neglected diseases, and cash donations between 2000 and 2011. The resolution then goes on to single out private businesses as “the most important institutional conflicts of interest” with WHO. If the WHO cannot embrace the growth of civil society with its diversity, choice, and prosperity that economic growth and democracies create, it risks staying on the back burner of health history.

The good news here is that there is a role for these global health institutions, other than worrying about losing market share. But, they will have to fight their instincts to command and control, and instead listen to all the new players, including local health care providers, entrepreneurs, foundations, academics, volunteers, businesses, and NGOs. They will need to let the post-2015 global health initiatives be demand- driven from the people who need them and know how to best help themselves.

Methinks the Lady doth Protest too Much

December 3, 2014
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The Fall of 2014 has been difficult for the Director-General of WHO, Dr. Margaret Chan, a Chinese national. Everywhere she turned in the popular media, such as Time Magazine and The Wall Street Journal, she found herself embroiled in controversy over her Organization’s slow response to the Ebola crisis in West Africa.  She posited that the reasons for her Organization’s fumbling response were due to an inadequacy of funds and staff shortages. On the latter item, she ignored the fact that the WHO has 100 staff in the three affected countries of Liberia, Sierra Leone and Guinea; and 600 in the African Regional Office, in addition to 2,500 consultants.

On November 9, the Secretary General of the United Nations, wherein WHO is the lead agency for global health, wrote an op-ed for The Washington Post on the crisis. He showered credit on UN partners like the EU and the African Union for their timely and effective response … entirely ignoring any mention of  the WHO or offering a defense of Dr. Chan’s beleaguered status in the media.

Finally, when Dr. Chan could get no traction on her Ebola excuses, she lashed out at her critics through a bold headline in The Washington Examiner. On November 3, she publicly blamed the “profit-driven drug industry for [the] lack of [an] Ebola cure.” A week later, Lawrence Summers, chair of The Global Health 2035 Report commissioned by The Lancet, picked up her charge and repeated it in an op-ed in The Washington Post.  He supported Dr. Chan’s contention that “health system strengthening at $30 billion a year for the next two decades” would be an effective $600 billion fix to future Ebola-like pandemics. He went on to state that the drug industry doesn’t develop new drugs for markets in which there isn’t a demand in the developed world. He repeated Dr. Chan’s long standing policy position within the WHO in which she had warned the world of this emerging mis-match in the R&D portfolio of the drug industry.

In July of 2014, however, Dr. Chan had only positive things to say about China’s vaccine industry. She presented a paper in Beijing to the China Food and Drug Administration (CFDA) where she announced that it had “been assessed by WHO with outstanding results”.  She went on to comment that the “WHO is fully committed to support China  … this is the vision of CFDA and we have joint formal plans for realizing this vision.” In this manner, using the institutional imprimatur of the WHO, China’s mercantile interests on entering the international vaccine market can be advantaged—at the same time that other Member States are disadvantaged.

But on the Ebola crises in West Africa, China is AWOL, leaving the care and treatment and of patients in the hands of the U. S. Army and the Centers for Disease Control.  Obviously, China is pre-occupied with its agricultural investments throughout Africa, where it has over 1 million agricultural workers in the field. One would think that with 10,000 nationals in the three affected countries alone who are especially at risk to the Ebola virus, China, as the second largest economy in the world, would have a binding interest in being an active financial partner with the UN in combating this disease.

Dr. Chan publicly criticizes the international pharmaceutical industry as self serving, yet singles out for support vaccine producers in China. In so doing, she used Article II of the UN Charter, the source of the WHO’s legal authorities, regarding “the principal of sovereign equality of all its Members.” During the July reception in Beijing, as the Ebola crises was running out of control in West Africa, she was hosted by leadership of China’s Food and Drug Administration. From this venue, she vested her Organization’s hard-earned institutional legitimacy behind the commercial interests of one WHO Member: China, then later used that same legitimacy to disparage the reputation of all other Members.

Perhaps if Dr. Chan spent less time as a booster to promote China’s trade opportunities in the global vaccine industry, and protesting less those who credibly took her Organization to task for its feeble response to Ebola, she could then direct more of her considerable administrative capabilities to better controlling deadly epidemics. The WHO might once again be seen as ”the legitimate inter-governmental authority on global health matters.”


We Drink 90% of our Illnesses

November 5, 2014

In no other country of the world is that admonition from Louis Pasteur more appropriately applied than India. In a country that has emerged from a net importer of grain products to a net exporter via the Green Revolution, and has moved into the enviable position of having the capacity to feed itself, providing sufficient nutrition for the 2nd largest population on the planet, to its centuries old cultural practices of open defecation, render the new UN’s Sustainable Development Goal #6 (SDG) of ‘sanitation for all’ moot. “India’s 162 million children under age 5 are malnourished, but suffering less a lack of food than poor sanitation. Half of its population defecates outdoors, exposing children to a bacterial brew that often sickens them, leaving them unable to attain a healthy body weight no matter how much food they eat. When this happens during the first two years of life, children become stunted and sustain cognitive loss. Particularly disturbing is that the loss of height and intelligence are permanent. UNICEF and other major charitable organizations said in interviews that they believe that poor sanitation may cause more than half of the world’s stunting problems”. 

In terms of adequate nutrition, the UN’s SDG through its ‘Zero Hunger Challenge’ by 2035 will be accomplished.  But changing the culturally accepted practice of defecating outdoors, when “just 1% of Chinese and 3% of Bangladeshis relieve themselves outside compared with half of Indians”, presents an insurmountable hurdle on SDG #6.

There is an enormous difference in infant mortality between “Muslim children in India who are 17% more likely to survive infancy than Hindus—even though they are generally poorer and less educated. Muslims are far more likely to use latrines and live next to others using them”.

In an article which carried a New Delhi Date Line, quoting from The Lancet, it was posited that “premature deaths worldwide can be reduced by 40% before 2035. However, at the 2000-2010 rate of progress, deaths in India before age 70 years would fall by 31% before that date, missing the 40% target”. The article made no mention of poor sanitation as the root cause of target failure.

 The Population Reference Bureau states that India will soon be the most populous country on earth, with 1.5 billion people by 2030. Its cultural practices on basic sanitation belie its role as the 11th largest economy in the world. India is a nuclear power with intercontinental missile launch capabilities. The Federation of Indian Chambers of Commerce & Industry states its Medical Tourism industry is one of the largest service sector industries, with an estimated value of $78 billion, employing 9 million people.  India has been designated as “pharmacy to the developing world” by Doctors Without Borders, providing 80% of antiretroviral products to poor countries.   This past September, it became the first Asian nation to place an unmanned spacecraft in the orbit of Mars, achieving a scientific feat at one-tenth the cost incurred by NASA.

When these considerable scientific and economic attributes are combined, one can reasonably ask why India remains an aid-assisted country, and why is it unable to mitigate the self- induced problems of poor sanitation? The magnitude of the task ahead is expressed through its recently inaugurated $10 billion ‘Clean India Campaign.’ If just 50% of these funds were directed to the 620 million Indians who don’t use latrines, then only $8 per capita over an indeterminate period would be focused on an unacceptable portion of its population that will continue to face irreversible stunting and cognitive development—even though they have sufficient nutritional access. If Indian statistics are applied against Goal #6 and included with all other countries, it will be rather improbable to reduce premature deaths globally by 40% in 2035.

India missed “by a significant margin its 2015 MDGs on infant and maternal mortality due to a lack of government expenditure on the health sector which was barely 1% of GDP.”   Instead of 8 targets under the MDGs, the UN has doubled-down and instituted 16 through the SDGs. This is eerily similar to the OECD/DAC’s Paris Declaration on Aid Effectiveness, which had 12 targets. At its end in 2010, only one was met, “albeit by a narrow margin.”  In November 2011, its proponents reconvened in Seoul, Korea for a High Level Forum to review this dismal record. They concluded their deliberations by proposing 36 targets for the next round of Aid Effectiveness!

When the UN and agencies like the OECD set monumental goals, they immunize themselves from subsequent accountability by stating that they should be measured by their intentions rather than their outcomes.  After all these decades of missed targets, they should assume a touch of humility when setting future ones. Rather, their targets are befitting their illusions.

As long one-half the population in a country soon to be the most populous on the planet continues its cultural practices of ineffectual sanitation, the preponderance of its numbers over all other nations will invalidate SDG #6.  Through a glass darkly, the global health community can see Louis Pasteur’s centuries old adage spring eternal.

What Wind Blew WHO’s Brand Hither?

October 22, 2014

Amidst the tumult of the Ebola crisis, few would know from its response that the World Health Organization (WHO) proclaims itself as “the legitimate inter-governmental authority on global health matters”. In the three affected Ebola countries, the WHO has 100 staff members, while the Region itself has 750 staff. The Regional Office in the Congo has 600 staff, with 2500 contract staff assigned to polio eradication. 

Across the ocean, the Centers for Disease Control and Prevention (CDC) is the national public health institute of the United States, headquartered in Georgia. Yet, in the response to the Ebola outbreak in West Africa, the CDC has emerged as the international public face of control, prevention, and treatment of this disease. The WHO’s African office didn’t welcome the CDC’s robust role. Rather, the WHO largely confined itself to the issuance of statistical reports on disease morbidity and mortality, pleading in the process that an insufficiency of funds justified a plodding response that allowed the situation to get out of control. How did this role reversal occur?

The diminution of the WHO brand can be traced to its high water mark in 1977 when it proposed “Health for All by the Year 2000.” This bold initiative was galvanized into operational field programming by the entire global health community. During the period 1977-2000, the OECD/Paris estimates that the community allocated $99 billion in support of its goals, which were largely to build primary care infrastructure in poor countries. At the conclusion of “Health for All in 2000,” the WHO never bothered to issue a report on this extensive global experience which had to have generated a wealth of lessons learned. Despite this vast expenditure of resources, Dr. Paul Farmer has stated that the current Ebola crisis is “a symptom of a weak healthcare system.” 

But is due to a lack of donor funds? Dr. Paul Collier, an economist at Oxford University, tracked donor funds released by the Ministry of Finance in Chad. They were designated for rural health clinics. His survey had the modest purpose of finding out how much of the money actually reached the clinics—not whether the clinics spent it well. “Less than 1 percent reached the clinics—99% failed to reach its destination.” 

The WHO launched a new effort in 2001, called “Macroeconomics and Health.” The thrust was a formulaic expression: “by expanding coverage to basic health services to the poor through scaling up resources, poverty could be reduced, economic development accelerated, and global security advanced. This could save at least 8 million lives through 2010, and yield a direct economic benefit of $186 billion per year, maybe more.”

When the WHO released the proposal, there wasn’t a single reference to “Health for All” in the main Text, the Notes, the Appendix, or the References. There is no public record of any of the “Macroeconomics and Health” recommendations ever being implemented.

The expansive health programs initiated by the WHO since 1977 can be seen as troublesome reminders of how impermanent values can be when global initiatives of promethean scope can so soon be forgotten and quickly discarded by those who commissioned them.

The WHO is burdened with an antiquated governance structure, constraining its response to Ebola. In 1948, it had 61 Member States supporting WHO through assessed dues. Today, it has 194 Members. The Regular Budget for the current biennium is $944 million, but is effectively reduced to approximately $756 million due to arrears. This is the only budget voted on by Members at the annual assemblies. TheWHO has an Extra Budgetary Account, funded at $3.015 billion by foundations, governments, and corporations. This is its central problem with governance and its difficulties in responding to the Ebola crisis. In order to do so, it needs private contributions to its Extra Budgetary Account.

A former Director General of WHO wrote of his concerns in a 1996 discussion paper on WHO resolutions : “these funds are usually earmarked, the choice of activities is determined by the donor and not by the community of Member States comprising the Organization, and the management of these funds generally escapes the jurisdiction of the Executive Board and Health Assembly.”

The current Director General commented when discussing the Gates Foundation contribution of $300 million to the Extra Budgetary Account: “these dollars come with strings attached, my budget is highly earmarked, it is driven by what I call donor interests.” 

Translation: the DGs are referring to a ‘pay to play’ budget.

The WHO’s Regional Directors are elected by Member States in their respective regions. If donors provide funds for Ebola, the money would first go to WHO/Geneva which would apply a fee of at least 13% before allocating it to the African Regional Office. Then, the Regional Director would have more say over their uses than does WHO/Geneva.

The WHO’s sole client in the developing world is ministries of public health. In an official report, WHO described them as: “having the reputation for being among the most bureaucratic and least efficiently managed institutes in the public sector.”  Since its Regional Office in Africa is staffed more by ‘friends’ than health professionals, this combination of institutional fragilities foredoomed WHO from an effective response.

As long as the Regular Budget is subordinated to special interest groups funding the Extra Budgetary Account, and Regional Directors are more beholden to their respective Member States rather than to WHO/Geneva, the Organization’s response to global threats such as Ebola will be incomplete. The institutional credentials of the WHO and its governing bodies have tarnished the brand from fulfilling its time-honored role as “the legitimate inter-governmental authority on global health matters.” Without a structural reconstitution of its Mission, that role can be considered one that is gone with the wind.


GDP to Health Care Expenditures: to Change the Perception, Change the Reality

December 30, 2013

By Jeremiah Norris

In global health, there is no other percentage that has so captured the public imagination and dominated media coverage than the relationship of national health expenditures to Gross Domestic Product (GDP).  In the US, the current figure is 18% of GDP. When published, this percentage ignites a perception that often takes on the value of reality. It is followed by hand-wringing comments in the press and among policy-makers that we spend more than double what other developed countries do and get less in return. This assumes that there is an equivalency within the various components which comprise GDP from developed countries with socialized medicine when compared to a capitalist system. Moreover, the expenditure rate is seen as a resource flow which dissipates into a dark hole in space, notwithstanding the fact that health care itself is a central contributor to the economy, particularly on employment, even in recessionary times.

The US Government’s Bureau of Economic Analysis (BEA) defines GDP as “the output of goods and services produced by labor and property located in the United States. As long as these are supplied by US residents, they may be located either in the US or abroad.”

That is the accepted definition of GDP. But it doesn’t mean that health expenditures within a socialist economy where it is funded through general taxation is measured by the same yardstick as those in the US where it is financed by an equal percentage of public-private sources and delivered almost exclusively through private provision.

These are some items counted towards US GDP but not in socialized medicine countries:

  1. the cost of mal-practice insurance and awards to plaintiffs;
  2. the accelerated depreciation on 5-year schedules of plant and equipment;
  3. health  care employer and employee payroll contributions to Social Security, Medicare, 401 (k) retirement plans, and Workmen’s Compensation Insurance;
  4. and, in most developed countries, capital investments are publicly funded and accounted for through ministries of public works; in the US these same investments are charged against GDP for health.

Canada has a single payer system. When an annual national health budget is passed, it is then divided among the provinces according to population. They can consume the amounts specified in their budget allocations—and then no more. Yet, Canadians spend more on health care than what is accounted for in their national budget. In 2012, more than 40,000 Canadians sought specialty care in U. S. institutions, where their expenditures were charged against US GDP and deducted from Canada’s.

The capital assets in hospitals and medical equipment in the EU are publicly owned, thus there is no need to apply for tax relief on depreciated values. This is a substantial sum in the US as “almost one-third of health care spending pays for hospital services”. EU health care cadres pay one tax into the Treasury for all social services, obviating payroll taxes as in the US for, pension, Social Security, Workmen’s Compensation and Medicare.

Over the past five years, health care jobs in the US have outpaced employment trends overall. They account for one out of every six jobs created by 2012. As jobs disappeared during the Great Recession, health care companies continued hiring. They “added 428,000 jobs throughout the 18-month recession from December 2007 until June 2009 and have continued to grow at a steady rate since the end of the recession.”

The percentage of health care expenditures is lower in “all other developed countries [which] rely on a large degree of direct government intervention and rate-setting to achieve lower-priced medical treatment for all citizens”. For instance, on pharmaceuticals, France and Italy directly regulate prices at launch and subsequent rate of price increases. Germany, the Netherlands, and Denmark operate reference price systems of reimbursement and thereby exert strong pressure on prices charged by manufacturers. The UK operates a system of profit regulation that constrains prices to yield no more than a target overall rate of return on capital. One effect of this regulatory environment is that one of its a major producers maintains a paper registration of corporate ownership on the London stock exchange, but conducts its main manufacturing operations in the US where it can price products on the open market. The Canadian government monitors price levels at launch and rates of increase to assure they are “reasonable”. If US pharmaceutical producers want to be in these markets, then they have to lower their prices and conform to EU regulations, though the same product is available in US markets, often at double the price.  Regulated prices in the EU translate into lower health care expenditures relative to GDP; in effect, they also mean that US citizens are subsidizing health care for their counter-parts in the EU.

To change this perception we have to change the reality. Objective-based research is needed on the relationship of GDP and health care spending since policy-makers allocate resources on the basis of comparisons between developed countries. The measurement has to be of like-things to like-things. There can be little doubt that it isn’t equivalent to compare socialist economies with capitalist economies. On one simple indicator, if EU countries permitted market pricing of drug products, then their ratio of health care expenditures to GDP would be far higher than presently reported in the 8-10% range.

The Upward Arc from an Unknown Expenditure to 18% of US GDP for Health

December 11, 2013

By Jeremiah Norris

The upward thrust of events that have shaped healthcare in America since 1900 when national health expenditures were unknown to 18% of GDP in 2013 constitutes a study often lost in the mist of time, and one that is illustrative of the long road to the Affordable Care Act of 2010 (ACA). The 18% is seen as expenditure within a seamless, integrated ‘system’, rather than the amorphous components which comprise a public-private cottage industry.  At the advent of the 20th Century, population was 76m with a life expectancy of 47 years. Health insurance wasn’t available, nor published reports on health expenditures until the mid 1950s.  Now, we have 317m with a life expectancy of 78.2 years, and 84% is covered by health insurance.

The beginnings of organized medicine weren’t in place until the Flexner Report of 1910, funded by Carnegie Foundation. The Report served as the catalyst for establishing a standard curriculum in medical schools, their accreditation, and the licensing and certification of practitioners.  Up until that point, there were proprietary medical schools, mainly operated as private businesses. Approximately one-third of them closed in the decade following publication of this Report. From 1910 – 1928, the Rockefeller Foundation funded a momentum for change through the reorganization of medical education within twenty-four universities.

Since then, the major drivers on the upward expenditure curve have been government initiatives. During the Great Depression of the 1930s, patients had difficulty paying hospitals for services. The government stepped in, offered community hospitals non-profit status in return for a fixed percentage of their income over expenses to cover uncompensated care. This was the birth of Blue Cross-Blue Shield Association.

In the late 1950s, the government established wage and price controls in private businesses. It then permitted employers to substitute health insurance as a covered benefit in lieu of wage increases.

In 1965, the Congress passed Medicare, which provided healthcare for those aged 65+. In 1972, legislation authorized the End Stage Renal Disease Program under Medicare. It now covers 90% of all US citizens with severe chronic kidney disease, regardless of age. In 1997, the Congress added a new component, the Program of All-Inclusive Care for the Elderly. It provides comprehensive care for individuals age 55 and older who are sufficiently frail to be categorized as “nursing home eligible” by their state’s Medicaid program. Disability insurance was added in the 1970s for those under age 65, some as infants. In 2006, the Prescription Drug Benefits Program was added.

In 1966, the Congress enacted Medicaid, a program for the provision of health services to the poor. States provide up to one half of the funding. Those with disabilities who do not have a work record and receive Supplemental Security Income (SSI), are enrolled into Medicaid as a mechanism to provide them with health insurance.   Medicaid payments currently assist nearly 60% of all nursing home residents and about 37% of all childbirths in the US. The federal government pays on average 57% of Medicaid expenses.

In 1997, the Children’s Health Insurance Program (CHIP) was enacted by the Congress as a partnership between federal and state governments. It is administered by HHS and provides matching funds to states for health insurance to families with incomes that are modest but too high to qualify for Medicaid.

In 1960, Congress enacted the Federal Employees Health Benefit Program (FEHB). The government contributes 72% of the premium of all plans offered to active and retired federal employees. FEHB is administered by the US Office of Personnel Management.

The Military Health System is under the US Department of Defense, while the Veterans Administration is a separate Cabinet post. They provide healthcare to active duty, retired military personnel, dependents, and veterans from all service branches.

The Indian Health Services was established in 1955, and is operated through HHS. In 2011, its budget was $4.3 billion, covering 2,700 nurses, 900 physicians, 400 engineers, 500 pharmacists and 300 dentists. Other health professionals bring total staffing to more than 15,000. Indians are also eligible to apply for health care provided by Medicaid.

For the period 2013-2022, these health spending differences per enrollee can be seen in 2013 and 2022:

  • Medicare spending per enrollee                             $11,829               $16,914
  • Medicaid spending per enrollee                             $7,784                 $10,777
  • CHIP                                                                             $2,187                 $3,115
  •  Employer-sponsored Private Health Ins.            $5,435                 $8,204
  •  Other Private Health Insurance                             $2,434                 $5,587

A central premise of ACA is that it will bend the cost curve downward on national health expenditures. Excepting Medicaid, the other programs mentioned will be outside of ACA’s specific domain, though they cover some 100m people. For those enrolled into Medicaid, the Federal government will pay States its full costs for the first three years, and 95% thereafter. There will be no deductibles.   This will accelerate the present differential between government and private spending, assuring that the HHS’s actuary prediction of health expenditures rising to 20% of GDP by 2022 will be realized.


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