Health-Care Reform: If You Can't Beat 'Em, Join 'Em?

I'm sure you've heard the statistics: America spends 16% of its GDP on health care -- considerably higher than anyone would like -- yet the nation ranks only 37th in overall health-care performance, according to the World Health Organization.

Rather than complain about the statistics, though, let's peer across the pond at one of our friendly neighbors and see whether we can steal some ideas to solve our health-care problems here at home.

We'll need to take a single-payer system like the U.K.'s National Health Service (NHS) off the table as a possibility. We can debate the merits of a single-payer system in the comments section of this story until the Fool's servers crash, but the idea is as politically unviable now as it was when Hillary Clinton discussed it in the early 1990s.

Investors certainly don't think a government-run single-payer system is likely. Even at their beaten-down levels, the health-insurance companies aren't priced as if they're going out of business.

Source: Company press releases.
*Adjusted.
**Based on guidance midpoint.

Even Humana, which has a larger exposure to Medicare Advantage and will probably see margins contract in coming years, is trading as though it'll be around for a long time.

Everyone pays
Although a single-payer system isn't going to happen, requiring everyone to be covered under some combination of public and private health insurance seems possible. Massachusetts has set up such a system.

The advantage to covering everyone is that the relatively healthy can pick up some of the tab for the relatively sick. An everyone-pays system would probably lower the cost for those who currently pay for health care, but it doesn't seem likely that it'll lower the total cost of health care for society at large, except perhaps for some minor cost savings that could come, for example, from having the previously uninsured use their primary-care physicians, instead of waiting until their health problems are bad enough to require more costly emergency-room visits.

Balancing the costs might make some people happier, but it doesn't solve the ultimate problem that spending 16% of GDP is unsustainable. We'll have to head back across the Atlantic for one idea of how to reduce costs.

Spreading the risk
Pharmaceutical companies spend a lot of money developing drugs, and they need to be rewarded with high prices to encourage future research. But that doesn't mean patients should have to pay for drugs that don't work.

In a deal with the U.K.'s National Institute for Health and Clinical Excellence (NICE),  Johnson & Johnson (NYSE:JNJ) has agreed to charge NICE only for patients who responded to the company's cancer drug Velcade.

The risk-sharing proposal has worked for some companies and their drugs, but others -- including GlaxoSmithKline's (NYSE:GSK) Tykerb, and Pfizer's (NYSE:PFE) Sutent -- have had a harder time getting their drugs approved for reimbursement in the United Kingdom. NICE has decided that it has to spend its limited health-care dollars as efficiently as possible.

Rationing is a four-letter word
This is a slippery slope indeed. There's a fine line between "we won't pay for it if it doesn't work" and "we won't pay for it at all." If drug companies won't cooperate or the price seems too high by some cost-to-benefit formula, the latter is a possible outcome in the U.S. if cost-cutting becomes a major focus.

As much as no one wants to discuss the pink elephant in the room, we already have rationing in America. It's not based on some government board that makes the decision, but rather on who can pay for the services and who can't. Is that what we want?

A U.K.-style system probably won't be very popular, but it might help get spending under control.

What do you think? Is health-care reform heading us down a path toward socialism? If the current path is unsustainable, what's your proposal for solving the problem? Is there money to be made from Obamacare? Let us know in the comments.