American Dinosaurs: What's the Matter With Health Care and Education?

Welcome to America's biggest long-term challenge: Our medical and education industries are a two-headed hydra of economic inefficiency, over-eating our resources and under-serving our needy

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The problems with our nation's health care system are of course very different from the challenges facing our national education system. But when you look under the hood, you could make a strong argument that the problems are actually very much the same.

Consider the structure of American health care over the past few decades. One can think of it as serving four levels of clients: those with no insurance, those with Medicare or Medicaid, those with employer-provided insurance, and those wealthy enough to pay for all their health care services in cash, including concierge services.

Most of those who were uninsured went without any health care services much of the time. When they did get services, it was typically in the hospital emergency room when their condition was so far advanced that treatment was very expensive and delivered only at the point when a favorable outcome was very unlikely. Those on Medicare and Medicaid were insured, but the reimbursement rates were so low that many doctors simply did not take Medicare or Medicaid patients, and the doctors that did had to see very large numbers of patients to make ends meet, leaving little time for each one.

Those lucky enough to have a job with health care benefits had access to a significantly higher level and broader range of services. Actually, within this class of service, one could distinguish the run-of-the-mill client from another level: the well-connected, wealthier client who had a personal network enabling them to find out who the best specialty physicians in the country were, get these physicians to take them on as clients, and pay for the airfare and hotel costs while getting the care they needed. Finally, at the very top of the heap, are clients for whom money is no object and who pay a very expensive cash fee to a renowned internist who has only a few clients, is available to them 24/7, and refers them instantly to the finest physicians in the world. This last class of clients, like the first class, does not bother with insurance.

Clearly, we have a health care system that is not only finely stratified by the client's wealth, but is also highly inefficient -- and these two facts are related. It is well-known that when the total cost of the American health care system is divided by the size of our population, we have one of the most expensive health care systems in the world. Some say it is also one of the best, but that turns out to be true only for those within the higher ranges of the system. The outcomes for the average client are just average in an international context, and the outcomes for those clients with scarce financial resources are comparable to the health outcomes for the citizens of third world countries.

One reason this grossly unfair and highly inefficient system is so hard to change is because health insurance companies whose revenues depend on it have enormous financial and political clout. But the clients who benefit most from this system also have enormous financial and political clout. There are, by definition, only so many top-notch hospitals and doctors, and this system enables those with the most money to have virtually exclusive access to them. They will not give that privilege up without a ferocious fight. That holds true not only for the super-rich--those with concierge medical services--but also for many in the next level down, the professionals and managers who work for the better firms with generous health care plans.


Now consider our public education system. What our health care system accomplishes through its insurance system aligns with what our public education system accomplishes through the property tax used to finance our public schools. The result is the same: a highly stratified system of services differentiated by the income of the clients.

Yet funding for our public education system works differently. To a degree unmatched by any other industrialized country, the amount of money our schools receive is a function of the value of the homes in the community. This means that wealthy people can form their own school taxing district that is accessible only to people who paid a great deal of money for their home. It's an exceptionally good deal: because the community is so wealthy, their required tax rate is very low while the tax yield is very high. At the other end of the scale are the communities where people can only afford to pay very little for their homes, but ironically pay a very high tax rate for schools that have only a small fraction of the budgets available to schools in wealthier communities.

Moreover, residents of the wealthy communities get an additional and very important bonus: their children attend schools with other wealthy children. This is worth as much as or more than the money because the single most important determinant of students' academic achievement is not how much money is spent on their school, but the education level and socio-economic status of their parents. The schools serving the wealthiest students have the highest expectations, deepest cultural resources and strongest value placed on education. These schools get the best teachers, science labs, sports facilities and everything else. The students who go to these schools are the most cultured, read at home, have both parents at home, access private tutoring when they need it, and receive good health care and the strongest possible early childhood education.

Presented by

Marc Tucker is president of the National Center on Education and the Economy and editor of the book Surpassing Shanghai: An Agenda for American Education Built on the World’s Leading Systems.

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