planning to punish those responsible. i'm don lemon at the cnn world headquarters in atlanta. thank you so much for joining us. i hope you enjoyed our special on slavery in mauritania. i'll see you back here at 10:00 p.m. eastern. fareed zakaria's special called "global lessons: the gps roadmap for saving healthcare" begins right now. thanks for joining us, again. see you at 10:00. welcome to a "gps" special. "global lessons: the gps roadmap for saving healthcare." i'm fareed zakaria. america's system of bringing us into this world, helping us stay alive, and supporting us as we die is at a major across roadside. president obama signed the most comprehensive overall of health care since medicare. this week, the highest court in the land will hear arguments for and against obama's law and could soon strike it down. meanwhile, our out of control health care costs continue to

climb. no other nation spends more than 12% of its economy on health care. america spends 17%. what's more, we don't really benefit from the huge price tag. our healthy life expectancy, the standard measurement, ranks only 29th in the world, behind slovenia. our infant mortality rate ranks 30th. it's more than twice that of sweden and japan. so what is our problem? in this hour, and in a "time" magazine essay, we're going to take you around the world to study health care systems in other countries. to find out what lessons we can learn from others. we'll visit great britain, taiwan, and switzerland to find out what those nations are doing right and what they're doing wrong. we'll also show you some really interesting innovation going on back here in america, in one of the poorest, most crime-ridden

cities in the nation. but first, let's talk about the one thing americans are certain is bad. government-run health care, across the atlantic, in great britain. is the nation's health service an evil death panel, as some say? let's take a look. during america's debate over health care reform, critics said britain's government-run system was an orwellian bureaucracy that rationed care to those in need. were they right? britain does have a system that is as close to socialized medicine as any rich country gets. the government pays for everything, own most of the hospitals, and pays most of the doctors. but consider this -- compared to americans, the brits have longer

life spans, a lower infant mortality rate, and a health care system that consistently ranks higher on every measure. all this and everyone's care is covered. no payments to doctors, no monthly charges from your insurance company, no co-pays, no fees, nothing. at cking's college hospital in london, dr. nigel heton performs a liver transport surgery with a live donor. a young man is giving part of his liver to his younger brother. the liver is cut in half with one part for the younger brother and the other part staying in the donor. >> the liver is a remarkable organ, in that it's made up of eight segments. so you can take pieces of the liver, and it will function perfectly well. >> this transplant costs tens of thousands of dollars, but under britain's national health service or nhs, the patient doesn't pay a thing. >> when patients come to us, we

only evaluate them from the point of view of their need. do the they need a liver transplant? the cost never comes into it. as a surgeon, i love that. because it means the focus is on the care that i can deliver. >> nobody pays a doctor's bill on the nhs. people will go their entire life without paying a single upfront cost. >> hello. >> dr. claire gerardo is the chair of the practitioners. >> our health practice is fair. it means irrespective of what you can afford or irrespective of your illness, you will be able to acquire health services. >> compare that to the u.s., where an estimated 137,000 people died over seven years because they were uninsured. of course, the brits do pay for

their health care in another way, with taxes. the sales tax is a whopping 20%. and income taxes are as high as 50%. all of that money feeds a health care behemoth. the nhs has well over 1 million people on the payroll. so you'd think it would be inefficient. >> that seems sensible, right? the private sector can do things more efficiently? it doesn't work in health care. >> t.r. reid, a former overseas bureau chief with "the washington post," toured the world's health care systems for his recent book, "the healing of america." >> the least efficient payers in the world are the american private insurance companies. they have administrative costs at 20 to 30%. that's a 30% tax on every dollar you spend on health care. britain is totally socialized medicine, administrative costs, 5%. canada is private doctors and public payers, 6% administrative costs. so it turns out, in health care, governments are doing this more

efficiently than our private sector. >> one reason, says reid, private insurers in america spend more money on non-medical costs, like ads and reviewing claims to help them stay profitable. another way governments can be more efficient when they are footing the bill is by having a more coordinated approach to health care. for instance, the nhs rewards primary care doctors with bonuses for achieving certain measures of good health, like getting patients to quit smoking. that's money well spent, because fewer sick people means lower health care costs for the country. on average, the british spend about $3,500 a person on health care. in the united states, we spend around $8,500. what about the argument that the only way to make the system work, the only way to get costs under control is to be, you've got to be a little cruel. you've got to say, we will pay for this and we won't pay for

that? >> well, that's absolutely true. no, the british health minister said to me, we cover everybody, but we don't cover everything. >> not covering everything, the so-called rationing of care, is the british system's most controversial element. and one man in particular is at the center of that system. >> occasionally, we do find ourselves up against everybody. the physicians, the patients, the media. it's sometimes a real challenge. >> sir andrew dylan is the chief executive of the national institute for health and clinical excellence, known as "nice" for short. yes, nice. it's the government body that decides which treatments the government will and will not pay for. >> this isn't about politics. it's not about money at the outset. it's about the evidence for what works best, so the clinical studies and the other research that's done in this country and right across the world. >> the evidence is weighed by independent panels that include doctors and patients, not

government bureaucrats. and their decision-making process is transparent. the public can weigh in. but the policy nice ponders involves some of the most vexing moral dilemmas in medicine, like whether to fund a last line of defense cancer drug. >> in the end, there's nothing else in life like facing death. and we have to be sensitive to that and we do try hard to be. but equally, we need to make sure that we're keeping our eyes on everything else that we need the nhs to do for us. >> another controversial aspect of british health care, long wait times for certain procedures. in the early 1990s, you could wait more than a year to be admitted to a hospital for a non-emergency. the nhs rule book now gives patients the right to be treated within 18 weeks of being referred. but that's still a long time to be standing in the queue. britain's government-run system provides good care for all and

is more cost effective than one might imagine. but the quality of its care can shift as funding waxi ines and wanes. so is there a way to provide care for all with less government? when we come back, we'll visit a country that went from almost half its population being uninsured to nearly full coverage in less than a year and without breaking the bank. tdd# 1-800-345-2550 let's talk about fees. tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees. tdd# 1-800-345-2550 no hidden fees. tdd# 1-800-345-2550 and we rebate every atm fee. tdd# 1-800-345-2550 so talk to chuck tdd# 1-800-345-2550 because when it comes to talking, there is no fee.

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to get yours, go to ssagesmalibubook.com. what would happen if a country were given a blank slate to design its health care system? if it could choose from any nation in the world, which one would it imitate? taiwan had that withdrew technique opportunity, and its story provides eye-opening lessons for the united states. economies like taiwan and singapore and south korea skyrocketed out of poverty in the 1980s and '90s. taiwan was growing at 7% to europe, joining the ranks of rich countries in no time.

>> the country was getting richer. however, the health care insurance system was not all good at the time. >> a health policy expert at princeton says 41% of taiwan's population had no health insurance in 1995. >> you paid out of pocket. and for the really poor, then, you pray a lot. >> so taiwan's government decided to reform its system of care from the ground up. william shao, a professor of economics at harvard, is one of the world's leading health care gurus. shao had a broad approach. >> we approached experts from all over so we could get their experience for taiwan. >> the panel considered the u.s., its close geopolitical ally as a model for health care. they were not impressed. >> you can learn what not to do

from the united states rather than learn what to do. >> they also looked at great britain, but the brit's government-run system was producing long wait times in the '90s. >> bureaucracy is not the best and most efficient way of running operations. >> then there was germany, which had privacy insurance, but they had so many different funds, their administrative costs were just too high. so taiwan went with a single payer insurance model, where there's only one insurer in the market, the government. they combined that with private doctors and hospitals to avoid too much bureaucracy. the system looks like american medicare, only it's for everyone, not just the elderly. taiwan's president at the time made a huge push to implement the plan quickly in 1995. miraculo miraculous, taiwan's uninsured dropped from 41% to 8% in less

than a year. taiwan has a highly rated health care system. what's more, it's a rock star when it comes to holding down costs. the taiwanese spend just 7% of their economy on health care. that's a paltry sum considered to our 17%. the government drives a hard bargain on fees with providers, and taiwan can monitor its spending with this cool device, the smart card. you swipe it anytime you go to the doctor. he can pull up your recent medical history and when you're done, he'll have a record of that day's visit. then he'll send an estimate for your bill to the government right away, so officials know how much has been spent at any given time. compare that to medicare in the u.s., which can only estimate its spending levels two years after the fact. >> in taiwan, all of that is recorded, on a daily basis.

>> but wouldn't all of that government stinginess make it hard to see the there? surprisingly, that's not the case. americans go to the doctor four times a year, on average. the taiwanese go almost 14 times a year. >> and they stay in hospitals much longer than americans stay in hospitals. the average length of stay for a taiwanese in the hospital is ten days. for the u.s., it's five days. >> so how do the taiwanese provide all of that care for such low costs? one way, the doctors work their tails off. dr. gary lin's primary care clinic in day pataipei is open hours a day, six days a week. the fees that government insurance pays doctors are very low. dr. lin gets only $14 for each primary care visit. his colleague in the u.s. makes $100 per patient.

taiwan's legislature just raised the insurance premiums people pay to get more money into the system. but don't expect politicians to do something unpopular like that very often. >> in the 16-year-old history, taiwan's government has succeeded in raising premium rates twice. just twice. >> no matter which health care system you visit, politics always comes into play. the next country we're going to visit has some remarkably similar politics to our own. its passed a version of obama care 18 years ago. has it worked out? or is it a disaster? find out when we come back. [ shivering ] sorry. sore knee. blast of cold feels nice. why don't you use bengay zero degrees? it's the one you store in the freezer. gives that instant cold sensation. that's chilly. same medicated pain reliever used by physical therapists.

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taiwan showed us that public insurance can work. but let's face it. government insurance for all is probably not a popular campaign slogan for many americans right now. so we searched the world for a completely private model. no government insurance or state-run hospitals. we found one in europe, of all places. imagine an alternate universe where a version of obama care has been the law of the land for almost two decades. no, you haven't entered the twilight zone.

you're in switzerland. >> tell the congress you want us to act and act now! >> right around the time president clinton was pushing health care reform in the 1990s, ruth dreyfuss, a left-wing swiss official, was pushing reform in her own country. he faced a lot of tough questions. >> will we have to pay for the treatment of obese people? will we have to pay for abortion? >> switzerland is not your typical european welfare state. it's extremely business friendly and it's always gone its own way, shunning the euro and charting its own course in health care, with private providers and private insurance. that's actually not so rare, according to journalist t.r. reid. >> one of the things that many americans believe about health care around the world is that other rich countries in the world all have socialized medicine. is that true? >> no, that's baloney.

some countries do have government provide the care and pay for it, but a lot of rich democracies, germany, switzerland, japan, belgium, the netherlands, cover everybody in the private system, private docs, private hospitals. >> the swiss were getting fed up with their private insurance system in the early 1990s. costs were rising, premiums were disproportionately higher for women and the elderly, and those with pre-existing conditions had trouble getting coverage. some were foregoing insurance altogether. >> the people were flying out of the insurance, so we had to stop this. >> dreyfuss, who would later become switzerland's first woman president, pushed for a law that required everyone to buy insurance, gave subsidies to the poor, and stopped insurance companies from rejecting people for their medical history. sound familiar? that's exactly what president

obama's law would do. but in switzerland, it was an uphill battle. the law passed parliament, but barely squeaked by in a national referendum with 52% of the vote. >> where nobody was really happy, but everybody could accept. >> so how is the swiss version of president obama's law faring almost 20 years after it was put in place? >> i'll show you the x-rays we did. >> everyone is now covered and the the care is still top-notch. the swiss enjoy one of the longest healthy life expect sis in the world. >> we have an extremely comfortable system. i mean, the access is easy, you don't have to wait. >> tom zelckner was the swiss secretary of state from 1992 to 2001. >> hospitals have become more like five-star hotels, offering health care. >> the swiss law went above and beyond obama care. insurance companies were already banned from making a profit on

basic health coverage. under the new law, they had to expand that basic package, covering even more procedures. >> even spr expensive pharmaceuticals are paid by the insurance plans and have to be paid. >> the swiss system is world renowned for the choice it provides its users. >> i chose the doctor i wanted to go to. i went there, and it was seamless. >> we caught up with jocelyn mills and her husband, phillip thompson, two americans living in switzerland. jocelyn was expecting at the time. she could go see a specialist right away without waiting for a referral from her physician, like in the u.s. >> i always waited three hours in an overcrowded waiting room, you know, to see somebody, then to see a specialist, if anything was wrong. so i don't have that here. >> another bonus, health insurance isn't linked to employment. plus, you can change your insurer every year if you want.

>> the choice is such that it is sometimes confusing. you know, you have in each town you're living, a choice of probably 100, 200 different plans. and you also need a coach or someone helping you to choose your health insurance plan. >> experts worry that the swiss don't reap the cost savings from their insurance choices because there are so many of them. that might explain why health care costs in switzerland are still very high. 11% of gdp. >> you cannot make a perfect law. but you can make a perfectible law. and i would say any law has negative side effects. and this is our lesson. we are still working to make this law better. >> health care costs are rising all over the world. but in the united states, health care is almost twice as expensive as everywhere else. why is that? we'll explore that question, next.

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there is no greater threat to the american dream than the rising cost of health care. it already takes up around one fifth of our economy.

by 2050, it could consume almost two-fifths, crowding out vital spending on other things, not to mention the military and social security. how on earth did we get here and what can we do about it? >> a big underpinning of the system is all of us kidding ourselves. someone else is magically paying for this. well, there is no one paying for it, except all of us. >> david goldhill, the ceo of the game show network, is an unlikely agitator in the health care debate. he got involved after his father went to the hospital with pneumonia and died from an infection while he was there. >> i saw a hospital with less impressive information technology than my dry cleaner has, than my auto mechanic has. a couple times, my father was taken for procedures meant for other patients. there's trash on the floor. almost everywhere, it overflows in patients' room. you're endlessly dealing with personnel that doesn't know anything about your case. this is the intensive care unit we're talking about. >> the fatal of goldhill's

father is all too common. every year, an estimated 100,000 americans die from an infection they got in a hospital. >> once i got beyond, obviously, the personal elements of the tragedy, i thought, there's something very unusual about this. just in the scope of how the world works today. and as i spent time thinking about health care, i began to think about the lack of real accountability to customers. and the incentives to bad behavior that really dominate the way the industry is structured. >> unlike many markets, customers don't really pay their own bills in health care. instead, it's a private insurance company or the government that pays. in the case of goldhill's father, medicare picked up most of the tab. which was over $600,000, before a hospital discount. >> to all of us, that seems terrific, right? i look at it a different way. if medicare had said to my mother, you pay the bill, and the hospital had come to my mother and said, here's what we're charging you for killing your husband, the collection

would have been zero. there's no way my mother would have paid that bill. there's no way any of us would pay that bill. goldhill summed up his world view in an article in "the atlantic," how american health care killed my father. he said if patients spent more of their own money on health care, the cost would come down. >> your basic argument is the whole idea of using insurance to pay for health care is wrong. >> the problem with insurance is that it's very costly. it's a very costly way to finance anything, which is why it's never used to finance anything outside of health care that isn't major and rare and unpredictable. i think if you look at the health care system, what you see is a system that lacks any of the normal disciplines we see in everything else. >> so give me an example of some place where you find market forces can actually work the way you're describing them? >> well, you know, around the fringes of health care, we have things that look like health care that aren't in the health care economy. they're not insured. we see that in certain types of

cosmetic dental surgery. in cosmetic surgery generally. we see it in medicine for pets. and what we see in all of those markets are markets. >> take lasik eye surgery, for example. since the procedure was introduced, prices have dropped can considerably, despite all of the expensive equipment and well-trained specialists. lasik doctors actually compete for your business, with ads that tell you about their safety record and prices. >> ask a very simple question of your viewers. how many of them know the safest hospital in their neighborhood? why not? why is there nobody with a billboard saying, don't go to downtown, go to uptown. downtown will kill you. we've been through 45 years of turning over our power to snurn e insurers, to medicaid and medicare. look at the result. >> goldhill's solution. insurance should only cover catastrophic events, serious illnesses, like routine care

should be paid for from a health savings account that each person controls. the poor would get government subsidies for their accounts. >> we have to care about the costs, because what we're doing in medicine is destroying the american dream. >> dr. gowandi is the author of several best-selling books on medicine. he agrees with goldhill that the market in health care isn't working, but he says there's an important fact to consider. >> the sick account for most of the costs, 5% of patients are 50% of the costs. and these are folks for whom the bills are $40,000 and $50,000. >> under goldhill's solution, limiting insurance to catastrophic events and serious illnesses, insurance companies would still be paying for a lot of our health care costs. figuring out how to treat the sickest of the sick, gowandi says, is the trillion-dollar question. >> the average patient who's elderly on medicaid has more than ten specialists, physicians

by the last year of their life. and if you've ever taken care of an elderly parent, you know how much you want to tear your hair out that they just won't talk to each other. >> reporter: what the country needs, he says, is a more coordinated approach to care. some doctors tend to prescribe too much medicine, he says. that's less efficient, but it is more profitable. >> we have focused on getting the best drugs, the best devices, the best specialists. we think very little about how we fit it together so it works well. >> what is wrong with prescribing lots of procedures? i think americans think of this as a case where, with surely, more is better. why not have more mris? >> yeah, more at the right time is better. but, you know, we're doing 70 million ct scans in a population of 300 million people. we know ct scans cause cancers. and second, doing more of these kinds of tests end up raising, maybe there's a spot there, maybe there's not.

that lead to more surgery and more risks. >> a more coordinated approach to care may reduce needless testing and lower costs. president obama's health care law encourages more coordination, giving funding to providers to come up with more efficient and effective ways to provide care. >> the concentration on the 5% of patients who are the highest cost patients and how badly we take care of them is unleashing enormous innovations, enormous reductions in costs. i think we're about to enter a period of very rapid change. >> when we come back, we'll show you a bold example of that change. a health care experiment being conducted in one of the roughest cities in the country, and it's working. ttd# 1-800-345-2550

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i'm don lemon. here are your headlines this hour. in the republican race for the white house, cnn projects mitt romney as the winner of today's puerto rico presidential primary. a look now at those results for you. it looks like it was a really easy victory for mitt romney. 83%, he is on top there. rick santorum, 8%. 2% for gingrich. 1% for paul. 20 delegates are at stake in the contest. romney will get all of them if he captures more than 50% of the vote. romney was endorsed by puerto rico's governor and campaigned there on friday and saturday. all eyes now turn to illinois, which holds its primary on

tuesday. the attorney for army staff sergeant robert bales has arrived in kansas to prepare for his first meetings with his new client. bales is the soldier accused of killing 16 afghan civilians last weekend. he is now at ft. leavenworth, kansas, and he could be charged in connection with those deaths as soon as this week. planning your budget for the week? make sure you throw in a bit of extra cash for gas. the national average for a gallon of regular is up to $3.83, that's according to aaa. prices have climbed nine days in a row in seven states. prices now have topped 4 bucks a gallon. wyoming has the cheapest gas, that is if you call $3.40 a gallon cheap. those are your headlines this hour. i'll see you back at 10:00. the fareed zakaria health care special continues right now on cnn. skyrocketing health care costs have created what some say is one of the biggest economic

bubbles in american history. doing nothing could lead to dire consequences. that's why some providers are experimenting with innovative approaches to health care before it's too late. >> we're spending a whole lot in our country for health care and not getting our money's worth. and that's a tragedy. >> dr. brenner is on the fron lines, trying to reform a health care system that has been called hopelessly broken. >> we spend twice as much at other industrialized countries and we cover fewer people in our country. >> brenner is tackling this disconnect in camden, new jersey, one of america's poorest cities. he's been a family physician here for 11 years. his mission started on this street in 2001, with a gunshot. an unremarkable sound in camden, which has one of the highest murder rates in the country. >> i was sitting at my desk one

evening and shots rang out. >> brenner ran outside, where the victim was lying in a pool of his own blood. no one was doing anything. >> i started yelling at one of the sergeants, you know, why didn't you do anything? and he said, well, we didn't want to dislodge the bullet, which was a complete blowoff, and just showed such lack of compassion and lack of concern for sort of the dignity of people's lives. >> the victim was a remarkable product of camden, a senior at rutgers university, who had talked about running for mayor one day. his death triggered a passion in brenner to reform the camden police department. but he says it was mired in dysfunction. >> i threw my hands up and said, i give up on helping to reform the police department in camden, but i think i can take a lot of the ideas that i learned in the process and bring them to health care. >> brenner had been mapping crime data to locate the city's most violent corners. just like the new york city

police department did in the '90s, producing great success. so he started mapping health care spending, identifying hot spots, where the costs were the highest. using medical billing records, brenner found the that just 1% of the patients accounted for 30% of health care costs in camden. and that's not all he discovered about the city's three hospitals. >> we learned that someone constituent 113 times in one year, someone went 324 times in five years. in similar work up in trenton, they found someone who went 450 times in one year. >> these were people with complicated medical histories and chronic illnesses. one patient alone racked up $3.5 million in medical bills over a five-year period. >> they are the difficult patients to treat, and no one is being paid and incentivized to pay attention to them. >> what's more? camden's problem is america's problem. just 5% of the americans

accounted for half of our nation's health care costs in 2009. this is perhaps the crucial statistic to understand about america's health care problem. if brenner could crack his city's cost crisis, maybe his model could help the country. >> we've met with his primary care doc. >> he founded the camden coalition of health care providers, a group of nurses, social workers, and volunteers, who treat the city's worst of the worst, one patient at a time. >> and i'm going to visit with her today. >> every day the group gets data from all of the city's emergency rooms, in realtime. that's the first time this has ever happened, anywhere in america. >> it's a nice day for this. >> jason, a former teacher and registered nurse, is making a house call to 52-year-old lilian perez.

she was admitted to the hospital eight times last year, literally for re for respiratory distress. jason and her colleagues got a ventilator placed in lilian's home. >> that's the new ventilator. >> i got what i need to live. >> she saw her pulmonologist who hasn't seen her in a few whiles and said she looked great. >> lilian has stayed out of the e.r. for 70 days and counting, a record for her in the past few years. but some are hard to reach, they don't have phones, so jason and his team do routine drive-byes to see patients like earl. jason from the coalition. how you doing? >> earl is one of the biggest e.r. users in camden. along with a host of social issues, earl suffers from

epilepsy, hypertension, and congestive heart failure. >> trying to make it through another day, you know what i'm saying? >> the three amigos came early. >> the three amigos, that's the term earl uses to describe the team that visited him earlier in the day. >> i know you're busy. >> despite the long odds, earl's hospitalizations have decreased by 30%. brenner found that many expensive patients like earl were concentrated in certain areas of the city. one building alone, a subsidized apartment tower, accounted for $12 million in hospital costs over five years. >> and the patients were appalled that someone made that much money, and yet they still felt so sick and they still felt like it was so hard for them to access services. >> so brenner set up a clinic right in the building, so that the residents can get preventative care. >> this is not a story of bad patients, bad doctors, bad hospitals, and evil insurance companies.

it's a story of a broken system that has irrational incentives and misaligned incentives, so that the patients aren't getting their needs met. >> check his height, weight, and i'll be back. >> brenner says that early evidence suggests his experience is working. hospital use is down for participating patients. his model is being replicated in trenton and newark, two other new jersey hot spots. these programs are bolstered by new legislation that rewards caretakers for preventing and controlling illnesses instead of just treating them. >> it was signed last august by government chris christie, with bipartisan support. >> rather than a cycle of failure in health care, it creates a virtuous cycle, where we're rewarded for doing the right thing. >> now, here's the problem. brenner's coordinated approach to reducing costs is essentially taking away patients and businesses from hospitals and doctors. that threatens the profits of most of the established players in health care.

when we speak of reducing health care costs, remember that for many powerful interests, that translates into taking away my business. but if brenner does succeed in bending the cost curve here -- >> it would make the rest of the country look silly if the city of camden is able to improve quality and reduce costs. and it really shows this is not a technical problem, but it's a spiritual, political, and moral problem. >> when we come back, i'll give you my thoughts on the health care debate. stay with us. nnouncer ] the draf the past is a powerful thing. but we couldn't simply repeat history. we had to create it. introducing the 2013 lexus gs, with leading-edge safety technology, like available blind spot monitor... [ tires screech ] ...night view... and heads-up display. [ engine revving ] the all-new 2013 lexus gs. there's no going back.

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after taking this tour of the globe and america, what is the best way to reform american health care? i'm reminded of the old irish joke. a couple is lost in the irish countryside and stops to ask a local the best way to get to dublin. well, i wouldn't start from here, he replies. america's health care system is really a mess. it is partly free enterprise,

partly state subsidized, and overall, highly inefficient in delivering quality care at a reasonable price. let me step back before making specific suggestions and outline a few general principles. i'm a big fan of the free market. i think it has an almost magical ability to allocate resources and generate growth. but precisely because it is so powerful, in places where it doesn't work well, it can cause huge distortions. the nobel prize winning economist kenneth arrow outlined in the 1960s why markets don't work very well when it comes to health care. he explained that people don't know when they will need health care and that when they do need it, the cost is often prohibitive. that means you need some kind of insurance or a government-run system. now, if we decided as a society that it is okay that when people

suddenly discover they need health care, they can get it only if they can pay for it, that would work. but it would mean that the vast majority of americans wouldn't be able to pay for that triple bypass or hip replacement when they need it. the market would work, just as it works for bmw cars. people who can afford it can get it. people who can't, don't. but every rich country in the world, and many not-so-rich ones have decided that all citizens should have access to basic health care. and given that, a pure free-market model simply can't work. and remember, even if one were to have only a catastrophic insurance model, that's where all the costs are. just 5% of the patients in the united states account for 50% of the health care costs. and taking care of these catastrophic illnesses is what drives america's costs up. now, a general insurance system can only work if everyone is

insured. that's what the swiss and the taiwanese found out. otherwise, only the people who are sick will want to buy insurance, and insurance companies will spend most of their time and effort trying to keep sick people off the system or deny coverage to those who might get sick. that's why the heritage foundation, a conservative think tank, came up with the idea of the individual mandate, requiring that people buy health insurance in exactly the same way that people are required to buy car insurance. that's why mitt romney chose this model as a market-friendly system for massachusetts when he was governor, and that's why newt gingrich praised the massachusetts model as the most important step forward in health care in years. the obama health care bill expands access to 30 million americans. that's good economics, it's also the right thing to do. but it does little by way of controlling costs. there are several experiments and pilot programs in it. there are new trends emerging,

such as the one we saw in cam n camden. but retail in the way of systemic cost controls. that's largely a failure of nerve in the entire political establishment. every expert realizes that no matter what the system of health, you need to have some kind of board that decides what's covered and what's not. now, this has been demagogued as death panels. when it is really the only sensible way to make the system work. no one is saying that you can't get nay medical procedure you want. merle that there are some that your insurance won't pay for. the other unusual aspect of health care, kenneth arrow points out, that buyers really don't have much knowledge or power. you can decide you don't want a new car. you can comparison shop for a new tv. but you can't really decide that you don't want a heart bypass. that's why costs have come down in optional areas like, lasik

surgery, but not in ones where the consumer really can't walk away. a final thought. one can ran from first principles and that's a good thing. but you must also reason from facts on the ground. and the facts are that all rich countries try to provide affordable health care for their citizens in some way or the other. all of them, including free market havens like taiwan, have found that they need to use an insurance or government sponsored model. and all of them provide universal health care at much, much lower costs than we do. maybe there is a theoretical free market model out there that would work perfectly. but right now in the world that we are actually living in, some kind of mixed, messy health care system is what we have, and our task is not really to abolish it in favor of a utopia that might come, but t