another young man got killed. somebody is running free. but once it became a phenomena, i kind of sat back and realized how revolutionary it is. >> stay peaceful, continue to protest if you want, but stay peaceful. i'm don lemon. see you back here tomorrow night, 6:00, 7:00 and 10:00 p.m. eastern. good night. welcome to a gps special, "global lessons: the gps road map 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 cross-roads. two years ago this week president obama signed the most comprehensive overhaul of american medicine since medicare. this month 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, owns 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. >> we'll be ready on the back table. >> reporter: at king's college hospital in london dr. nigel heton performs a liver transplant 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 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 britain's royal college of general practitioners. >> our health service is fair. it means irrespective of what you can afford, irrespective of your illness, you will be able to access health care. that is what we require. that is what a fair and honest health system. >> 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 is europe's largest employer, with 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 of 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. >> at the end of the match i felt pain in my knee. >> 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. now, 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 "n.i.c.e." for short. yes, n.i.c.e. 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 policies n.i.c.e. 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. >> i've got monday between 2:00 -- >> 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 waxes 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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will be giving away passafree copies helping you do what you do... even better. of the alcoholism & addiction cure. 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 unique opportunity, and its story provides eye-opening lessons for the united states. asia's tiger economies like taiwan and singapore and south korea skyrocketed out of poverty in the 1980s and '90s. taiwan was growing at 7% a year, 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. >> sung may chang, 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 proposed a bold approach for taiwan's health care reform. >> we invited experts from all the whole range of countries so we can draw out the lessons and 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 brits' 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 private 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 li dung hwei, made a huge push to implement the plan quickly in 1995. miraculously, 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 compared 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 doctor? surprisingly, that's not the case. americans go to the doctor four times a year, on average. the taiwanese go around 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. in the u.s. we're 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 taipei is open 11 hours a day, six days a week. >> i take more than 200 patients a day. >> 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. it passed a version of obamacare 18 years ago. has it worked out? or is it a disaster? find out when we come back. today, we stand against the tyranny of meager travel cards. battle speech right? may i? capital one is issuing a venture double miles challenge. show us how much you spent last year and we'll give you 2 miles for every dollar spent

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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 obamacare 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. she faced a lot of tough questions. >> will we have to pay for the treatment of drug addicts? will we have to pay for 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. private insurance. germany, switzerland, they don't have medicare. people stay with the private insurer cradle to grave. >> but 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 forgoing 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 care is still top-notch. the swiss enjoy one of the longest healthy life expectancies 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 health from 1991 to 2009. >> hospitals have become more like five-star hotels offering health care. >> the swiss law went above and beyond obamacare. 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 very 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 almost 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?

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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 1/5 of our economy.

by 2050 it could consume almost 2/5, crowding out vital spending on education infrastructure, science and technology, not to mention the military and social security. how on earth did we get here and what can we do about it? >> a big part of the underpinnings of the system is all of us kidding ourselves. someone else is somehow magically paying for this. well, there is no one paying for this 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 a patient's room. you're endlessly dealing with personnel who don't know anything about your case. this is the intensive care unit we're talking about. >> the fate 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, prices in the industry would come down. >> your basic argument is that 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 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 insurers, to medicare, and medicaid. look at the result. >> goldhill's solution -- insurance should only cover catastrophic events, serious illnesses, while routine care like doctors' appointments 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. atul gawande is a surgeon, a staff writer for the "new yorker," and 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, gawande says, is the trillion-dollar question. >> the average patient who's elderly on medicaid has more

than ten specialist physicians by their 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, says gawande, 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 mean, i think americans think of this as a case where 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. >> we are done. >> 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. today, we stand against the tyranny of meager travel cards. battle speech right? may i? capital one is issuing a venture double miles challenge.

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i'm don lemon. checking your headlines. rick santorum claims victory in louisiana. cnn projects he's the winner of that state's presidential primary. campaigning in wisconsin on saturday, he said the republican race still has a long way to go. santorum will pick up at least eight of the 20 delegates that were up for grabs but remains far behind mitt romney for the overall race. former vice president dick cheney's recovering from a heart transplant. apassistant confirmed the surgery to cnn.

he has a long history of cardiovascular issues and has survived five heart attacks. his assistant said he waited more than 20 months for the transplant. the family of slain florida teen trayvon martin is planning to file a civil lawsuit. their certain these they will sue the homeowner's association in the neighborhood where george zimmerman says he shot martin in self-defense. the radical new black panthers are offering a $10,000 bounty for zimmerman's capture. even though she's not on the run. those are your headlines this hour. i'm don lemon keeping you informd. cnn, the most trusted name in news. 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 we're not getting our money's worth. and that's a tragedy. >> dr. jeffrey brenner is on the front lines trying to reform a health care system that has been called hopelessly broken. >> we spend twice as much as 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 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 went 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 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 ture, a former teacher and registered nurse, is making a house call to 52-year-old lilian perez. [ speaking spanish ]. >> she was admitted to the hospital eight times last year, mostly for respiratory distress. she literally has a bucket full

of medications for chronic lung disease, sleep apnea, and other conditions. >> can i see these prescriptions? >> yes. >> jason and his colleagues got a ventilator placed in lillian's home. >> we're going to talk to you about that. that's the new ventilator. >> i got what i need to live. >> she saw her pulmonologist who only had seen her in the hospital every couple of months and he said, well, we haven't seen you in a while, you look great. >> lilian has stayed out of the e.r. for 70 days and counting, a record for her in recent years. but the city's sickest are often hard to reach. some don't have phones. so jason and his team do routine drive-bys to see patients like earl. >> hey, earl. jason from the coalition. how are you doing? >> all right, all right, all right. >> 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? >> mm-hmm.

>> i seen the three amigos. they came earlier. >> the three amigos, that's the term earl uses to describe the team that visited him earlier in the day. >> yeah, you got -- 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. [ cheers and applause ] >> 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 experiment 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 governor 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 business 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 cost. and it really shows that this is not a technical problem, but it's a political, spiritual, and moral problem. >> when we come back, i'll give you my thoughts on the health care debate. stay with us. [ male announcer ] this is genco services --

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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 errol 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 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 kick 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 camden. but little 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 any medical procedure you want. merely that there are some that your insurance won't pay for. the other unusual aspect of health care, kenneth arrow points out, is that buyers really don't have much knowledge or power. you can decide that 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 reason from first principles. 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 to improve it so that americans can get good care at reasonable prices, like so much