The health care system in the United States is broken. Most who receive care in hospitals cannot pay. Those who can, suffer outrageously inflated bills. Increasingly unprofitable hospitals and doctors' offices have been closing. Even the prestigious field of medicine is drawing fewer and fewer candidates to our nation's universities. How can the wealthiest country the world has ever known have gotten to such a distressing state?

Hospitals in California routinely mark up their services by 500-1,000%. The reason for this outrageous markup is simple: 80% of those being treated at those hospitals can't pay for the services provided. Still, the hospital needs to be able to cover its costs, and in most cases earn a profit. The obvious question therefore, is where does the money come from?

In almost all cases the answer is ultimately the same: "We, the American workers, and taxpayers." How that money gets from us to that hospital, however, is at the heart of the health care problem in the United States. Most health care bills are paid from three sources: 1.) Health Insurance (either paid for by employers, or increasingly privately purchased) 2.) Federal and State governments (predominantly through Medicare, Medicaid and reimbursements for some non-paying patients). 3.) The patients directly. No matter how you look at it, that means we're paying, either through 1.) Less pay 2.) Taxes 3.) Our wallets.

According to the Dept. of Health and Human Services, about $1.7 trillion was spent in the US on health care in 2003, accounting for about 15.3% of GDP. This cost was born almost equally between the private sector (insurance and individuals) and the public sector (both state and federal). Our entire Federal budget in 2003 was approximately $2.2 trillion. This means that, very roughly, we are spending about a third of our budget on health care, ostensibly only for the elderly and the poor. This provides an important safety net for approximately 24% of the population. (39 million people from Medicare and 32 million from Medicaid). An additional 41.2 million people (13.8%) are estimated to be uninsured in the US, leaving about 186 million (~ 62%) insured privately. Put differently, the average American accounts for approximately $5,700 per capita in health spending!

Health insurance is perhaps the most basic of benefits that most American employees expect when accepting a job. The government agrees, providing tax breaks to corporations for offering insurance. Increasingly, however, corporations are hiring workers without this basic benefit. The reason is that health insurance is increasingly becoming a serious distortion to the economies of US companies.

Take General Motors, as a particularly famous example. The company has been losing billions of dollars and recently announced that they will be cutting 30,000 jobs. According to A.T. Kearney, last year General Motors spent $1,500 per vehicle on health care. Toyota, in contrast, spent just $201 per vehicle in North America and $97 in Japan. In short, benefit obligations (which also include high pensions) have made it impossible for GM to compete in the global car market.

On the other side of the corporate spectrum is a company that has been able to compete remarkably well: Wal-Mart. How much does Wal-Mart pay per employee on healthcare? For the vast majority of its workers: $0. Wal-Mart is one of the pioneers of the practice of hiring "Part-Time" work, so that they will not need to pay benefits to their employees. In essence, transferring the burden of benefits back to the government, making it possible to offer its goods cheaper and its profits higher.

In an increasingly globalized economy, the lessons from these two examples are obvious: The traditional American system of employer financed healthcare leaves those companies that generously take care of their workers at a severe disadvantage vis-a-vis International competitors, who have the equivalent benefit costs financed by national health care systems. Companies like Wal-Mart are actually at a significant advantage as they are burdened even less than their competition as they pay very few benefits themselves and bear little responsibility for healthcare through taxation. Their workers often fall either into the social safety net of Medicaid or are forced to purchase insurance individually.

Canada spends approximately 22% of its budget on universal health care or about 10% of GDP. The UK spends approximately 8% of GDP on its universal health care system. In fact most European countries spend between 7-12% of GDP on their health care systems. Most Americans regard Europe's "welfare states" as extravagant. In terms of health care, however, Europe pays far less than the 15% of GDP spent in the US where nearly 14% of the population is not insured at all. This is not to say that the American system is inferior. Quite the opposite: Medical technology and access to expensive state-of-the-art tests are better in the US than anywhere in the world. Ask a Canadian who has waited 2 years in line for surgery which system he prefers and he's likely to cry. Americans pay more for a superior level of service, the problem is that the way we pay is increasingly disjointed.

Whether we like it or not, we must compete globally. In order to ensure that our corporations, and with them our economy, will continue to be competitive in the 21st century, we must level the playing field by removing the disadvantages of our outdated health care system. Our companies will have a serious burden (partially) lifted from them, and an increasingly anxious American workforce will be able to worry a little bit less about where to go when they get sick. This does not mean that the US need enact a massive new Federal health care bureaucracy, or adopt Universal coverage systems like those in Europe. It means that we need to fundamentally reform our system so that it is no longer a patchwork of different payers, leaving so many of us without any coverage at all. After all, we're already paying about a third of our taxes into the healthcare system in the US anyway!

Some suggestions on how to tackle solutions to this immense problem in a future column.