Thursday, January 18, 2007

The illusion of socialized health care.

Americans spend more per capita on automobiles than do Nigerians. Is there an American car crisis? Americans spend more per capita on houses than do Chinese? Is there an American house crisis? If you look at American per capita spending on various goods you will often find that Americans spend more per capita than many other nations, if not more per capita than most nations.

Films, cosmetics, computers, cars, houses, pets, magazines, chocolate, the list is almost endless. If you take these items and compare per capita spending on them to the spending in other nations you will regularly find America in the lead.

But you don’t hear people talking about the chocolate crisis, the pet food crisis, the lipstick crisis, etc. We don’t do that because spending more is not necessarily a bad thing. If individual B spends $500 a year on cosmetics while individual C spends $0 that doesn’t mean that C is better off. It may mean that C can’t afford any cosmetics while B is well off. This is true for every consumer good you can think of including health care.

But when it comes to health care the advocates of socialist systems of care immediately reverse things. Americans are worse off because they spend more. And that is true. Americans spend more because they purchase more. The average American receives more health care than the average European.

The assumption in much of the world is that American health care is significantly inferior because Americans spend more per person than do people in other wealthy nations.

But no health care system anywhere in the world has been able to make health care available to everyone. Every state provider of care restricts services, often through the use of queuing. Canada’s health care is lauded by advocates of state systems yet Canadians wait significant periods of time for what care is available. One factor often ignored is that most Canadians live along the US border and that some of the for Canadians is provided privately in the United States.

There is little argument that American health care is among the best in the world when it comes to technologies and innovation. What is targeted for criticism is that costs are high and this restricts access.

Economist Arnold Kling points out in his book Crisis of Abundance that in the last 30 years very highly sophisticated new medical procedures have been developed. And these are extremely expensive in themselves. Health care costs in the American government’s budget are a problem. But Kling notes, that if the same sort of care available in 1975 were what was available today, the budget would be safe. New technologies have driven up cost considerably. Costs have gone up because more expensive new technologies push up those costs. Many socialist systems don't have that problem because they decline to use the technology or severely restrict access to it.

Other nations ration these expensive technologies in ways that American consumers find unacceptable. And Klin suggests that this rationing has “also slowed the adoption of premium medicine” where practised.

These premium services do raise the cost of health care. And, as Kling notes, health care is not an exact science. Often a physician looks at a problem, tries his best to determine causes and takes actions which may, or may not, help. He has to make educated guesses but often still guesses none the less. With so many people ready to sue physicians for making the wrong educated guess it is in the benefit of physicians to take all reasonable precautions regardless of cost. A headache could be just a headache solved by a few cents worth of aspirin, or it could be something far more serious requiring tests costing hundreds of dollars just to rule out that possibility. Before the invention of such techniques the recommendation may well have been “Take two aspirins and call me in the morning.” Physicians may well be penalized today if they don’t over test.

Care is often provided by ruling out problems. A patient has specific symptoms which may indicate a number of problems. The physician begins to narrow down the options. Different problems require different solutions and what may work for one problem may make another worse. But imagine if no tests were available for this winnowing process. More patients would suffer from having their problems continue but health care costs would be significantly lower.

Today in the US there are about 25 million MRI scans performed per year. In 1990 it was 1.8 million and none were performed in 1980. This cost didn’t exist in the 80s because the technology didn’t exist. Abolishing new technologies would lower health care costs significantly. But people would suffer and there would be more deaths -- but it would be cheaper.

Today people want the best care that money can buy. That is the problem. New technologies come onto the market daily. These are often capital intensive services requiring highly skilled care givers. The physician of the old days, that some yearn for, could still exist provided patients are willing to accept the care provided in the old days. But they can’t have it both ways.

American consumers are facing higher medical costs due to procedures that are not as available in state-care systems. Kling notes: “Heart bypass surgery is about three times as prevalent [in the US] as in France and about twice as prevalent as in the U.K. Angioplasty is more than twice as prevalent... as in France and about seven times as prevalent as in the U.K.” And what is true for technology is true for personnel. America has the highest rate of medical specialists in the world. All this premium health care does make health care in total more expensive in the US than elsewhere. This is what Kling calls the “Crisis of Abundance.”

Is America overspending on health care? No doubt. But it is also likely that state systems are under spending as well. The extra money that Americans spend is one reason there aren’t queues for surgery. Clearly the third party payment system in the US has driven up costs through the use of premium care. But equally clear is that state systems attempt to reduce this tendency to over consume by rationing care. No central planner can ration health care in a way that optimizes care for all patients. They paint with a wide brush and that means needed care is not given and what is given often is in such short supply that patients die before they move to the top of the waiting list.

America is said to have a health care crisis because it spends more than any other nation per capita. But Americans also lead the world in spending on food, entertainment and automobiles. Yet no one speaks of the food crisis, entertainment crisis or automobile crisis. Of course the big difference is that Americans don’t have their food, cars or entertainment paid for by a third party such as insurance or government.

Some health costs were due to the explosion in demand for services, not due to increased illness. They were the result of the rise of new methods of paying for services.

Mostly the patient was put into a situation where he did not pay directly for the costs of his visit. Approximately 86% of health care costs for Americans is paid for by either government or insurance. This is actually higher than the coverage given under Canada’s state system.

One result of such high third party payments is that demand for care goes up which increases per capita costs as well..

Now patients are starting to pay a fairer share of these costs themselves. One result has been increased competition in health care and improved health services. The New York Times recently reported that in the US a “growing number of physicians... have streamlined their schedules and added Internet services, among other steps, to better meet the needs of patients. For physicians... it is simply good business.”

The reason for the improved services is that in recent years walk-in medical clinics and retail-store clinics have dramatically increased and “pose new competition, and as shrinking insurance benefits mean patients are paying more of their own bills, family care medicine is more than ever a consumer-service business. And it pays to keep the customer satisfied.”

Yes, it is true that Americans spend more per capita for health care and that is because they get more health care per capita. Socialist systems routinely forbid expensive health care to patients. And entire classes of patients are told they must suffer, or die, because the state refuses to provide the care they need.

In South Africa the government announced “free” health care for children under a certain age. How as that provided? One was by neglecting other patients who needed care. A second thing they did was arbitrarily limit that care to certain infants only. For instance if the birth weight was below a certain weight the child was denied life saving care even if it were available.

In one case a mother was told that the hospital would not save her infant’s life even though it had the ability to do so. It was a few grams below the weight limit set by the state. Press reports on the case brought in private donations; the mother and infant moved to a private hospital and the baby lived.

In England a winner of the Big Brother reality show was asked what he planned to do with his large cash winning. He said that a big chunk of it was earmarked to fly a friend to the United States for badly needed surgery. The surgery could be done in England but the socialist system refused to do it because it cost too much. Britain spends less per capita on health care than America does and denying needed surgeries like this is one reason. Deny people needed health care by bureaucratic edict and you can lower the costs per capita.

There is no denying that Americans consume more health care than they need. That is what third party payment schemes do. Nor can anyone deny that some Americans get less health care than they need. But the same is true in socialist systems. There are many people who over consume on small issues because the state covers the costs but who under consume on big issues because the state won’t provide the care at all.

America could match the other developed nations in per capita spending tomorrow but to do so it would have to do what they have done -- deny certain expensive treatments across the board.

Labels: ,