How Capitalism Will Save Us (55 page)
Read How Capitalism Will Save Us Online
Authors: Steve Forbes
The combined pressures of low insurance reimbursement and increasing malpractice litigation are creating an unsustainable burden on physicians. Typical is Dr. Matthew Allaway, a urologist in rural Maryland who, according to the
Baltimore Sun
, starts at 7:00 a.m. and often sees as many as sixty patients a day in order to make ends meet. His office is often packed, with waits of up to ninety minutes. The reason: many colleagues have left the profession.
Little wonder so many people believe the system is a chaotic mess. Capitalism bashers are convinced that a Canadian- or European-style, government-run system is the only way to fix these problems.
They should think again. Many people blame today’s health-care troubles on “greed” on the part of drug and insurance companies, and even some doctors. However, they miss a critical Real World truth: America’s health-care system is anything but a “free market.” It is the nation’s most heavily regulated economic sector.
What people today call the “health-care crisis” is actually a massive economic imbalance created by bad government policy.
Today’s health care can definitely be expensive and uncaring. That’s because, as we pointed out, the patient really isn’t the customer. The real customers are corporations: the
employers
that buy coverage from insurance companies—and the
insurers
that reimburse doctors and hospitals.
Remember, in a marketplace, people and companies seek to satisfy the needs and wants of their customers. Today’s health-care system is about satisfying the needs of employers and insurers that are the primary customers—not your needs. In Milton Friedman’s words, “The [physician] has become, in effect, an employee of the insurance company or, in the case of Medicare and Medicaid, of the government.”
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Third-party payment has also driven up costs by artificially boosting the use of health-care services. The late Milton Friedman once put it very simply: “The patient—the recipient of the medical care—has little or no incentive to be concerned about the cost since it’s somebody else’s money.”
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Insurance may be expensive. But for people who have it, doctor’s visits can seem “free.” Patients end up making more visits to the doctor’s
office. Everyone knows what happens in the Real World when demand for anything goes up. Prices do, too. Health care is no different.
Third-party payment of health insurance was not the free market’s response to patient need. Some may be surprised to learn that the system really owes its existence to an entirely unrelated government policy—the wage and price controls of World War II. They were enacted by FDR to control wartime inflation resulting from the government’s printing so much money to pay for the war effort.
Companies needed to pay their employees more than government wage controls would allow. They couldn’t do it with cash. So they did it through fringe benefits, principally health care.
The distorting effects of third-party pay were amplified many times over when government got into the health-insurance business in the 1960s, launching its two monster programs—Medicare insurance, its mandatory program for seniors, and Medicaid for low-income people. Medicaid has since been expanded with the State Children’s Health Insurance Program (SCHIP), which began in 1997.
Both third-party payment systems, Medicare and Medicaid, increased the demand for health care even further. But unlike private insurers, government was less willing to pay for it.
Medicare and Medicaid only partially reimbursed doctors and hospitals. You couldn’t really blame them. After all, they were paying with taxpayer money and had to control their own costs. Doctors and hospitals, squeezed by Medicaid and Medicare, started charging privately insured patients more. Private insurers today subsidize Medicare and Medicaid in excess of $90 billion a year.
Little wonder the cost of private insurance spiraled out of control after Medicare and Medicaid were established. Employers responded by offering plans that relied on cost-conscious health-maintenance organizations with networks of physicians who agreed to deliver care according to stringent guidelines set by insurers. The growth of Medicare and Medicaid since the 1960s thus led to the rise of bureaucratic managed care.
One more problem snarling this convoluted market that we explore later in this chapter is the tangle of state regulations that rigidly dictate what kind of health insurance you are allowed to buy in each state. What
if government forced you to buy twice the number of groceries you needed when you went to the supermarket? Your bills would be enormous. That’s essentially the effect that mandates have on the cost of insurance.
The bottom line in the Real World is that today’s health-care economy is not only overregulated but essentially governed by price controls—those low reimbursement rates imposed not only by government but also private insurers. We’ve already talked about the consequences of price controls and command-and-control regulation in places like the old Soviet Union, and in Soviet-style countries like Cuba and Venezuela. You get declining quality, shortages, and rationing.
That’s what’s happened with health-care delivery in countries like Canada, Britain, and the nations of Europe—and it is happening today, in varying degrees, throughout our system. The worst example is Medicaid, where the quality of care is demonstrably lower. Many doctors won’t treat Medicaid patients because of low reimbursement rates.
The answer to health care is to bring back the consumer and restore a normal market where individuals, and not corporations, make the buying decisions.
We see this starting to take place with the few consumer-driven solutions—like health savings accounts—that have managed to spring up despite the system and that are beginning to make health care more patient friendly and affordable.
The Real World bottom line: government-run economies result in monopoly and rigidities that work against innovation and productivity. Think post office, public education, Amtrak. Do you really want government bureaucrats in charge of your medical care?
Q
W
HAT’S SO BAD ABOUT A GOVERNMENT HEALTH-CARE SYSTEM?
AS
TATE-RUN HEALTH CARE IS RATIONED
. I
T’S “FREE,” BUT YOU OFTEN CAN’T GET IT—OR YOU HAVE TO WAIT TOO LONG
.
I
n 2009, the actress Natasha Richardson, skiing in a resort in Quebec, Canada, hit her head and eventually died from massive brain injury. Days later, many speculated whether she might have been saved if a medical helicopter like those common in the United States had been able to transport her to a trauma center. There are no medical helicopters in the province of Quebec.
Fortunately, most of us won’t ever need a medical helicopter. But we will need to see a doctor. And in countries with state-run health-care systems, needing to see a doctor, even for life-threatening conditions, can mean waiting months—or longer.
As one Canadian citizen, Esther Pacione of Ontario, told the
New York Times
, getting even basic care in Canada means being put on a waiting list. “If you are not bleeding all over the place, you are put on the back burner,” Ms. Pacione said, “unless of course you have money or know somebody.”
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That’s because care in these systems is rationed. In Canada, rationing forced a Quebec man to wait a year for a hip replacement. He took his case to the Canadian Supreme Court, which ruled in 2005 that “access to a waiting list is not access to health care.” The court struck down Quebec’s law banning private health insurance.
It’s not coincidental that two of the leading opponents of government-run care, Dr. David Gratzer and Sally Pipes of the Pacific Research Institute, are both Canadians. Gratzer decided to write a book,
The Cure: How Capitalism Can Save American Health Care
, after experiencing a harrowing epiphany as a med student walking into a Canadian emergency room.
Swinging open the door, I stepped into a nightmare: the ER overflowed with elderly people on stretchers, waiting for admission. Some, it turned out, had waited
five days
. The air stank with sweat and urine. Right then, I began to reconsider everything that I thought I knew about Canadian health care. I soon discovered that the problems went well beyond overcrowded ERs. Patients had to wait for practically any diagnostic test or procedure, such as the man with persistent pain from a hernia operation whom we referred to a pain clinic—with a three-year wait list; or the woman needing a sleep study to diagnose what seemed like sleep apnea, who faced a two-year delay; or the woman with breast cancer who needed to wait four months for radiation therapy, when the standard of care was four weeks.
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And that’s just in Canada. In a 2007 article for
City Journal
, Gratzer noted that more than one million Britons must wait for some type of care, with two hundred thousand in line for longer than six months. In Britain’s state-run system, hospitals have been known to manage demand by imposing
minimum
waiting times of approximately six months.
The
London Daily Telegraph
reports that hospitals are penalized for “treating too many patients too quickly.”
5
The paper reports: “One gynaecologist said that he spent more time doing sudoku puzzles than treating patients because of the measures.”
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Things aren’t any better in Sweden, where the wait for heart surgery can be as long as twenty-five weeks, and more than a year for hip replacements. According to Swedish policy analyst Johnny Munkhammar, some Swedes get so desperate they end up visiting veterinarians. Why? Because “veterinarians are private and there are many.”
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Not only do patients in state-run systems have to wait for care, they have less access to advanced medical technology. CAT scans, for example, are three times more available in the United States than in Canada.
Yes, drugs may be cheaper in countries like Canada. But that’s because their state systems keep the prices artificially low. (As we’ve noted, we pay for this in U.S. drug prices.) But people often don’t get the drugs that can cure them—because they’re banned by state healthcare bureaucracies.
Sally Pipes has her own story about Canadian health care.
[M]y uncle was diagnosed with non-Hodgkin’s lymphoma. If he’d lived in America, the miracle drug Rituxan might have saved him. But Rituxan wasn’t approved for use in Canada, and he lost his battle with cancer. A couple of years ago, I received an email from a woman in Ontario who had heard my uncle’s story. Her reason for writing?
She wanted to let me know that Rituxan still wasn’t available—so she was about to embark on a trip to Michigan for the drug. That’s the grim reality of price controls—they lead to rationing. Similar tragedies have played out over and over again in Britain, France, Italy, and virtually every other country that imposes price controls on drugs.
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Labor shortages are a chronic feature of state-run health care in Canada, Britain, and France. A shortage of physicians and inadequate hospital capacity were said to be key factors behind the deaths of some fifteen thousand elderly citizens from a disastrous heat wave that struck France in August of 2003. Health-care policy analyst Linda Gorman wrote in 2008 that doctor shortages have been recently reported even in nations
such as Germany and Switzerland, whose systems are considered successful by supporters of state-run medical care.
Why is rationing an inevitable consequence of state-run care? Because, as we’ve noted, state-run health care is a command-and-control system. In a market economy, consumer need drives what the market provides. But in a state system, politics determines what is produced—and who gets it. Practices and prices are rigidly imposed on the market—not developed spontaneously by people who are seeking to serve others’ needs.
This is true whether the system is entirely state-run, like the British National Health Service, or state-financed, like Canada’s single-payer system, where government pays for care provided by private entities.
