What’s the Matter with Socialized Medicine?

January 9, 2008

What’s the Matter with Socialized Medicine?

Daniel interpreted the writing on the wall for the decadent King Belshazzar. “You have been weighed on the scales and found wanting” (Daniel 5:27). Socialized medicine deserves similar judgment.

The United States medical system merits description in apocalyptic terms. However, presidential candidates and religious leaders advocating socialized medicine seem blind to the dysfunctional nature of third-party health care. Despite ostensibly compassionate intentions, expanding government control of medical care would result in greater disservice to the uninsured and precariously insured.

Government health care creates a great deal of misperception about who’s responsible for paying the bill. Resource consumption increases when people think someone else is shouldering the cost. Nobel Laureate Milton Friedman observed, “Nobody spends somebody else's money as carefully as he spends his own.” More than 60 years of “someone else” paying for health care has led to medical expense inflation. Our predominately third-party reimbursement “system,” beginning after World War II for employees and after Medicare in 1965 for the retired, has resulted in out-of-control spending. Increasing the role of government will spur unbridled medical services consumption and further harm the underserved. Medical resources are limited. An expanded government role in health care will necessarily lead to rationing, shortages of health-care providers, delay in treatment, and deterioration in quality of care.

Medicaid is a socialized medicine microcosm. In that system, price controls and bureaucracy result in rationing by deterring provider participation and delaying treatment, with subsequent deterioration in quality of care. Affluent individuals are able to access better health care outside of any government system. The majority will wonder why circumstances are worse with a single-payer system.

Government health care fails to control expenses. The combination of an aging population, technological advances and unconstrained consumption has led to an unsustainable growth in costs. Paul Starr, in The Social Transformation of American Medicine (1982) compared United States medical spending before and after President Johnson signed Medicare legislation in 1965. Seven years before Medicare, medical inflation was 3.2 percent. Five years later it was 7.9 percent and now it is approximately 9 percent. The Congressional Budget Office reports that over the past 30 years, in comparison to the nation’s gross domestic product (GDP), health care spending has more than doubled. Furthermore, the CBO predicts that it will double again by 2035, to more than 30 percent of U.S. GDP. These trends would improve if medical resources were consumed with more direct personal participation in the cost of those decisions.

Doesn’t government health care cost less than private, for-profit, coverage? Benjamin Zycher reported that private insurance administrative costs are 11-14 percent of benefits, compared to Medicare, when including relevant costs, at 6%. (Manhattan Institute, 2007) However, single-payer advocates suggesting costs savings over private insurance disregard the increase in health-care consumption by the newly covered. These additional costs would offset, and likely exceed the single-payer savings scenario. Furthermore, when considering the domestic economic losses from increased taxes to pay for more health care, the single-payer model costs conservatively rise to at least the 24–25 percent range, well in excess of private insurance.

Government health care elsewhere is inadequate. Canada and the United Kingdom provide contemporary models where rationing occurs by bureaucracy and delay. Disease specific outcome comparisons discredit studies that report greater satisfaction with socialized health care despite lower relative spending. Morbidity and mortality are worse. For example, a 5-year survival rate for prostate cancer of less than 70 percent in the United Kingdom is objectionable compared to a greater than 95 percent survival rate in the United States. A 2006 Frasier Institute study reported that the average waiting time between primary-care referral and specialist treatment increased to 17.8 weeks in a Canadian survey. The average delay between referral and orthopaedic surgery was 40.3 weeks. Wealthier Canadians commonly travel to the United States for care. The majority cannot.

Single payer advocates argue health care is the right thing to do and government ought to fulfill this duty. However, given finite medical resources, fulfilling all health-care demand is impossible. Moral theologian Fr. Thomas Williams, in Who is My Neighbor? (2005), distinguishes between moral and civil rights. Moral and civil rights differ with respect to their demands upon government protection. We can agree upon a moral duty to make health care accessible to all citizens and work toward that goal, while disagreeing about the obligation of government to provide complete health services to everyone via socialized medicine.

The common good would be better served by market oriented reforms for elective and extraordinary health care coupled with compassionate subsidization for the needy, rather than socialized medicine. Tax law changes could help improve insurance portability and affordability. Current laws perversely subsidize high income earners and large company personnel. Small business employees and others who pay for health care with after tax dollars are regressively burdened. Increasing inter-state competition for insurance companies could decrease premium cost, remove thousands from the uninsured roles, and lead to stronger demands for quality.

Patients paying for health care at the point of service would be more prudent consumers than those perceiving health-care benefits as an entitlement. People might take better care of themselves. With improved alignment of responsibility for personal health choices and medical-care consumption, scarce health-care resource allocation would improve. We cannot expect this much from government.

Dr. Donald P. Condit is an orthopaedic surgeon specializing in hand surgery in Grand Rapids, Mich. He also holds an MBA degree from the Seidman School of Business at Grand Valley State University.

Comments

Bill McCubbery: Bill.McCubbery@mdgp.com.au

A few days ago, having stumbled onto this blog, I submitted a comment like others before me. It was not very profound;
but ,then, neither was anything else I saw. So far it has not appeared. Why is this?

Peter Bond: pjbnd@yahoo.com

This reminds me of a "liberal" radio phone-in during the last attempt at doing something about the health care system. The host asked why, if America's system was so good, why was life-expectancy in neighboring Canada several years longer. Someone called in to say it was nothing to do with the system, and blamed it on the general stress to Americans of keeping the world peace!

I think the article misses the point. "Socialized" medicine prolongs life at less cost not because the service is better (although my experiences in Canada and Britain were better than those in the States) but because the lack of deductibles and co-payments means that GP's are used more effectively to detect and treat problems before expensive procedures are needed. As an example, I had a shop-floor employee who had difficulty walking up some stairs. When I told him to see his doctor, he explained that, with a $400 deductible, he could not afford to. In most developed countries, this would not have been a factor. Further, the medical systems there are far better integrated with other social and public health services, providing significant value-added at negligible cost.

Also, private medicine and the insurance companies have overextended the product offerings, covering and providing unproven services without reference to cost-effectiveness. Rationing health services on a scientific basis can actually save lives as well as reducing waste.

The other consideration which is seldom discussed is the financial insecurity caused by the lack of a guaranteed, ongoing insurance system. This causes people to act in strange and ineffective ways. Knowing that there will be excellent care, no matter what the situation, significantly enhances the quality of life for Europeans and Canadians. If you are uninsured, the charges are very much higher than the discounted rates charged the insurance companies. Only when these charges have driven the victim and his family to destitution do you suffer the additional humiliation of becoming a charity case.

The system is broken beyond repair. Only by putting the interests of individuals before those of the cartels of providers can the system start to be improved. This just is not happening yet.

Incidentally, there is no "free" market in America. The majority of health professionals are members of monopolistic trades unions such as the AMA.

Greg Brown: gcbrown@fastmail.fm

I question the assertion of price inelasticity! New studies conclude that if just 20% of policy holders had some sort of "consumer driven" health plan, then the price of health care in America would start to come down.(http://www.manhattan-institute.org/html/_jfsp-consumer.htm) When it's your money, you will shop by price or negotiate. Plenty of uninsured who pay cash, negotiate much lower prices directly with their doctors. Sure some goods and services may be inelastic over the short term but they also adjust better or become more elastic, in the long run as society adjusts. And remember, even if a price is relatively inelastic, it does not mean that the prices are fixed and immune to market forces, they are just less elastic. So, I agree with Tim. Again the upward spiral is due to consumers having no price information and no "skin in the game".

Chris Manes: lokcism@aol.com

Economists have studied price elasticity of medical care and almost unanimously concluded there is little or none.

http://209.85.173.104/search?q=cache:UNSknjzbmOMJ:www.rand.org/pubs/monograph_reports/2005/MR1355.pdf+price+elasticity+medical+care&hl=en&ct=clnk&cd=4&gl=us

"Despite a wide variety of empirical methods and data sources, theestimates of the demand for health care, shown in Table 3.1, are consistently found to be price inelastic"

Thus, the economic model of the article above is unsupported, and suggests an agenda to enrich the rich and make the lives of workers even more difficult.

Bob Auten: rauten1@sbcglobal.net

Unfortunately the insurance industry, media and government have created a public who think the biggest problem is their premiums going up. The public in most cases never sees the real cost of medical care because they see their doctor office or Rx co pays of $10-$65 and think that's all there is to it. The public, also, will not take the time to shop for the best proceedure, hospital or doctor. The public doesn't care about any of this until it impacts them personally and then they think they are being treated unfairly and want socialized medicine as their answer. They have no idea what socialized medicine would do to them. Why do I hold these views? Because I have been marketing health insurance to companies and individuals for 34 years and this is exactly what I have seen from the inside. The American public gets as involved in health care as they do politics, only when it diraetly impacts them personally. The insurance industry, media, and government have a very poor track record of educating the public.

Drew Albert:

One premise to this discussion I don't accept is that which the author states is the Fraser institue's statistic on delays between referral and treatment. One must ask why there are such delays and the answer always centers around the lack of medical expertise. Canadian doctors have been recruited by US medical institutions for decades. This has placed Canada in the unenviable position of serving more patients with fewer doctors on a per capita basis. If for profit health care were a level playing field (there were the same number of specialists per capita in both countries), the difference in time to treatment would be miniscule. The point is that American style "for profit" health care can afford to pay health professionals more and therefore skew and amplify the drawbacks of the Canadian health care system.

The author's claims do not fall in line with the recent study regarding preventable deaths in the top 19 industrialized countries (see: the journal Health Affairs ). The US finds itself in dead last (excuse the pun), showing a contradiction that begs explaination - BTW the Canadian health care system was ranked 5th in this study.

Andrew1218: Andydadoffour@aol.com

Conservative Health Insurance Plan

The issue of the “47 million uninsured” is not going away in this political environment, therefore, a plan has to be instituted that will not destroy the quality of the current system and will not result in socialized medicine. This is my solution.

Rather than create another Federal Bureaucracy with a host of employees and endless new departments and rules and regulations, it should be left in the private sector where they are already equipped to handle new insureds. Current health insurers have the employees, facilities, computers and complex infrastructure to handle the influx of the uninsured. Therefore, it would be more efficient to leave to each geographic area, like the Northeast, their share of uninsureds to absorb into the various insurance companies servicing their area.

Why would the private sector take on this burden? Answer= Significant Tax Incentives. For example, if a company could write off $2.00 for every $1.00 it expends in insuring the uninsured, then it would be motivated to take on the uninsured and provide a policy. Obviously, it depends on a business model and the ultimate tax burden of each company, which would have to be calculated. The beauty of the plan would be to prevent a new bureaucracy and to lessen the amount of money going to the Federal government, which is ultimately wasted for pork projects and/or inefficiently used. The more of our money the Federal Government has the more power it has, and the greater potential for abuse of power.

Even if the insurance companies are not motivated by the tax incentive, a similar plan could be offered to all companies and individuals to lessen their tax burden if they send their money to a non-profit set up to collect the funds and to distribute to pay for insurance policies. It would act more like a private donation to charity than a government program.

How do we properly designate who is qualified? Answer=Require anyone who is interested in the benefit to file a tax return no matter what the income level. Have a form with the return asking specific questions under oath. If they lie about their eligibility, then they are subject to fines and imprisonment. Initially, certain income levels can be set and depending on the response, the pool of eligibility can be increased. Obviously, particulars need to be added, but as a general framework, it is a win win for all involved. People insured who weren’t before, and companies and individuals with lesser tax burden. It will also determine how many people who really aren’t insured. I am sure that a significant percentage of the “47 million” can afford to pay for health insurance, but they choose not to make it a priority. This would clarify that number.

If the democrats don't like the plan because of the tax cuts, do they really care about the uninsured?

Jeff Crowe: jeffcrowe@kc.rr.com

I disagree with Mr. Manes. The focus of the article is about how to best provide coverage for the poor.

If we can lower the cost of health care more people will be able to afford it. Removing the third party payer will help. Allowing consumers to choose the jurisdiction in which to purchase their health care will cause states to think twice before issuing unnecessary regulations. Allowing consumers to consume without reference to cost will certainly have the opposite effect because there is a certain amount of price elasticity to health care.

On another topic Dr. Condit discusses the rise in healthcare cost over the past decades. As we become wealthier we should be willing to pay not only more but also a higher percentage of our wealth on health care because we have satisfied other needs and wants.

AMDG,
Jeff Crowe

Vincent Penzo: vincentpenzo@comcast.net

Both Dr. Condit and Mr. Manes miss the main point. No individual should be forced by anyone, including their government, to sacrifice for the needs of any other individual. Jesus said to help the poor, he did not say to send the government after someone who did not help his neighbor. God created us with free will. To interfere with this is to deny the inherent dignity of the human person and subvert the natural law. All charity must be voluntary, as we learn from Christ's ultimate act on the cross.

Tim Rozmajzl:

Chris,

Your assertions that there is no price elasticity in medical care and that unregulated (I assume you meant to say "free") markets cannot provide affordable healthcare hardly sound like they should be "left aside" in this discussion.

Can you help enlighten me as to how medical care services/prices are immune to the forces of a free market. Are there other goods or services that are immune as well?

Tim

Chris Manes:

Once again the Acton Institute stands up for the rich against the poor. Using the term "socialized medicine" to describe universal insurance shows the bad faith of Acton's writers.

Leaving aside the well established fact that there is no price elasticity in medical care, and thus unregulated markets cannot provide affordable medical services, don't you ever tire of taking the side of the rich and powerful?

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