So I've been reading a lot about universal health care lately. According to some recent polls, over 60% of Americans support a universal health care system, and they think the Federal government are the best ones to provide it. And I mean why not. As the argument goes, the government can provide cheaper health care than the private industry because they won't be working for a profit. Not to mention that by giving everyone health insurance, the overall system costs associated with providing medical services to currently uninsured patients will be eliminated. Sounds like a win-win to me!
Obama has recently said that implementing universal health care is a bigger priority than even his climate change initiatives. So obviously we are going to see some big political battles over the next couple of months over this issue. What gets me the most angry is the terms that supporters of universal health care cast the issue in. Their whole argument is that the rich should payer higher taxes, use that money to pay for health care for the indigent and working poor, and VOILA! Problem solved. It is the most fundamentally flawed type of argument. List a couple of facts and ideas and then simply assert that it will fix the issue because it sounds like it would work. Never in this analysis (if you can even call it that) are any effects or the proposed changes even considered. In order to develop an effective health care system in this country the analysis must start with three fundamental questions: What is the effective goal of our ideal health care system? How does our current system fall short of that goal? How do the we change the current system to best meet our goal and prevent unintended bad consequences resulting from that change?
You would think the answer to the first question is easy, but if you ask a diverse group of people I bet you would get several different answers. Liberals may say that they want everyone to have affordable coverage and equal access to treatments. Conservatives may say the want the government to stay out, regardless of how that affects the system. If you ask me, both these are not going to happen, either because its physically impossible (liberal) or politically impossible (conservative). Personally, I think a diversified health care system would be most ideal, allowing individuals to pick and choose the amount of coverage they want based on a variety of circumstances: amount of risk willing to accept, family medical history, ability to pay, etc. This would be unacceptable to the democrats running things however. They think they can provide everything for everybody. In determining whether this is possible, it is helpful to look to the state of Massachusetts, who a few years ago implemented a system similar to the one proposed for the rest of the country. Let me tell you how great the results have been.
The first problem with the Massachusetts system is the extraordinary costs associated with it. The program provides no- or low-cost insurance to approximately 165,000 residents, roughly 60% of the people who had been previously uninsured before the program took effect. The Massachusetts budget for 2010 sets aside approximately $880 million for this part of the program alone. And that cost represents a 42% increase in cost since the program began in 2006! It has increased in price almost 50% in just 4 years!
How could that be, you ask? Easy, by providing extensive coverage for people who don't have any stake in paying for it, these newly insured people have no incentive to save. Why not go to the doctor for that cough if you don't have to pay for it? Until a system is put into place where the users are forced to pay for the costs of services received in some type of proportional way there is no incentive to keep costs down, and they will continue to rise.
"Easy fix!" yells the supporter of universal health care. Simply cap the amount of treatments a person can receive. Yay, problem solved. Not quite. Whether the limit is based on the relative necessity of the procedure, the value of the service based on clinical effectiveness and/or cost, or a limit on total expenditures, each option will lead to undesirable results. The first problem is that its going to be government bureaucrats, not doctors and patients who will be deciding these limits. In health care each patient is different and localized doctors, not federal bureaucrats should make these decisions.
And if you think that just because care will be rationed for those who choose the federal health insurance option will be limited, while those who remain with private insurers will see no change, then you are very mistaken. When the government provides health insurance to the indigent, they will no doubt do what they do for medicare and medicaid: force service providers to accept the patients and only receive what the bureaucrats running the system thinks your services are worth. Undoubtedly, this price will be well below the true cost of the service. This will lead to higher costs for private providers who can't mandate their own prices, which will be passed on to the consumer.
Since mandating lower costs for people that don't even pay for the service is probably not even politically feasible, the U.S. system will probably go the route of Massachusetts and its European and Canadian counterparts and simply impose price controls on all medical services. Price controls are one of the most economically undesirable political actions that a government can make. When a price control is set at a value higher than the market equilibrium, it will lead to a surplus in the good or service as the supply increases faster than demand. Contrarily, a price ceiling will drive down supply, while increasing demand by creating an artificially low price for the service leading to shortages. This is exactly what happened in Europe and Canada. The shortages have led to rationing of medical services, often leading to long waits to see a doctor and critical care industries, death before you ever receive treatment.
At the end of the day, increased health care coverage and lowering costs are competing goals; it is not possible to achieve a high degree of both. As output increases, the cost associated with that output increases as well. Universal health care will not increase coverage while lowering the overall cost of the system. Instead it will lead to huge amounts of debt and the rationing of medical services. And the rationing will not be done by doctors and patients, but by bureaucrats in Washington. Until personal responsibility and choice are hallmarks of our health care in this country, we will not see any change from the status quo except maybe things could get worse as the government tries to fudge things. I hope in the next few weeks to develop a proposal on how a system based on the market would be more advantageous than the current system Although such a system would not cover everyone and may not be ideal, at least I won't try to mask its flaws in rhetoric and hide its true effects (cough, cough, Obama and Pelosi).
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