How to ruin the American health care system

A new disturbing trend seems to appear in American politics : talks of public health care. Like any other social problem, the most popular solution seems to remove rights from the individuals, and put them in the hands of the “enlightened politicians”. Most people living in a country where health is socialised has quite another opinion on the subject.

There are a lot of opinions, but what are the facts ? Are public health care systems an exception to Friedman’s Law (the economical principle which states that private systems are twice as efficient as public systems) ? Or is this yet more statist rhetoric ?

At first, it seems that health care somehow has become an exception. The United States spends more for the same medications, and has less insured people (around 85% instead of 96% in Canada).

However, statistical data seems to indicate that this is superficial. In comparaison with other socialized countries, which allow free-market processes in their health system, Canada has the most socialized health care in the world. Because of this, Canada’s system is the worst :

“Although Canada spends the most on an age-adjusted basis on health care among OECD nations [and fifth-highest in general terms], our system produces inferior access to physicians and technology, produces longer waiting times, is less successful in preventing deaths from preventable causes, and costs more than any of the other systems that have comparable [socialist] objectives.” (“How Good is Canadian Health Care? An International Comparison of Health Care Systems”, Fraser Institute, August 2002).

The efficiency of the American system versus the British system was also discussed in the Telegraph article “NHS is left trailing by the Americans”, in January 2002.

Furthermore, a special on health care by the National Post has reported that one of the biggest hospitals in Stockhold, St. Gorans, was sold to the private sector in 1999. Since then, St. Gorans operates at 15% less cost than the Swedish public hospirals, despite all employees being on its payroll and being forced by law to admit emergency patients (which cover 78% of its total patients).

From the study and examples we have, it seems far more likely that Friedman’s Law does indeed obtain. I have already explained the theoretical reasons for this in my article “An evaluation of capitalism vs statism”, and therefore I will not make this article longer by enumerating them here. For a more technical paper on the inefficiencies in public health care in particular, see “Market Structure and Hospital Efficiency: Evaluating Potential Effects of Deregulation in a National Health Service” (Dalmau and Puig , 2000).

How does this deficiency translate in practice, in the case of Canada as compared with the United States ? By hospital bed shortages, deaths on waiting lists, and less equipment.

I quote from the executive summary of “The Availability of Medical Technology in Canada: An International Comparative Study” (Fraser Institute, August 1999) :

“Although Canada is the fifth highest among OECD countries in terms of total spending on health (as a percentage of GDP), it is generally among the bottom third of OECD countries in availability of technology. (…) The local comparison is equally unfavourable. CT scanners, nuclear medicine facilities, MRIs, lithotriptors, positron emission tomography (PET), specialized intensive-care facilities, and cardiac catheter labs are all less likely to be found at a community hospital in British Columbia than at a similar hospital in Washington or Oregon. Angioplasty and transplant facilities are mainly restricted to the University teaching hospitals in British Columbia, while they are more widely dispersed in the two American states.

“Although Canada is the fifth highest among OECD countries in terms of total spending on health (as a percentage of GDP), it is generally among the bottom third of OECD countries in availability of technology.”

Furthermore, the trend is worsening in some categories. For example, the data reveal that Canada’s deficit in the availability of MRIs became worse between 1986 and 1995 relative to other leading OECD countries including Australia, France, and the Netherlands, not to mention the United States.

This pervasive technology deficit points to the need for a serious re-evaluation of the way in which health care is funded and provided in Canada.”

Health care in Canada is so backwards compared to the United States that doctors go work south of the border in droves, and a number of patients, as well as politicians (who hypocritically promote the public system), get treated in the United States.

It is not simply a question of injecting more money in the system. While we should expect that the price of medical services would get lower with time because of technology, it seems that with public health care the exact contrary is observed. In Canada, there is no correlation between health budgets of various provinces and waiting times, and waiting times in the country have ballooned while spending has risen. Between 1993 and 1998, while the health care spending per capita has risen by 77$, the average waiting time have risen from 9.95 weeks to 14.21 weeks (for a statistical study of the relation between spending and effect in Canada, see “Spend More, Wait Less”, Martin Zelder, 2000).

Financial crisis is also the norm in the UK, where more than a million people wait on the lists and one-quarter of cardiac patients actually die before it is their turn to be called in (“The million-year wait”, Adam Smith Institute, 2002).

People say the US spend a lot on health care. As we say, you get what you pay for. Studies have demonstrated that the US’ medical spending, while higher than most countries, is also more productive per dollar. Four diseases (diabetes, cholelithiasis (gallstones), breast cancer, and lung cancer) were measured for expectancy and quality of life, and the US was ahead of the UK and Germany in all except diabetes treatment in the UK (William Lewis, “The Power of Productivity”, p97 – also in “The productivity of healthcare systems”, The McKinsey Quarterly, 1996 no. 4).

What, therefore, are we to make of the disadvantages of the American system ? It turns out that the high price of American drugs is a myth. American prices are average compared to the rest of the industrialized world, if you include generic drugs (for statistics, see “Making Sense of Drug Prices”, Patricia Danzon, Regulation Magazine).

What about insurance ? Canadian insurance offers less coverage than private alternatives. It pays only half of prescription drugs costs, and offers a restricted list of drugs. The government also arbitrarily takes away certain drugs from the list, and jacks up co-payments (John Graham, Houston Chronicle, August 8th 2002). Furthermore, tax bias in favour of employer-sponsored health insurance railroads the American public into unwanted health care choices.

It is vital that the US not follow Canada’s statist footsteps. Otherwise American doctors will have to run away to Cuba, and that would just be humiliating.