Nationalized Health Care Is Hazardous to Your Health

by Don Boudreaux on February 9, 2009

in Health

Nationalizing the provision of medical care will not make medical care less costly — indeed, it's likely to make it more costly.  Nadeem Esmail explains in this account published in today's Wall Street Journal.

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{ 29 comments }

Sam Grove February 9, 2009 at 11:19 pm

I like to call it "totalitarian health care".

LoneSnark February 9, 2009 at 11:39 pm

Not true. Every other socialized medical system has found ways to cut services, ours would too.

Don Boudreaux February 9, 2009 at 11:56 pm

LoneSnark,

Uhhhh….. cutting services is precisely what the wSJ report is about….

Mezzanine February 10, 2009 at 1:27 am

What's wrong with socialized health care. Japan and Israel have great health cares systems!

vikingvista February 10, 2009 at 3:34 am

Polls show socialized medicine is very popular in the countries that employ it. Of course, the polls are careful to include mostly those people who have little interaction with it, and a false presumption of what their taxes are buying them. The elderly or those with rare and costly diseases are the ones who bear the tragic costs in a system that denies them services regardless of the patient's willingness to pay for them. Because after all, buying a service is unfair to those who can't afford it. It is much fairer to deny everybody.

Mezzanine February 10, 2009 at 4:42 am

People are such a spiteful lot, that they would sacrifice having good health care if it meant the rich were denied their even better access. It's all about envy, spite and hatred as the underpinnings of all policy.

Luk Arbuckle February 10, 2009 at 8:22 am

Only one metric, wait times, is being used in the WSJ article to criticize Canada's health care system. Complementing the public system with privatized health care would provide competition and improve the system overall. But let's not get ahead of ourselves. Making inferences into a public health care system in the US based on the results from a single metric is weak at best. There are bigger problems, in my opinion, regarding the public health care system in Canada, such as the exploding cost. Since there is no real private health care system in Canada, no politician wants to put limits on what can be covered (it's easier to let wait times increase). The problem is one of monopoly, and politics.

Methinks February 10, 2009 at 9:15 am

As far as I am aware, Canada outlawed private practice. I don't know much about the Canadian constitution, but I don't know if this would fly here. Please correct me if I'm wrong.

In various countries in Europe, one can opt out of the public system by paying out of pocket and the really good doctors don't accept NHS patients or don't accept many. This creates the very two tiered health system that lovers of egalitarianism seek to prevent. The wealthy and well connected get healthcare and everyone else waits.

Luk Arbuckle February 10, 2009 at 9:40 am

And where in this article are the wait times for comparable treatments in the U.S.? Although some people can and will pay for immediate care, I find it hard to believe that others in the U.S. won't have to wait their turn based on scarce resources and the like.

@Methinks Provincial regulation in Canada attempts to prevent the public sector from subsidizing the private sector. Private insurance for medically necessary services is illegal in most provinces. Suffice to say it's a complicated issue that is evolving.

Methinks February 10, 2009 at 10:27 am

Luk,

Thanks for answering my question about private insurance in Canada. How is private insurance subsidized by the public? I don't understand that logic.

There aren't wait times in the United States. I may have to wait to see a particular doctor because she may be so popular she's booked and I may have to wait a week to get the MRI from the center that I choose, but I've never heard of anyone having to wait for treatment unless the treatment is not urgent. I can also choose to see another doctor in the practice, so that's pretty easily solved. The reason for this is lack of quotas and price controls. for example, no radiology department is capped in the amount it can charge. Thus, it can take as many patients as it can handle in a given time period. If there's more demand than the services the radiology center can supply, then another one opens or the radiology center expands. Unlike in Canada, supply is allowed to fluctuate with demand.

In Canada, my elderly uncle has been almost immobilized by a pinched nerve. It's been two years and he's still on the waiting list to see a specialist in Toronto.

There are problems with the U.S. healthcare system which, imo, stem mainly from the distortions created by insurance regulation.

Sam Grove February 10, 2009 at 1:17 pm

Left something out:

There are problems with the U.S. healthcare system which, imo, stem mainly from the distortions created by insurance regulation, which are substantially affected by government regulations.

Methinks February 10, 2009 at 2:02 pm

Thanks, Sam. Although, I think that's tautological. It's the government regulating the insurance industry.

Luk Arbuckle February 10, 2009 at 2:24 pm

@Methinks Private insurance is not illegal in some provinces because it would be considered subsidized by the public. The two points I mentioned are separate. I believe it's because the Canada Health Act stipulates that all citizens have "reasonable" access to medically necessary services. Some provinces have taken the position that by making it public, and only public, there will be no question of access. But note that extended health care insurance is available in many provinces (even if the question of having private health care itself is still in question).

Contrast the idea that public funds can't be used to subsidize private health care with private schools in Quebec. It can cost as little as $1000 a year to put a child into private schooling in Montreal, thanks to government subsidies. And there's plenty of evidence to suggest that the schools in Montreal, public and private, are among the best in the country. Two-tier education is a hot topic, but it seems to be working Montreal. And Montreal is a major battle ground for two-tier health care.

I may be wrong, but I believe you contradict yourself when you say "I may have to wait a week to get the MRI" after saying "there aren't wait times in the United States." Perhaps you meant to specify no wait times for treatments, but note that the WSJ article uses a specific example involving MRI to describe one case in which there was a long wait time (for the test, and then later the treatment).

I have friends that have had to wait for treatment in the U.S. because they weren't willing to pay above what their insurance would provide. The market can't make MRIs and surgeons available if people aren't willing to pay more for shorter wait times. My family in Canada has received treatment whenever it was deemed urgent and necessary (appendicitis, concussion, eptopic pregnancy, cancer treatment, etc.). Are these outliers? How much does the anecdotal evidence depend on state or province? And how do we define "medically necessary", or "urgent"? Regardless, wait times exist for both test and treatment, in the U.S. and Canada.

The problem with government regulation is that it requires more regulation to sort out details, the courts to interpret the regulations, and that it is inflexible once it is in place. This is what I think the WSJ article demonstrates best (i.e., government inefficiency), even though it was using weak stats with no comparative measures to support the story they were actually trying to tell.

Mezzanine February 10, 2009 at 2:44 pm

Methinks – if the proletariat gets angry enough they will outlaw private health clinics for the rich. We all know where those clinics are – they serve people like you.

ben February 10, 2009 at 4:34 pm

New Zealand is an example of how costly nationalised health care can become. Public spending on health has doubled in the last decade here and fewer operations are being done. Public health boards generally blow their budgets every year and my understanding is that it is usually a surprise to because they track their costs so poorly.

It wasn't always this way. Health care in NZ was nationalised a decade ago as well, but in 1999 a socialist government was elected and they came in with the view that healthcare should not be run like a business. Careful cost accounting of services, being the sort of thing a business does, was therefore inappropriate to healthcare and abandoned. I am told the health service embraced this new approach because it lowered accountability.

I am not a health care professional, but I imagine making best use of resources starts with having a clear idea of costs. Apart from declining productivity, hospitals are frequently found to be unsafe, staff are badly underpaid compared with other countries and judging by the difficulty hospitals have in attracting staff, and by all accounts public officials go out of their way to make it difficult to measure the performance of the health system.

New Zealand is I suspect a prime example of the dangers of having government run healthcare.

Here is a study on NZ healthcare productivity.

Here is a scathing press release in reply to the government's response to the study. This sums up quite well just how little a government can care about delivering healthcare.

Mezzanine February 10, 2009 at 6:23 pm

ben – stop the hate! everyone knows socialized medicine is the only way to go. Can't run something so holy like a business. As we know business is the epitome of evil and can't be a role model for anything.

Mezzanine February 10, 2009 at 6:25 pm

I have it on good solid reliable from a liberal that businesses "are just out to make a buck and screw people in the process".

Methinks February 10, 2009 at 6:55 pm

Luk,

I'm sorry if I was confusing. What I meant was that one may have to wait to get an MRI from a particular radiology center or get in to see a particular doctor, depending on how busy they happen to be at the time. However, getting in to see a doctor or get an MRI doesn't require a waiting period. But even for the doctors who are very busy, if it's an emergency, they'll squeeze you in for a quick consult and will stay late if the emergency calls for it.

I have friends that have had to wait for treatment in the U.S. because they weren't willing to pay above what their insurance would provide. The market can't make MRIs and surgeons available if people aren't willing to pay more for shorter wait times.

That's precisely the point. Those who are enamoured of government run health care believe that that an infinite quantity and quality is available at a single price. I'm troubled by "reasonable access". Who decides what's reasonable for you? Clearly your U.S. friends decided that they would rather wait than pay more. I may decide to pay more because for me the same wait is too traumatic – more traumatic than parting with more money. What right does government have to decide to take that choice away from me?

And how do we define "medically necessary", or "urgent"?

We each decide for ourselves. Certainly, a disinterested government shouldn't be deciding for us.

Regardless, wait times exist for both test and treatment, in the U.S. and Canada.

Yes, but as you point out, in the U.S. the wait is by choice and in Canada it's not.

The problem with government regulation is that it requires more regulation to sort out details, the courts to interpret the regulations, and that it is inflexible once it is in place.

This is because of constraints of laws and regulations. Human problems are complex but laws have to be relatively simple,one size fits all. If you write in enough exceptions to make it flexible enough to accommodate individual situations, you'll end up with a meaningless law. So, they write a law or regulation and then go back and endlessly tweak it for exceptions. It's more efficient to just let people work it out on their own as the need arises.

I think what you're missing is that the WSJ article was written for a U.S. audience. In the U.S. such waiting times are jaw-dropping and it was meant to drop our jaws. Doesn't that tell you something about how long the wait times are here compared to Canada? Also, in the anecdotes in the article, the Canadians who sought treatment in the U.S. got it right away. That should also give you an idea what the comparative wait times are.

Mezzanine February 10, 2009 at 11:08 pm

Methinks – only your rich people don't have to wait for MRIs, the rest of us proles have to wait for Medicare MRI to become available because you won't open up your rich person's hospital to my kind!

Luk Arbuckle February 10, 2009 at 11:10 pm

@Methinks

"The Canadians who sought treatment in the U.S. got it right away" because they were willing to pay for it. What about all those Americans that are waiting precisely because they are not willing to or can't pay? What about those Americans that aren't even covered by medical insurance, or with an inadequate level of coverage?

The article is trying to make the argument that, in Canada, "care is rationed by waiting". I don't necessarily disagree. But the argument presented is only supported by anecdotal evidence, a couple of national averages, and no mention of U.S. figures, not even cost comparisons.

I'm sure you're familiar with the idea of confirmation bias. Believing in the idea does not make the poor analysis in this article correct. If anything it weakens the argument and discredits the source. And that's why I criticized it in the first place.

Babinich February 11, 2009 at 5:41 am
Stan February 11, 2009 at 11:18 am

Get an education, work hard and get a better life. That was the rule in previous generations. This concept drove Americans to strive for an income that paid for medical insurance, and allowed them to move to that nice house in the suburbs with good schools.

Now the kids are bused back to the schools they left, they tax the achiever to death, while paying the non-achiever, and now they want to diminish health care to the lowest common denominator. Why work?

Methinks February 11, 2009 at 11:36 am

Luk,

There are no waiting lists in the U.S. If you choose to wait for a particular provider, that's your choice.

We pay slightly more for health care in the U.S. than people pay in socialized country. The real question is are we paying more and getting what we pay for? Anecdotally, having extensively experienced both systems, I think we absolutely are.

However, I don't think the U.S. is optimizing its health care thanks to health care mandates and idiotic regulation – both of which stick it to the uninsured and the poor by increasing the cost of health care insurance.

Luk Arbuckle February 12, 2009 at 12:36 am

@methinks

From an article about wait times in the U.S. (the first of a quick google search):
"Shortening waiting times is part of a nationwide move toward empowering patients, reducing medical errors and improving health care".
http://www.msnbc.msn.com/id/15487676/

Making an appropriate comparison between wait times in Canada and the U.S. is not trivial. How do you deal with those people that can't get treatment in the U.S. because of poor or nonexistent medical insurance (infinite wait time)? Even comparing specific treatments is tricky because the disease coding between U.S. and Canada differ (e.g., ICD codes). And then you have to consider subgroups and possibly Simpson's paradox.
http://en.wikipedia.org/wiki/Simpson's_paradox

How do you know you pay more for health care in the U.S. than Canada? It certainly wasn't in the article. And I can provide my own anecdotal evidence from friends and family about poor medical treatment in the U.S. compared to Canada, but it doesn't prove a trend (although you only need one example to disprove a theory, the reverse is not true).

I'm sorry if it wasn't clear in my previous comments, but I'm not arguing for or against public health care. I'm advocating critical thinking, regardless of personal bias. I can't quote the Fraser Institute in Canada without being attacked because of their obvious bias. Articles like these only go to weaken their credibility further among those that don't already agree with the premise of their arguments.

Luk Arbuckle February 12, 2009 at 1:53 am

@methinks

I think I just realized one point you are trying to make. Namely that, in theory at least, there are no wait times if a person can choose to seek care elsewhere. Allow me to clarify some points, assuming this is correct.

Although I'm not sure how regulations change for each province, there's no national regulation in Canada that limits where someone gets treatment. For example, I know people that have changed medical service providers within their province (doctors and hospitals). Also, Canadians can choose to go to the U.S. for treatment at their own cost. This is one reason I mentioned the two-tier system previously (since people are already taking advantage of the two systems by crossing the border).

Realistically, however, wait times exist because of scarce resources. Emergency rooms have wait lists based on urgency, as do all departments in a hospital. One difference in Canada, I suppose, is that governments are trying to elevate the wait lists to provincial or national levels for some treatments to try and reduce wait times.

Regardless, my point was to criticize the strong conclusions in the article based on little to no evidence.

Methinks February 12, 2009 at 10:30 am

Luk,

Yes, you got my point. I also understand your point about critical thinking. In fairness, the article wasn't presented as a comprehensive comparison of two healthcare systems.

There is a belief in the United States among people who desire the government to provide health care that an infinite quantity will be provided at a single price. That is, we can get more quality and quantity of health care if we nationalized it. The article merely points out that this is impossible and cites Canada's wait lists as an example of the rationing that must take place in such a system. In the United States, one is limited only by money. IMO, finding the money for health care is easier than not having the service available at any price because of rationing – but that's going beyond the article.

Canadians spend less than half the amount Americans spend annually. http://www.nationmaster.com/graph/hea_spe_per_per-health-spending-per-person.

But, honestly, I'm always wary of these numbers. How much of that is medically necessary and how much of that is out of pocket voluntary plastic surgery procedures? How much of that is because of artificially high insurance prices because of state mandates? NY state has so many mandates that health insurance costs $1,000 per month for a family of two, young and healthy adults and more for a larger family. So, in NY state, if you can't afford $12K per year for health insurance, you go without. The politicians force the mandates and yet scream about the number of uninsured. By contrast, in neighbouring Connecticut, catastrophe health insurance is available and costs only $220/month for the same family. Tests are covered as are illnesses, the cost of the doctor for routine checkups isn't but most visits don't exceed $100. I realize I'm going beyond the scope of the article here, but you see one of the problems with U.S. health care here. Again, beyond the scope of the article, but…

Luk Arbuckle February 12, 2009 at 9:36 pm

@methinks

The article doesn't have to be a comprehensive comparison, but the stats presented don't allow for the conclusions made. It raises more questions than answers, leading to questions of credibility and merit. The premise that Canada's wait lists are a form of rationing is sound, but without a comparative measure how can you conclude that the wait lists are unreasonable? How long is a long wait time?

You should be skeptical of those numbers on per capita spending, as they are another example of using stats to tell a tale that may not be true. Per capita spending may be higher in the U.S. precisely because it is not nationalized. No rationing because government is capping the spending on health care. And wait times should be factored into the costs. Who knows, those numbers could be hiding an argument in favor of free markets. Maybe a greater variety of treatments are being performed than elsewhere. Maybe they are being provided with lower wait times. They should be breaking up costs by treatment and subpopulations. How are these numbers corrected for differences in population health, poor eating habits, etc.? Descriptive stats are about as reliable as are generalizations.

There are other problems that make it difficult to compare health care systems between Canada and the U.S., such as access to health care. But the U.S. system, by my understanding, is plagued by a hodge podge of regulations that have completely perverted any attempt at having a true "free" market. One advantage to the public health system in Canada is consistency. Most Canadians agree that we want all citizens to have access to health care, the question is how do we provide it. Singapore is a great example of achieving similar ends using a free market system. But I think Canada is more likely to introduce private clinics that complement the public system.

Methinks February 13, 2009 at 10:19 am

But the U.S. system, by my understanding, is plagued by a hodge podge of regulations that have completely perverted any attempt at having a true "free" market.

That's correct, Luk. I'm not arguing for the U.S. system over the Canadian system. I'm arguing for a free market system over socialized medicine, largely based on years of experience in both systems.

Before we provide "access to health care", we have to define the term. A six month wait for chemotherapy is not "access to health care" in my opinion. Even if you don't have money in the United States, clinics will take you right away and work out a payment system over time. Which of the two provides more access in your opinion?

I think Canada is unlikely to scrap its system of socialized medicine and I think it's unlikely that the U.S. will adopt a free market system. Regulation – which is just indirect state control anyway – destroyed the health care system and now politicians use that destruction to blame free markets and take complete control. Unfortunately for Canadians, once that happens, they will no longer be able to come to the United States as an alternative to their own system.

Luk Arbuckle February 14, 2009 at 12:34 pm

@Methinks

Socialized medicine? Government does not operate our health care system in Canada, although they do fund and regulate it. I had never heard of this term before but I don't feel it's appropriate. Although I'm sure it was not your intention, this sounds like an attempt at misinformation.

A six month wait for chemotherapy? Although some people do fall through the cracks, in any system, there are usually good explanations. This comment is hard to swallow as I have sat with family receiving cancer treatment, and my wife volunteers at a cancer institute. Please don't exaggerate or cherry-pick stories (without the details to explain what actually happened) to make a point, as this is a sensitive issue.

There is growing pressure in Canada to increase the presence of private health care, as mentioned previously. Limiting access to the U.S. system would only add to this pressure. But just so that it's clear, note that the public monopoly is only for services deemed medically necessary. It's probably only a matter of time before Canada allows for a parallel private system for all health services.

Private spending represents about 30% of the average provinces total health care spending. Almost half of that is for medications, and another quarter to services not covered by the public system (such as dentists, optometrists, etc.). And now private insurance is available in Quebec for three types of surgery (hip replacement, knee replacement, and cataract removal), and the list will grow.

I agree with you entirely regarding the misdirected blame towards free markets. All problems in the U.S. health care system are deemed in Canada as problems with free markets, and therefore reasons not to allow private health care. But, in the same way, let's not blindly criticize the Canadian health care system just because it's mostly public.

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