America's Healthy Healthcare

UPDATED: below

Stev at Debate Anything mostly agrees with my recent posts on healthcare, including a post supplying several reasons why comparative national infant mortality statistics cannot serve as a cross-national healthcare benchmark. Stev asks if "life expectancy [might be] a better indicator." Stev also twice suggests that competition and the opportunity for profit isn't essential in healthcare:

[P]eople delivering services that help the public do not need those motivations. Why make hospitals compete when they could work together to get the best care to their patients which - when the profit motive and competition is taken out of the agenda - will be the only motive. That's what I don't like about private healthcare - it brings in other motives which I believe can create a negative influence on what the patients receive. Prescribing drugs to people who don't need them just to increase margins for instance.

Finally, Stev pleads that "with nationalised healthcare at least the very poor get treated too. And if it is the rich that bother you - perhaps you should consider an entirely nationalised healthcare system in which case everyone has the same pie."

This responds to Stev; some of this answer previously was posted on Debate Anything.

1. It's not just profit (although the profit motive is important). It's the fact that most lefty solutions presuppose the advantages of a monopoly supplier of healthcare (socialized medicine) or of health insurance (single-payer health insurance). Such systems constrain choice and deliver lower quality services, and -- in some cases -- a lower quantity of service than demanded by the market. It's the problem with all monopolies: inefficiencies and retained consumer surplus. The U.K.'s NHS is the poster-child for lower quality and quantity healthcare; most European systems fall short on quality by failing to cover recent "breakthrough" medicines.



2. Stev implies that removing the profit motive means government provided healthcare reduces over-prescription. Yet supposed socialized utopia France sufferes simliar ills:

   Nearly one in four French people are on tranquillisers, antidepressants, antipsychotics or other mood-altering prescription drugs, according to an alarming report published yesterday.
   
   It revealed that an average of 40% of men and women aged over 70 in France were routinely prescribed at least one of this class of dependence-creating drug, as well as some 4% of all children under nine.
   
   "The French now consume between two and four times as many tranquillisers and anti-depressants as the British, Italians and Germans," one medical expert, Martine Perez, said in Le Figaro. "The problem is not new, but this underlines the fact that it is getting worse."

   And socialized medicine does not obviate tough decisions about paying: what treatments should be covered; which new drugs can be prescribed, especially when established medicines already are authorized--rather, it merely means bureaucrats make those calls. For example, Germany's mostly-government-funded healthcare system was "bloated and corrupt. Health fraud and corruption among doctors, insurance funds and drug companies was costing the country up to 1 billion euros per year." Even after reform German drug expenditures grew over 8 percent per year and medicines in Germany were costlier as compared with the rest of Europe--until Brussels forced the country to allow establishment of discount drug stores. The new chain's customers "pay €8.50 for a box of 50 aspirin tablets; the same box costs almost €10 at a traditional pharmacy in downtown Frankfurt." Put differently, competition and the pursuit of profit reduces, not increases, consumer prices:

   America's medical system has problems, but profit is the least of it. Government mandates, overregulation and a tax code that pushes employer-paid health insurance prevent the free market from performing its efficient miracles. Six out of seven health-care dollars are spent by third parties. That kills the market. Patients rarely shop around, and doctors rarely compete on price or service.

3. At the same time, it is beyond cavil that the profit motive stimulates R&D and the creation and development of new medicines. "Before turning over the entire profit-making pharmaceutical industry to the government," observes Econ Prof Mark Perry, consider this fact:

   "Looking at a broad range of pharmaceuticals, scholars at Tufts University examined all 284 new medicines approved in the U.S. in the 1990s. They found that 93% originated from the pharmaceutical industry, with 7% split between government and academic or nonprofit sources."
   
   In other words, it was the profit-making private sector that developed 264 out of 284 new medicines in the 1990s, and many are saving lives today. Without the profit motive, most of those drugs probably wouldn't exist today.

   Or some people. Such as Andrew Sullivan--according to Andrew Sullivan.



4. Contrary to Stev's assumption, in non-nationalized healthcare America, most of the poor -- even those without health insurance -- still are cared for--only about 10 percent of American families were unable to get, or delayed in receiving, healthcare. In part this reflects the fact that America does not have purely private healthcare: in 2004, government paid about 70 percent of medical costs for households earning below the poverty line, and about half of all healthcare expenditures.
   
   So the stark contrast Stev sees is a strawman: I'm not opposed to all government healthcare or health insurance funding. I am defending America's mixed, but market-driven, approach as compared with single-payer systems like Canada or single-provider systems like Britain--if not already too late.



5. And as previously detailed, most lacking coverage are insured again within months; only about 10 percent of the non-elderly population has spells of two or more years without insurance.



6. Life expectancy doesn't work as a healthcare metric for many reasons. First, it depends somewhat on the characteristics of a nation's population. Our ethnic diversity means that some Americans aren't as long-lived as white northern Europeans. Despite huge improvements over the past century, the life expectancy of black Americans still lags that of white Americans. This is regrettable, and lowers comparative life expectancy statistics--but doesn't, in the main, support an indictment of U.S. healthcare. On top of that are cultural differences I already have noted--having more murders, car crashes and suicides is unfortunate, but hardly the fault of healthcare or health insurance in America.
   
   Third, Americans spend more time at work than most Europeans (see chart 2.9), which tends to shorten longevity: In his book Genome, Matt Ridley quotes (at page 155) a study concluding that heart disease among British civil servants was correlated with their ranking in "the bureaucratic pecking order. . .the status of a person's job was more able to predict their likelihood of a heart attack than obesity, smoking or high blood pressure." That's not about healthcare--it's about lifestyle choice. Just like the decision to brush with toothpaste.
   
   Fourth, and perhaps most important, life expectancy, and health in general, is hugely influenced by immigration. In comparison with Europe, U.S. health care and/or health insurance must contend with a far less homogeneous population that constantly is augmented by those lower-skilled and poorer than average. According to a 2005 survey by the Center for Immigration Studies:
   
   
   • The poverty rate for immigrants and their U.S.-born children (under 18) is 18.4 percent, 57 percent higher than the 11.7 percent for natives and their children. Immigrants and their minor children account for almost one in four persons living in poverty.
   
   
   
   • One-third of immigrants lack health insurance -- two-and-one‑half times the rate for natives. Immigrants and their U.S.‑born children account for almost three-fourths (nine million) of the increase in the uninsured population since 1989.
   
   
   
   • The low educational attainment of many immigrants and resulting low wages are the primary reasons so many live in poverty, use welfare programs, or lack health insurance, not their legal status or an unwillingness to work.
   
   We could, of course, improve our statistics instantly--by forbidding immigration. I don't favor that approach, but the hypothetical again suggests disparities in international health care statistics don't necessarily reflect national differences in health care.



7. Whatever commonality there may be about the statistical definition of death, life expectancy statistics still reflect the lack of commonality about what constitutes a live birth. Indeed, there probably is no single valid statistic for trans-national healthcare comparisons, according to a World Health Organization publication (page 29):

   Unlike the comparison of the performance of the health system of a country with itself over time, the comparability of the performance of health systems between countries was viewed as something desirable, but difficult to carry out for technical and political reasons.

Conclusion: I don't have all the answers. But that's partly because there is no perfect solution, reminds Arnold Kling in his book Crisis of Abundance (at 45):

Any health care system must reflect a compromise of preferences. We cannot have health care that is both accessible and affordable while insulating consumers from the cost.

To which I could add that, regardless of whether public- or private-funded, medical cost control requires rationing:

Not even socialized insurance can escape the long-standing debate over "rationing by price" vs. "rationing by queue" vs. "rationing by technology." But neither governmental fiat nor taxpayer funding sidesteps the need for rationing--and its brutal consequences. [Policymakers still must provide a] guide for distinguishing appropriate public goods from vain or futile demands.

America can, and should, do better. Still, without additional proof of a panacea, I see no reason to abandon America's flawed but surprisingly successful approach to healthcare for Canadian waiting or low-innovation, bureaucracy-driven surly EU docs (often after waiting) in dirty hospitals--much less Cuba's revolutionary paradise factory care. As John Stossel warns:

One basic problem with nationalized health care is that it makes medical services seem free. That pushes demand beyond supply. Governments deal with that by limiting what's available.

In contrast to much of Europe, America's growing mostly free-market economy delivers ever-wider prosperity. So far, the authoritarian impulses of John Edwards, Hillary Clinton and Stev haven't persuaded me otherwise. In socialism, many get "the same pie"--but a pie often spoiled and smaller.

MORE:

Megan McArdle on the Atlantic blog (January 29, 2008):

The problem is, once you've developed a drug, it's easy to copy. It's also usually trivially cheap to produce. And your patent is rapidly running out. This gives a monopsony buyer a lot of leverage to force down your price--you're almost always better off taking something. This is particularly true if the monopsony buyer has the power to break your patent and license its generic manufacturers to turn out cheap but near-perfect imitations of your product. This is, in fact, what Europe has done; they make pharmaceutical firms sell to them at cost plus. The lion's share of the profits on any drug come from the United States; what they get in Europe and Canada and the rest of the world is (thin) gravy, a price that is just a little bit better than not selling any drugs there.

Now imagine that America drives drug prices down to that sort of "cost+10" or "cost+20" level. The pharmaceutical firms will keep making the drugs they already have, because there will still be a little profit there. But they would have to be psychotic to invest billions of dollars over a 20 year time horizon in exchange for a one in a thousand chance of making that small a profit. Would you put 20% of your income now into an investment that might yield a profit of 10% of your income--in thirty years?

But they have to invest in R&D, say my interlocutors; otherwise they won't have any drugs to sell! This makes the odd assumption that they can't do anything else. But history is full of companies that used to do something else entirely--and also, of companies that went out of business when their market collapsed.