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logo    How Not to Cure Health Care-Part 2


In his article, How to Cure Health Care (http://www.thepublicinterest.com/archives/2001winter/article1.html), Milton Friedman cites a number of facts about Americas health care system that most Americans are unaware of. He writes, for instance, "the United States is exceptional: we spend a higher percentage of national income on medical care (and more per capita) than any other OECD country, and our government finances a smaller fraction of that spending than all countries except Korea. And Direct government spending on health care exceeds 75 percent of total health spending for 15 OECD countries. The United States is next to the lowest of the 29 countries, at 46 percent."

Unfortunately, he continues, "Our steady movement toward reliance on third-party payment no doubt explains the extraordinary rise in spending on medical care in the United States. However, other advanced countries also rely on third-party payment, many or most of them to an even greater extent than we do. What explains our higher level of spending? I must confess that despite much thought and scouring of the literature, I have no satisfactory answer."

This last sentence must certainly be disingenuous. While other countries may also rely on third-party payment, they also control the operations of those payers while we do not.

In the United States, third-party payers negotiate fees with physicians with no guidance from the government. They can pay their employees, especially their corporate officers, huge sums of money, and they can use facilities of any type they wish from modest to luxurious. They can set premiums and co-pays at any amount they wish in order to cover the costs of not only the  physicians' fees but all of this overhead along with additional profit margins. And except for the fees paid to physicians, not one single cent of these amounts buy any health care.

Now I'm sure Mr. Friedman would retort that competition between payers prohibits them from abusing these practices, that Adam Smith's invisible hand restrains such excess. But in truth, there is practically no real competition between health care providers and insurers. Adam Smith's invisible hand has been shackled.

My evidence for this claim is this: Companies in competition advertise, but have you ever heard of physicians or hospitals advertising. Do they ever offer specials; do they ever have sales? Why not? Because there is plenty of patients around to buy all of the services supplied.

The same is true of medical care insurers. Have you ever seen them advertise? Do they ever offer specials; do they ever have sales?

Contrast this with the pharmaceutical industry. When companies have competing drugs on the market, the advertising is ubiquitous. Drug are advertised along with the recommendation that patients ask their doctors if these drugs might be beneficial. In effect, the patient is being asked to recommend his treatment to the doctor.

Now have you ever heard a health care insurer advertise his service and ask you to recommend it to your  employer? Why not?

Of course, Mr. Friedman admits that In terms of holding down cost, one-payer directly administered government systems, such as exist in Canada and Great Britain, have a real advantage over our mixed system. . . .  [But} Our mixed system has many advantages in accessibility and quality of medical care . . .

Unfortunately, those who make this claim never address a very important question: What good is the quality of medical care to the many persons who can't afford it? After all, it has never been a secret that the well-to-do can purchase better products and services than the not-so-well-off. But in most other circumstances, there are not-quite-as-good alternatives. In our system of medical care no such alternatives exist.

Another claim made is that "[one payer systems] can ration care more directlyat the cost of long waiting lists and much dissatisfaction." Well which is better, a waiting list or no service at all? And so far as dissatisfaction goes, Mr. Friedman, in this very same article, writes, " Since the end of World War II, the provision of medical care in the United States and other advanced countries has displayed three major features: first, rapid advances in the science of medicine; second, large increases in spending, both in terms of inflation-adjusted dollars per person and the fraction of national income spent on medical care; and third, rising dissatisfaction with the delivery of medical care, on the part of both consumers of medical care and physicians and other suppliers of medical care." How much worse can the dissatisfaction become?

People, like Mr. Friedman, who object to government programs in principle, remind me of this quip delivered by Winston Churchill: "The United States can always be relied upon to do the right thingonce it has exhausted all the alternatives."

Before the development of some recent medications, I was afflicted with extremely painful migraine that often lasted for days. The only thing that brought relief was injections of Demerol. And my physicians were usually willing to provide it in controlled circumstances. Once, however, after moving to a new location, I ran into a physician who would not provide it, saying that she did not believe in narcotic treatments. I told her in reply, that she was then a preacher posing as a physician, since her treatments were based not on accepted medical knowledge but an unjustifiable belief. After thinking about what I said, she approved the injection.

I am tempted to think of people like Mr. Freidman in the same way. Economic advice based on a belief in some stated economic theory, such as free-market capitalism, is really akin to advice based on religious doctrine. Such people are preachers passing themselves off as economists. Perhaps they ought to be required to wear collars. (5/11/2005)