Jasper Smith

Commentary on politics, economics, culture and sports.

Babies and bath water

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Cafe Hayek brings to Jasper’s attention a John Stossel column on the how America’s healthcare system stacks up in world rankings. Here’s a little excerpt:

The New York Times recently declared “the disturbing truth … that … the United States is a laggard not a leader in providing good medical care.” As usual, the Times editors get it wrong. They find evidence in a 2000 World Health Organization (WHO) rating of 191 nations and a Commonwealth Fund study of wealthy nations published last May. In the WHO rankings, the United States finished 37th, behind nations like Morocco, Cyprus and Costa Rica. Finishing first and second were France and Italy. Michael Moore makes much of this in his movie “Sicko.” The Commonwealth Fund looked at Australia, Canada, Germany, New Zealand, the United Kingdom and the United States — and ranked the U.S. last or next to last on all but one criterion. So the verdict is in. The vaunted U.S. medical system is one of the worst. But there’s less to these studies than meets the eye. They measure something other than quality of medical care. So saying that the U.S. finished behind those other countries is misleading. First let’s acknowledge that the U.S. medical system has serious problems. But the problems stem from departures from free-market principles. The system is riddled with tax manipulation, costly insurance mandates and bureaucratic interference. Most important, six out of seven health-care dollars are spent by third parties, which means that most consumers exercise no cost-consciousness. As Milton Friedman always pointed out, no one spends other people’s money as carefully as he spends his own.

This, shockingly, got a nice frothy libertarian contra socialist comment debate going. Characteristic of the debate is the following claim:

The US healthcare system is the best in the world. Period. Better doctors, better/more accessible delivery, better research and development, better perfusion, better administration, better response time, better trained professionals (just not enough), better overall in virtually every single measurable metric.

Okay, let’s get one thing straight: what we have in the United States is certainly not the best healthcare system by “every single measurable metric.” What I think is more accurate to say is that the product delivered by this system is often superior — but the system for delivering that product is creaky, inefficient, and in need of reform. The libertarian pro status quo folks are aping the rigid, “blinders on” stance of their left wing opponents in the pro single payer camp. Both approaches are flawed.

While the actual product delivered by the US healthcare system is very often the best in the world, that system is nonetheless subject to pressures and difficulties that are far less severe and even non-existent in other rich world healthcare systems. Generally speaking, in those other systems, people don’t get denied coverage for preexisting conditions, but in the US this is a serious issue. As is the related problem of job lock. Moreover, in the US, a significant portion of the population lacks medical insurance at any given time; depending on whose statistics you cite that number is anywhere from 7% to 15% of the public. In the rest of the rich world that number approaches zero. In the US, administrative expenses — such as the money devoted to finding out which people ought not be sold an insurance policy — are a tremendous drain of resources. Again, these numbers have consistently been shown to be much lower in other rich countries. And here in the US, medical expenses are a significant driver of personal bankruptcy and financial ruin. Again, this simply isn’t the case elsewhere. And by “other” systems we’re not necessarily talking about evil socialist schemes. France, Australia and Switzerland, to give a few examples, embrace a wide degree of private sector participation in healthcare, and yet manage to avoid the pitfalls of the US model. And their systems deliver results broadly in line with the American experience. For a lot less money.

I agree with many libertarians about the numerous advantages America consumers enjoy because of the heavy participation of non-governmental actors in the delivery of healthcare. I also strongly agree with the notion, that, in any efforts to enact reform, we should refrain from throwing out the private sector baby with the bath water. But nonetheless it’s time to change that increasingly dirty water.

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Written by Jasper

August 26, 2007 at 4:06 pm

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