Home Economics What American Lefties Get Wrong About Health Care

What American Lefties Get Wrong About Health Care

Author

Comments

Current Affairs magazine has a long piece about why private insurance companies are just terrible things to have in a health care system. Because, you know, profits! That’s money leaking out of the system which should, could, be used to pay for health care. QED!

So some of the money you pay to the insurance company gets paid to the healthcare provider. But some gets paid out to shareholders in the form of dividends, to executives in the form of salaries and bonuses, and to “tusslers.” By “tusslers” I mean those whose job it is to tussle with you about your claims, and to try to minimize the amount they pay out to pay for your healthcare.

This is a for-profit insurance company. This means, at least on the common theory that a corporation’s job is to maximize shareholder value, that the company’s mandate is to try to maximize the thickness of that green line on the bottom left (shareholders) and minimize the thickness of that line coming out on the right. It wants to give as much as possible to its shareholders and as little as possible for your care. That is its job.

So, therefore, everything should be done by government. We pay taxes, the taxes get spent on health care and we’re better off.

There’s a bit missing there of course. Which is that government itself is a cost. We pay people to collect the cash and to distribute it. We also get quite a lot of involvement of politics in such a system. We might even lose the occasional incentive along the way – incentives often enough improving efficiency.

For example, food’s also an essential. So, should we abolish the private food companies and have government doing the job from field to fork? We can go look at places that tried that. The Soviet Union – and I speak as someone who observed, right up close and personal, the final throes of this system – had it as a fully government system from the planting of said fields up to the exit from the shop. Actual food preparation, as in cooking, was still done privately. This did not lead to a system of plenty and surfeit of fine food as we probably all know.

Mao tried to go one further which was that the cooking was also to be done communally and without those pesky markets or personal preferences. This worked even worse.

So, OK, we’ve an example of where government provision of something necessary isn’t actually an advance upon private, profit grabbing and money lusting, economic actors.

We can run this the other way around and insist that at times government is the better system. We have tried private sector militaries and we just didn’t like the Wars of the Roses at all.

So, our actual consideration is which things are better run by that monopoly of government and which through the intercession of the capitalist moneygrubbers?

Which are better, parochial schools in the inner cities or the public system? Read Thomas Sowell on the impact of charter schools in New York City? We’d like hospitals to be run with the charm of the DMV?

We think the treatment and experience available on Medicaid is better than that from Blue Cross?

It’s a difficult contention to support, isn’t it, that government is going to do this health care thing better.

Do note that I too can think of ways of making American health care better. But handing it all over to the Federal bureaucracy isn’t the slam dunk it’s being described as here.

The CA piece then goes on to use the NHS as an example of going to step further. Instead of just having government finance everything why not have government actually providing everything? We run into our Soviet problem again but there’s more than just that:

Among the UK nations, Scotland’s administrative costs were lowest, England’s were highest, and Wales’s were in between ( Exhibit 3 ). This ranking correlates roughly with the role of market mechanisms in those nations’ health care systems. The NHS internal market reforms introduced throughout the United Kingdom during the 1990s separated the commissioning and provision of care, with price-based competition among hospitals. Scotland reversed these market-based reforms soon after devolution in 1999; Wales did so somewhat later, in 2009.

Yes, that’s all true. But it ain’t, as you might expect from someone writing propaganda, the whole story. The three (we tend not to worry much about NI in these comparisons) nations of the UK do indeed have separate NHS structures which do indeed have different leavenings of market activity within the government provision of health care. That does indeed mean that profit is made in some niches.

And here’s the kicker. The performance of those three NHS systems roughly tracks the amount of market mechanisms and also those admin costs. England performs best, then Wales, then Scotland. We now actually have our proof that markets – and, yes, money grubbing capitalist bastards siphoning profits out of the system – produce a better, more efficient, health care system which delivers more health care. And, actually, does so for less input of money at the other end of the system.

Life expectancy at birth
This has increased by between about five and three years for men and women,
respectively, in each country from 1991–2011. In 2011, England had the highest
life expectancy for males (78.9) and females (82.9), followed by Wales (77.5 and
82.2), Northern Ireland (77.0 and 81.4) and Scotland (76.1 and 80.6). At the start
of that period, men and women in North East England had similar life expectancy
to Scotland, but by the end of the period, men and women in North East England
would have been expected to live about one year longer than men and women
in Scotland.
Amenable mortality
Amenable mortality is defined as premature death (under age 75) from causes
that should not occur in the presence of timely and effective health care, and is a
good indicator of quality of care at the system level. Other mortality is based on
deaths from other causes. Between 1990 and 2010 the principal changes were as
follows.
• Rates of amenable mortality more than halved in both sexes and across all
countries. These rates of decline were twice the rates of the decline of other
mortality for men and three times the rates for women.
• For both amenable and other mortality for both sexes, England had the lowest
rates and Scotland the highest. The amenable mortality rates per 100,000, in 2010,
in Scotland and England were for men, 97 and 80; and for women 77 and 64.
• Comparing Scotland with North East England, the rates of decline of amenable
mortality were similar for both sexes but the decline in other mortality was
about 10 per cent greater for both sexes in North East England. By 2010, in
Scotland, rates of amenable mortality for both sexes were about 10 per cent
higher than in North East England, and for other mortality, were about 15 and
19 per cent higher for women and men.

There’s much, much, more of this sort of comparison available out there. Markets, with their profit maximisation – and higher admin costs – produce so much more efficiency that the system as a whole has greater output, as counted by that useful measure of actually treating those things which can be treated, for lower input.

Capitalism more than pays for itself as compared to state bureaucracy that is.

Do note this isn’t always true and not true entirely. We could – would perhaps – argue that A&E should be socialised in some sense. As it already is in the US, turn up and you’ll be treated. Money is worried about afterwards. We could look at the Singapore system which has largely public hospitals and near entirely out of pocket (through compulsory and tax privileged health care savings accounts) payment for all but the grossest expenses – as good as the US system and a quarter of the cost. There is still government insurance for those grossest expenses. There are, that is, nuances in all of this.

However, the base contention being put forward by our American progressive, that ripping capitalism, profits and markets out of the health care system makes it better all over is simply wrong. Not arguably, and with shades, it simply is not true. Therefore designing a health care system which does that isn’t going to be an optimal solution.

As to where we will find that optimality the answer almost certainly lies in understanding the difference between insurance and assurance. Something the Singapore system does very well and the US system appallingly. That’s perhaps for another day in detail but I’d – despite my being the capitalist and profit loving classical liberal bastard that I am – quite happily argue for government health care insurance as long as we were in fact using the correct definition of that word “insurance”. Something which absolutely no one at all in the American debate over the subject is doing which is why they keep getting it all wrong.

SUPPORT US WITH A SUBSCRIPTION?

9 COMMENTS

  1. It’s one of those things where I watch some American TV programme and somebody says “my insurance won’t pay for my pregnancy bills”.
    Yerwot??? You tried to *insure* yourself against getting pregnant? So who do you sue, the condom manufacturers?
    “But it was a planned baby”
    So you sue yourselves?????

    Even worse: My *INSURANCE* won’t pay for my contraceptives.
    Well duh! My insurance don’t pay for my bog roll and toothpaste either.

    • The thing that’s worth bearing in mind here is that isn’t “You tried to *insure* yourself against getting pregnant” so much – in America health insurance generally comes bundled with your job. That’s a paradigm shift that explains why people stop thinking about it as “insurance” in the conventional sense – if their risk group rises or falls it didn’t affect their premiums in the same way that we can control car insurance costs by picking a cheaper, less powerful car and driving fewer miles – and start thinking of it as “a fund car covers my health costs”, even recurring items like contraception.

  2. Graphs showing off the differences that the reforms made over time in england vs wales vs scotland vs northern ireland show the differences pretty clearly. They’d work great in this article. I think the Niemietz book had some in there, looked pretty bloody clear to me.

  3. In my 20+ years of working in insurance, I was told that assurance applies to future events that are certain to occur at some indefinite point in the future (death being the obvious example) and insurance for contingent events (such as your house burning down). So: life assurance: car insurance. Tim seems to be using a different definition.

    • No, Tim’s using the right definition. Insurance to cover being run over by a bus, assurance to cover having a baby, those nice teeth, and that hair transplant. Insurance to cover an eye injury, assurance for glasses.

      • But as Americans don’t understand the difference between insure and ensure*, is it any surprise they don’t understand the difference between insure and assure.

        *”Insure the data is written to the disk….” *NO*! You *ensure* the data is written to the disk; you put procedures in place to prevent failure, not put procedures in place to pick things up after failure.

  4. But if I want cancer treatment or dialysis but someone who wants his thingy cut off and converted into a cavity comes first (that’s why they call it Pubic Health) and there’s not a thing I can do about it. No, give me the private medical scheme so that there are butts to be kicked when things don’t happen as I the consumer like.

  5. As is usually the case, they’ll pick on a small & not too relevant part of the picture – admin costs or executive pay. “They have higher admin costs” – yes, but they provide better quality at lower overall cost. “The execs are paid millions” – yes, but the results are worth it.
    Always reminded of a back & forth in the comments section one time about Africa. Bloke pointed out that (in the case being discussed at least) for-profit companies had done far ore good than the UN, gov’t agencies or NGOs, bird responds “but they’re making profits!!!”

LEAVE A REPLY

Please enter your comment!
Please enter your name here

expunct

in British English
expunct (ɪkˈspʌŋkt)
VERB (transitive)
1. to delete or erase; blot out; obliterate
2. to wipe out or destroy

Support Us

Recent posts

In Praise Of Benign, Even Helpful, Beneficial, Tax Competition

Richard Murphy tells us that it is not possible for there to be anything other than harmful tax competition. All such competition must, by...

If Women Working Causes Inflation Then Women Must Be Less Productive Workers Than Men

Over at Politico there is the assertion that one reason for past inflation was that women joined the workforce. If there are more people...

The Point Of Inventions Is To Be Able To Use Them, Not Sell Them

This is a common complaint about the British economy, that we can invent things but don;t then go on to make fortunes out of...

An Interesting Method Of Avoiding Tax Rises – Just Borrow

Those progressives over at American Prospect, it is possible to wonder whether they've quite got the basics of how the economy works at times. So,...

The Truth About Biden’s Tax Plan – It’s Based Upon Lies

So Richard Murphy told us how lovely the Biden corporate tax plan is over at FT Alphaville. I pointed out in the comments that...

Recent comments