October 21, 2002
From the desk of Jane Galt:A Ted Barlow snippet caught
A Ted Barlow snippet caught my eye:
Steve at Deinonychus had a counter-post to my argument on single-payer health care. I personally don't find it terribly convincing, because (in my reading) it's basically a philisophical libertarian attack on the idea of treating health care as a public good. But I know I'm never going to convince a libertarian to support single-payer health care philisophically; I'd have to do it practically. That is, I'd have to show that countries that have single-payer health care manage to provide better care to more people for a lot less money per patient. I think that's true. Nonetheless, Steve's post is well worth reading.
That's an interesting question: would single-payer systems be cheaper if they were implemented here?
Single-payer advocates assume the answer is "yes" because health spending is lower in countries with single-payer than here. But that result doesn't necessarily follow.
1) Medical research. The top research facilities in the world are almost all in the US. Right now, those facilities are paid for, in large part, by the payoff from successful procedures: if you're the only guy who can do a heart-lung-spleen transplant, you can charge a lot for it, especially to people who come from other countries, paying full freight, for the privilege.
2) Medical equipment. Most major advances again come from the United States, where the market for medical machines is lucrative. You pay $1500 for an MRI in order to compensate for the cost of developing the MRI. Governments, which negotiate in bulk, pay less than the average cost of the equipment.
3) Prescription drugs. Argue, if you will, that you could save money by lopping off the advertising budget, but advertising is only 1% of a company's SG&A budget, and junkets are much less than the cost of the stuff that would still have to be done, such as printing information about the stuff to give to doctors. There's also the lengthy approval process involved in selling to a government agency. If you want to assess the potential cost, consider that much of th eR&D spending by drug companies is really compliance spending to put things through the FDA.
In all of these cases, the free market is subsidizing the government purchases, both domestically and abroad. Kill the free market, and the price of the government purchases will have to rise.
Other arguments I've seen, such as the fantastic savings to be gained in administrative costs, strike me as unconvincing. Sure, Medicare has a low administration cost, but that's because they push it off to the doctors, who do 4-8 times as much paperwork for a Medicare patient as for a regular patient, which is why many won't take new Medicare patients -- they lose money on every visit.
Also, all of the labor in a government-run system will be union, even if they're contractors. This says to me that labor costs are going to rise, and productivity is going to fall, and really bad health-care workers are going to stay in their jobs while evidence is gathered and a the process runs out (average time to fire a worker in the New York state system: 7 years).
Also, there are problems in the other systems: doctor and nurse shortages, for example. Sure, some of them come here. But some of them are just deciding to do something else.
Finally, two of the main savings come from exogenous political variables not possible to implement here. The first is extremely limited liability: we're talking about awards in the $100,000 range for someone who mistakenly had the wrong limb amputated. That's not going to fly here. The second is low immigration, which improves costs and health outcomes; a very high percentage of expensive emergency room care is focused on people who were not born here, and are thus less healthy. A third is the sedentary American lifestyle and rich American diet, which are not going to change short of police-state tactics.
There are also difficulties in predicting how the market would evolve in the face of a US single-payer system. For example, drug costs. Assume, please, that much of, of not all of, the price premium on pharmaceuticals is necessary either to run the company or research the product. We are not going to make drugs 20%, much less 40% cheaper, by going to a single payer system. Unless we gut pharmaceutical research, that is.
I just went on a new drug, Singulair. It's the first really new type of asthma treatment in 40 years. It's not an exaggeration to say it's changed my life. Oh, sure, it's a "lifestyle" drug, in the sense that it's a "lifestyle" choice to engage in physical activity, and not visit the emergency room to have tubes stuck up your nose. Pharma profits bought that drug. I don't want to miss the next one. And I think most of you don't want to miss the treatment that will save, improve, or extend your life. We're willing to pay for it.
A US single-payer system unambiguously would have the power to gut the research budget. They can force pharmaceutical companies to sell near marginal cost, simply by taking the drug off the "approved" list if they don't agree. The pharmas can then sell, or go under. I find it hard to believe that politicians would refrain from so doing. The medical budget would simply be too large a portion of GDP, the taxes too unpopular, to hold back. I know that my friends on the left believe corporations can buy themselves any law they want, but that's simply not true. They can buy themselves addendums, riders, little changes in the law that benefit them at the expense of some other company -- but not at the expense of the majority of voters. Try this thought experiment: how much money from, say, Hollywood liberals, would it have taken to get congress to vote against the Iraq resolution? Answer: there is not enough money in the country to make Tom Daschle vote to get himself unelected next time around.
The open question, then, is whether the companies that are currently subsidized by the US would spread the costs around more, raising everyone's health spending to ca 13% of GDP -- a win for the US, a loss for everyone else, but no net loss of medical innovation -- or whether the political calculations of the various government officials involved, combined with monopoly purchasing power, would force margins down to the point where little research gets done. I'm betting on the latter. Government is, by its nature, a short-term enterprise. Politicians look to the next election, not the untold generations stretching ahead.
Building a model of what the system would look like is difficult. But there is ample reason to think that it would not be cheaper than the current system in most regards.
Posted by Jane Galt at October 21, 2002 11:41 AM | TrackBack | Technorati inbound links