A Bad Idea Who’s Time Has Come?

By

Richard W. Crockett

 

 

 

How are we going to pay for it?  This is the enduring question for proponents of anything new that the government may undertake.  And of course, this is especially true of proposals for universal health care.  We are told by a 2004 Census Bureau press release that as many as 45,800,000 Americans do not have health insurance.  Do these persons think that they don’t need it, and therefore do without it, or is it that they cannot afford it?  During a two year period in my life spent in the financial services industry, devoted to selling life insurance, annuities, and health insurance, I had some success in selling the first two, but during that two years, I did not sell a single health insurance policy.  There was one reason for that—the unaffordable costs.   There were many inquiries about health insurance, but upon reviewing the monthly premiums, most families with a need for it could not find the resources to make a purchase.  Sometimes a monthly premium for a family of four would rival a mortgage payment.  If one were to use the data of the World Health Organization, the annual cost per person for health care in the United States is $3724, and the monthly cost per person computes to $310.   For a family of four the cost would be a whopping $1241.  How many family members need to be employed at the all too common figure of $8.00 per hour to pay that amount as a family health insurance premium?  These figures are the actual cost and do not include any profit for an insurance company.

 

Are these costs “low” because of the wonderful efficiencies of the private marketplace?  Or, are they high for some other reason?  I submit that they are high, and it is for some other reason.  There is in economics a concept called market failure.  This occurs in instances where the marketplace for whatever reason does not work in a “normal” way.  In instances of market failure one of the things that may occur is that demand (as in the law of supply and demand) becomes inelastic. The price of a good or service does not seem to respond to the law of supply and demand.  Inelasticity of demand means, in other words, that the demand for that good or service does not change upward or downward as a result of the price of the commodity.  For example, if the price of beef goes to sixteen dollars per pound, fewer people will eat beef, and accordingly, because demand has fallen from previous price levels, demand is said to be elastic.  But sometimes the price of a good or service can go up and the demand does not fall.  This is often illustrated with the demand for insulin.  Diabetics must have insulin to stay alive.  If the price of insulin goes up, demand for insulin may remain constant, because the diabetic needs his insulin shot no matter what the price.  Failure to use insulin for the diabetic threatens life itself.  When this happens, demand is said to be inelastic.  So it is with health care generally, I would argue. When one is ill, one heads for the emergency room.  The plain fact is that health care is ill suited to a distribution system that depends upon the market place for the pricing of its services, and accordingly, it should not remain in the private sector.  To get health care costs under control, America will have to adopt a single payer health care system.

 

Removal of health care from the private sector is the only way to place a cap, or at least slow the rate of increase, on the cost of health care.  It is an area where science converges with capitalism, and unfortunately the science of medicine is overwhelmed by capitalism.

Medical doctors are among the best paid of the professions in America.  Newly minted MDs with less than one year of experience have a median salary of $118,883 per year.  With twenty years or more experience, the median salary is $172,851 per year.  Median income for an anesthesiologist is $248,296 per year.  These figures are current as of February 8, 2008, from Pay Scale. By comparison, household income was only $44,473 based upon a three-year average in 2004, according to the US Census.  That would put per capita income at $11,118 per year, by comparison.  Economic factors also have begun to drive the medical choices through pharmaceutical industry power. The drug industry makes some good products, but recognizing that they have a gun pointed at the head of the patient, they take full advantage of it.  Byetta, used for diabetes, can cost $250 for a thirty-day supply as one example.  Also the insurance industry has begun to inject itself into medical decision making with the practice of dictating which medicine it is willing to pay for.  Because of “sweetheart deals” between insurance companies and drug manufacturers, an insurance company may be willing to pay for Lipator or Simvastatin, but not Pravachol, even if the doctor prescribes Pravachol. These drugs are all used to reduce high cholesterol, and are effective, but may differ in potency and the number and severity of side affects. Drug choice should not be an insurance company decision.

 

You may have a concern that quality of health care will decline as a result of a single payer system.  Although we may think we have the best health care in the world, and this may be true for the rich and famous, but the United States ranks only 37th in the World Health Organization’s ranking of the most effective health systems in 2000.  France is number one. The French!  Don’t you hate it? Although our science is pretty good, it is the delivery system that is poor. One solution would be to simply extend Medicare to everybody.  Its per capita costs should be lower than at present, since the elderly now served by Medicare represent a higher risk, higher consuming part of the population.   By  

the way, we often hear arguments that the UK or Canada does not have good health care with their socialized medicine, and we surely would not want to emulate their system.  Well, they rank 18th and 30th respectively, both ahead of the United States.  If one needs a heart transplant, come to the United States, but if one only needs routine health care, the average person is better off in Britain or Canada, or any one of the thirty-six countries ahead of the United States. I remember during my teaching years at Western Illinois University having conservative Canadian students who brought to my office copies of the conservative Canadian Maclean’s magazine, in order to persuade me of their view on some political question. In spite of their conservatism, these students marveled at the attitude in “the states” that the Canadian health care system was not desirable or effective.  To the contrary, they asserted that they would not swap their system for the one “in the states even up.”   As the expression tells us, maybe if we achieve universal health care through a single payer system, it is “a bad idea who’s time has come”-- and in fact, it may turn out not to be so “bad” after all.

 

2/14/08