Commentary

Is Socialized Medicine the Answer?

This article appeared on TCSdaily.com on March 14, 2006.
“When you think of the problem of health care costs, you shouldn’t envision visits to the family physician to talk about a sore throat; you should think about coronary bypass operations, dialysis, and chemotherapy.”
-Paul Krugman and Robin Wells, “The Health Care Crisis and What to Do About It”, The New York Review of Books, March 23, 2006

In fact, when you think of the problem of health care costs, you should think of MRI examinations for back pain, colonoscopies to screen for colon cancer, and non-emergency visits to cardiologists, gastroenterologists, and other specialists. These are expensive procedures that often do not affect the outcome for the patient. Advanced medical technology and referrals to specialists make up what might be termed “premium medicine.”

Premium medicine often falls in a gray area that is in between unnecessary health care and acute care. The procedures have some medical justification, but they are not always cost-effective.

Krugman and Wells correctly point out that our health care financing systems, both public and private, are unraveling under the pressure of premium medicine. However, they make an unproven case that, in their words, “honest-to-God socialized medicine” would be so efficient that it would make premium medicine affordable, at least until technology and medical know-how expands even further. In the long run, they see health care rationing by government as the only solution for controlling health care costs.

Krugman and Wells point out that other countries use government-financed health care, and that in those countries health care outcomes are not notably worse while spending is less. They would have us believe that people in other countries receive the same treatment at lower cost.

In fact, Americans consume more premium medicine than citizens of other countries. To some extent, this may produce better results that are obscured in the data used to compare health outcomes on a national basis. Longevity, for example, is affected by many factors other than health care.

The main reason that other countries can spend less on health care is that the availability of medical services is limited by government policy. The health care rationing that Krugman and Wells believe is inevitable for the United States takes place today in other countries. Health care rationing is one way to try to cut back on medical procedures that are not cost-effective. However, it would represent a radical change for the American health care consumer.

Today, the United States has two large government health care programs - Medicare and Medicaid - that do not display the efficiency that Krugman and Wells ascribe to single-payer health care systems. In fact, Krugman and Wells admit that Medicaid and Medicare are in dire financial straits. Notwithstanding the allegedly lower administrative costs in government programs, and despite the government’s use of its leverage to hold down the fees charged by health care providers, the spending by the U.S. on its elderly population, on a per capita basis, is as high relative to that of other countries as is spending on the under-65 population. In other words, our elderly are heavy consumers of premium medicine, so that within the United States there is no sign that single-payer health care can reduce health care spending.

Krugman and Wells write:

“The medical profession, understandably, has a bias toward doing whatever will bring medical benefit. If that means performing an expensive surgical procedure on an elderly patient who probably has only a few years to live, so be it. But as medical technology advances, it becomes possible to spend ever larger sums on medically useful care. Indeed, at some point it will become possible to spend the entire GDP on health care. Obviously, we won’t do this. But how will we make choices about what not to do?”

They argue that eventually we will need government rationing of health care. But they say that this issue can be deferred, because in the short run the shift to a government-run health care finance system would save enough money to allow us to continue to afford premium medicine.

Krugman and Wells believe that the efficiency of socialized medicine is a sure thing, and that health care rationing is a far-off possibility. In fact, if the United States were to adopt government-financed health care, the results would be the reverse. Efficiency would fail to improve, and instead it would most likely deteriorate. Rationing would be a sure thing.

The opposite approach is to have consumers bear more of the cost of health care decisions, with a safety net consisting of long-term catastrophic insurance with very high deductibles. This would put an unfamiliar burden on Americans to assess the costs and benefits of our specialist visits, MRI exams, and so on. No doubt, some of us would make mistakes. But these would be our individual responsibility, not a collective crisis.

In my view, either single-payer health care or a return to individual responsibility represents a radical change. It would be more prudent to have individual states experiment with these alternatives before we commit to any single approach at a national level.

Arnold Kling is an economist and author of the forthcoming health-policy book Crisis of Abundance.