by Lee Kurisko, MD
We were promised that the Patient Protection and Affordable Care Act would “bend the cost curve down”, and yet health insurance premiums are expected to rise by as much as 60% in 2016. What should be done to solve this dilemma? A common refrain is that since the “free market” has failed, the United States needs a Single Payer healthcare system like Canada’s.
Being a Canadian physician now living in the Minnesota, I assure you that Canada’s healthcare system is not Utopia. In my former life as Medical Director of Diagnostic Imaging for Thunder Bay Regional Hospital in Canada, for a while our wait time for an elective MRI was 13 months and for CT it was seven months. I managed to convince the hospital administration to increase MRI operational hours, and we reduced the wait to 4 months becoming the envy of the province. Doctors from other regions attempted to send us their patients. We said no. We could not accommodate the extra work because we only had one scanner for a radius of about 500 miles because that was all that the government would allow. As payer for the system, it is inevitable that the government controls the system. The incentive is to control costs, not necessarily to care for patients.
The Fraser Institute monitors wait times in Canada. As of 2014, the average wait time for medically necessary specialty care is 18.2 weeks. In the province of New Brunswick, the wait time averages 37.3 weeks. In my hometown of Sault Ste. Marie, where I still own property, the average wait for a newcomer to town to get established with a family doctor is five years, unless you have insider ties to the system.
The standard response by single payer advocates is that Canada’s healthcare system is underfunded. According to the Fraser Institute, the average Canadian family is spending 12,000 dollars per year for health coverage (buried in taxes). According to the Organization for Economic Co-operation and Development (OECD), Canada per capita healthcare expenses rank sixth highest amongst 192 ranked countries.
Another rejoinder of the single-payer advocates is that “outcomes” are better in Canada. For example, according to the World Health Organization, the average life expectancy in Canada is three years longer than in the US. Many factors affect life expectancy of which the health care system is only one. Racial background is very important. According to 1999 OECD data, an Asian-American male at birth can expect to live 80.9 years, a non-Hispanic white male can expect to live 74.4 years, and an African-American male has a life expectancy of 68.4 years. More homogeneously white, Canada is a less racially diverse country than the US contributing to a higher average life expectancy. According to Sally Pipes of the Pacific Research Institute, when allowing for deaths from violent crime and traffic accidents, Americans are the longest-lived people in the Western world. According to John Goodman in “Lives at Risk”, Americans fare better than any other country when looking at individual disease states such as myocardial infarction and various malignancies.
What happens in the doctor’s office or in the hospital pales in significance to the decisions that people make in their day-to-day lives. For example, Canadians are generally less obese than Americans and there is less gun-related crime. The relationship between health care systems and population outcomes is murky, and so we cannot conflate the efficacy of a health care system with average life expectancy.
Why is it that Canada’s single payer health care system is so constipated with an onslaught of patients waiting interminably for care? There are two basic reasons that are really two sides of the same coin. They are price controls and central planning.
Canada’s system of health care began merely as a government-run payment system. With a service that is “free”, demand is unfettered, driving up costs leading to relentlessly increasing government control. He who holds the gold, calls the tune. Allocation of resources is not determined by supply and demand, but by government fiat. In Thunder Bay, there clearly was a demand for imaging services that was unmet because the government only allowed one CT scanner and one MRI scanner for a geographic region about the size of France. Rationing of healthcare is Canada is covert by limiting resources. The government controls everything from the availability of operating room hours to Emergency room budgets to the number CT scanners and the number of doctors. As Frederich Hayek would say, the “the fatal conceit” of the central planners is that they can, from afar in their government offices, strike the exact right blend of resources to make the system work. This is simply not possible.
In 1958, Leonard Read published the classic libertarian essay, “I, Pencil”. Written from the perspective of a humble pencil, he pointed out that no central authority on earth could successfully co-ordinate the production of a pencil. The graphite, the wood, the paint, the eraser, and the metal band are made from natural resources around the world by people voluntarily co-operating with one another in a free market coordinated, not by a central authority, but through information transmitted by prices based on supply and demand rather than central command. If no central authority can coordinate the production of a pencil, why would we expect them to successfully coordinate a health care system?
Price controls have been tried for centuries and invariably result in a misallocation of resources. For example, when I worked in Canada, the reimbursement for a spinal facet injection was approximately 14 dollars. Facet joints being bilateral, they would only pay for one side, so we did the other side for free. With a tax rate of approximately fifty percent, we pocketed approximately seven dollars for the effort. For not much more than the price of a fancy coffee from Starbuck’s, we were expected to assume millions of dollars of liability. No thanks. We stopped offering facet injections. Likewise, peripheral angioplasties paid approximately 90 dollars. Price controls lead to shortages. The reimbursement for all medical services in Canada is determined by arbitrarily set prices.
So if the current US healthcare system is not the answer and Canada’s single payer system isn’t either, where should we go next? I propose something radically different from both. It is called a “free market”. Advocates of single payer proclaim that the free market has failed. A free market is a market economy based upon supply and demand with little or no government control.
With 132,000 pages of Medicare regulations, Medicare price controls and insurance company reimbursement pro-rated to Medicare rates, there is no free market in health care in the US. The 2000+ pages of Obamacare law, anticipated 100,000 pages of new regulations, and 159 new federal bureaucracies exacerbate the situation further. In a free market, the nexus of decision-making is the individual not centralized authoritarian bureaucracies.
A free market in health care would have three pillars.
- The patient/consumer controls the cash. Prices would then have to be transparent and aligned with what people are willing to pay.
- The system would be based on true insurance. Insurance normally is a vehicle to buffer risk for large unexpected financial losses. If your roof blows off, homeowners insurance kicks in. It doesn’t when you need a new bottle of floor wax. We all can expect to have minor illnesses and injuries. Rather than paying massive taxes and/or insurance premiums to third parties that tell us what the money can be used for, we should keep the majority of this money ourselves and make purchase decisions in conjunction with our doctors. Even when expensive care is needed, insurance reimbursement should go to the patient/consumer to spend in a competitive market. People will claim that healthcare is too complex for people to make their own decisions. Computers and cars are complex also, but it is easy to seek out enough information to make informed purchase decisions. If a patient working with his or her trusted physician cannot make these decisions, why would you expect a nameless, faceless bureaucracy to do so?
- The role for charity in a free market cannot be understated. Alieta and John Eck in New Jersey were going broke seeing Medicaid patients and so opened a free clinic in their church basement with the aid of volunteer doctors, nurses, and support staff. The cost of a Medicare patient being seen in the local ER is at least 1000 taxpayer dollars. In the local federally qualified health clinic, it is 160 dollars also from the taxpayer. In their private clinic, the cost averages 13 dollars all paid for through voluntary charity. They have a waiting list for people that want to volunteer. For hospital-based care, we need to look at tax credits or deductions for charity care rather than regulations and price controls. Most people are decent human beings that do not want their fellow mankind to suffer. People want to help. Government needs to get out of the way.
Would a free market be perfect? No it would not. Utopia does not exist and the word was coined from Greek meaning “no place”. It is not in any person’s power to create a perfect world, but if government would get out of the way, we can make a better world.
Lee Kurisko MD is a radiologist with Consulting Radiologists Ltd., Chief Medical Officer for www.medibid.com and author of “Health Reform – The End of the American Revolution?”