Tuesday, June 21, 2005

To Live and Die in America, and Elsewhere

Does “single-payer health care” deliver better results? Few questions more clearly distinguish the state and freedom as ways of making choices. Health treatment, like anything else that is valuable, is scarce. Both a government health-care system of the sort that prevails in many countries, as well as a market-based health-care system, which partially prevails in the U.S., are ways of resolving that fundamental scarcity by different criteria. When health care is provided by the “market,” what is really meant is that people get the resources they from others to maintain or improve their health by asking for them via competitive bidding. The immediate bargaining partners need not be doctors or nurses – midwives, employers paying insurance premiums, drugstore owners dispensing both FDA-approved medicine and “nutritional supplements,” all of these actors are part of the grand market bargain over health care.

Several things about such a system are going to be true. First, those who are willing to pay more will generally obtain more health-care resources. This is the basis for the common claim that single-payer systems better serve the poor. (Of course, the same thing is true about food, clothing and housing, and only in the latter case do most rich countries attempt to make the state a substantial provider.) Second, the primary driving force in determining what kinds of health-care choices are offered is competition. Individuals make claims to particular kinds of resources, and subject to whether those resources can be obtained at a sufficiently low opportunity cost, they are made available. If you want an MRI today and have the means to compensate someone for the opportunity cost of providing it to you, you will get one in a market system. Of course, higher-quality care – more and better machines, less waiting time – costs more, and so part of the explanation of why U.S. health-care is so costly is that it commands higher opportunity-cost resources in order to provide these things. In that sense comparing health-care systems by their “cost” may mislead as much as illuminate. (The economist Gordon Tullock once noted that as a percentage of GDP transportation expenditure surged in the 1920s, not because there was a “transportation crisis” but because the Model T had made vastly superior transportation possibilities available to huge numbers of people.) Third, and most important, reliance on decentralized individual choice promotes not just greater visibility of tradeoffs – forcing somebody to ask whether that higher nurse-to-patient ratio is really worth fewer surgeons, or patients to ask whether that trip to the doctor is really worth the copay – but a greater willingness to engage in competitive experimentation to explore alternative ways of providing more health care at lower opportunity cost.

Ronald Bailey at Reason has written that an unappreciated virtue of market health care is that it promotes innovation:

Which suggests the following thought experiment—what if the United States had nationalized its health care system in 1960? That would be the moral equivalent of freezing (or at least drastically slowing) medical innovation at 1960 levels. The private sector and governments would not now be spending so much more money on health care. There might well have been no organ transplants, no MRIs, no laparoscopic surgery, no cholesterol lowering drugs, hepatitis C vaccine, no in vitro fertilization, no HIV treatments and so forth. Even Canadians and Britons would not be satisfied with receiving the same quality of medical care that they got 45 years ago.

Everybody pays more to obtain improved pharmaceuticals, imaging technologies, cancer therapies, and surgical techniques. The happy result is that average life expectancy has increased by about eight years since 1960.

As [Harvard University economist Kenneth] Rogoff suggests, the nationalized health care systems extolled by progressives have been living off the innovations developed by the "only country without a universal health care system." I wonder how Americans would vote if they were asked if they would be happy freezing medical care at 2005 levels forever?

Relying on individual choice to make social health-care decisions promotes both competition and entrepreneurial innovation. The effect here is not just that the pursuit of profit means a greater willingness to take risks and provide expensive services, or that competition replaces poorer service with better, although these are both true, but, as Hayek taught us, that decentralized competition means more health-care delivery experiments are tried more often, so that in the end the collective members of society are able to try out a greater number of medical-provision experiments.

A government health-care system is also a way of making choices, but the rules are different. Here, the production of political decisions, which looks different in every society, governs. In European and North American countries we would expect voting to matter a lot. In the U.S., the popularity of Medicare with broad swaths of the public (nearly all of whom will eventually have parents whose health care costs can be transferred to others via its use) undoubtedly partly explains its expansion over time, while the struggles of advocates of Medicaid, the program for the poor (a small minority of the U.S. population), to prevent it from shrinking in many states, let alone expanding, is another predictable result. Apart from raw voting, the application of political pressure by other means will also result in particular types of choices. In the U.S., pharmaceutical manufacturers, doctors, nurses, hospitals and many other pressure groups find reward in influencing the government to funnel resources their way just as they do in improving care for patients. The health-care system will reflect this collective production of political pressure. The elderly will do well because everyone has parents; the poor will do well in broadly egalitarian societies. But the tradeoff of relying on politics instead of decentralized bidding to make health-care choices is that consumers, being largely replaced by politics, are unable to give signals to potential health-care providers about the value of various alternatives.

So which system “works better”? The question is meaningless without some stipulation of what moral goal we are pursuing. Achieveing some level of average outcomes or a certain distribution of outcomes is one, but hardly the only, such goal. It is often alleged that the U.S. system, with its greater reliance on markets, does worse by such measures as infant mortality and life expectancy, both of which are worse for the poor than other Americans. Below are data for five countries on death rates per 1000 live births for children under five and for life expectancy, from the WHO for 2003. (They round to the nearest whole number, unfortunately.)

CountryInfant MortalityLife expectancy
United Kingdom679
United States877

But that is only part of the story. Outputs are a function of the inputs. And the inputs to health-care outcomes are substantially a function of individual choices and idiosyncrasies. The most obvious instance is Japan, with the world’s longest lifespans despite high smoking rates and spending less on health care as a percentage of GDP than any of the above five countries save the U.K. As for the U.S., Americans are much fatter than the other four nations. The data simply must be seen to appreciate this. Obesity rates were, respectively for the above countries, 14.9%, 9%, 9.2%, 22% and 30.9% in 2000, according to OECD Health at a Glance 2003. (Notice this is not being overweight, which may affect as many as 60% of Americans, but out-and-out obesity.) We also drive a lot more. (But on the other hand we smoke less than all of the above nations save Sweden.) For life-expectancy differences as small as the above it is risky to attribute these outcomes to the health-care systems. Obesity alone has a sizable impact on life expectancy. If we assume that obesity (again, not simply being overweight) takes four years off the average lifespan (and a controversial study in the New England Journal of Medicine by S. Jay Olshansky and others in March of 2005 puts the impact at at least two to five years), then we can calculate a hypothetical life expectancy when no one in the population is obese. Those become:
CountryObesity-adjusted LE
United Kingdom79.9
United States79.2

In other words, eliminating obesity by itself significantly diminishes the gap with the other countries. If obesity wipes ten years off life expectancy, the gap becomes essentially meaningless. So too with infant mortality. It is sometimes argued that most, all or perhaps more than all of this gap is accounted for by the heroic efforts to save very premature newborns in the U.S. who are left to die, and hence counted as stillbirths rather than neonatal deaths, in other countries. This is a hard hypothesis to test. The OECD keeps track of (Table 22) perinatal mortality (deaths within seven days after birth or in utero after the 28th week of gestation). The U.S. now has the second-worst rate (ahead of, for statistically artificial reasons, the U.K.) rather than the worst, but the gap is much closer. But even that may understate the importance of this effect because it is not uncommon, at least in the U.S., for babies to be born in the 23rd-25th week. Because of the lack of data I am unable to make much of a judgment about which system better promotes lower infant mortality.

In any event, infant mortality and, as we have seen, lifespan, are dependent on choices made (in the infant-mortality case, not by the patient but by the parents). Defenders of single-payer systems would say that part of a well-functioning health-care system is to use state power if necessary to improve the choices that such parents make. But is that intrusiveness worth the entrepreneurial-deadening effects?

Another measure of health-care quality is what happens to you when you eventually get sick. The same source from which the perinatal data came (tables 32-35) lists five-year survival rates contingent on getting four types of cancer. In one case (lung cancer) the U.S. ranks second in survival rates among nine OECD jurisdictions, very marginally trailing France. In the other three types of cancer (breast, colon and prostate) the U.S. ranks first, in the prostate case by a substantial margin. Much of the other available information in which the U.S. leads measures inputs rather than outputs – rates of cardiac surgery, pharmaceutical use, etc.

The picture that emerges is about what one would expect in a relatively market-oriented environment. American producers use the (somewhat diminished in our mixed system) incentives to bring new advances in medical technology to patients, which are generally made available to broader groups of the public. The American consumer plays a hugely disproportionate role in driving medical innovation, signals which would be lost in a full single-payer system. But at the end of the day the difference in the two systems is probably less dramatic than first appears. Whatever gets invented anywhere can be duplicated, technologically if not economically, elsewhere in short order. The trick, though, is how to spur that invention. If the U.S. consumer vanished as a guide for medical entrepreneurs, it is hard to be confident that innovation would continue at anything close to the same rate.

Penultimately, perhaps the ultimate judge of the quality of a health-care system is how the people living under it judge what they are getting. The U.S. leads the above group in terms of the number of people who report that their health is “good” or better than before:
CountryHealth Satisfaction
United Kingdom74.0
United States88.2

As a final note, recall that the morality of a health-care system is judged by much more than data. In much of Canada (with the brand-new exception of Quebec), as in North Korea and Cuba, if you and I want to exchange medical care for money outside the confines, and the queues, of the state health-care system, that is a criminal offense. The morality of that is dubious at best.


Anonymous Blue Cross of California said...

Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.

1:06 AM  

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