A Quick Note on Socialized Health Care

Here’s a brief chat on socialized medicine and the economic problems inherent in it.  It’s brief, because I’m tired and had a crappy day.  I’ll leave the more important moral and civil rights arguments for another day. 

The current health care system is all kinds of screwed up.  One of the primary sources of this problem is our historical blunder into employer-provided health insurance.  This quirk of the system came about during FDR’s administration when he froze wages, so businesses were forced to offer other benefits in order to attract employees.  But what this has done is put a couple of layers of insulation between the health care consumer and the health care provider.  Since the employer pays most of the health insurance premiums and the insurance company pays the bill, the health care consumer has zero market motivation to be efficient and intelligent about their health care usage.

This problem has been aggravated by the insurers’ and providers refusing to disclose either actual costs or an objective measure of the quality of care for the health care consumer to make an informed decision. 

So what would socialized health care do to the situation?

Socialized medicine essentially eliminates the myriad of health insurance companies and replaces them with a single payer - the government.  The initial effect is to increase the overall cost because the government program will cover a bunch of people who weren’t previously covered.  Since they are now covered, they are more likely to use more health care. 

Socialized health care does not rectify this problem.  Even though the insurance companies are gone, there is still a separation between the consumer and the provider that will result in people overusing health care unless they are restricted. 

Now socialized health care does hold a more significant market advantage for consumers when it comes to cost.  The government, being the sole payer for health care, can essentially dictate the price of health care services.  But there are some problems with this.  If the government dictates a price for a health care service that is below the actual cost of that service, it will drive that service out of Wisconsin and reduce access to that particular service.  For example, let’s say that the market price for a heart operation is $100,000, but the government of Wisconsin will only pay $60,000.  Many of the doctors who perform those operations will simply move to another state to continue their practice.  So the government will face a choice: match the market price or reduce access. 

If the government can’t avoid market prices, there is only one other way to reduce the cost of services: rationing.  The government can reduce the demand for services by rationing health care services. 

Given the political realities that we have seen with other American experiments with socialized health care (Medicare, Medicaid, BadgerCare, etc.), the public pushes for more services - regardless of cost.  What Wisconsin politician is going to tell Granny that she has to wait on her hip replacement because we only budgeted for 700 of them this year? 

In Europe, where they largely have socialized health care, rationing is common.  People often wait an extraordinary amount of time for procedures that are commonplace in America.  Also, the government dictates care.  For example, in most of Europe, they treat prostate cancer very differently than in America.  80%+ of men will get prostate cancer in their lives - usually when they are old.  If you are quite old in Europe and get prostate cancer, they will likely deny any treatment because… well… you’re old.  This is a perfectly rational decision, but it’s the government that makes it - not the patient or the doctor.  In America, this likely wouldn’t fly.  Our culture is different and we would demand that our government pay for all extraordinary measures. 

It’s difficult for me to see how socialized health care would result in lower health care costs in American culture without onerous government rationing or reducing access. 

The one place where socialized medicine may reduce cost is in administration.  Naturally, the government doesn’t need a marketing department or other departments that insurance companies require.  It also doesn’t need to worry about their market share, stock price, or claims department.  By eliminating all of these departments that private companies need, the government would likely have lower administration costs.

Like I have said before, my primary opposition to socialized health care is based in morality and liberty, but I don’t see it working economically either unless we are willing to ration care or drive health care providers out of Wisconsin, thus reducing access.