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John Hood's Syndicated Weekly Column

Avoid Unhealthy Lack of Perspective

Apr. 25th, 2008
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RALEIGH – I’m warning you right off the bat: the following is a trick question.

If I gave you a list of 12 major industrialized countries and asked you where the highest share of medical bills was paid directly by patients rather than by third parties, would you say the United States? Or at least put the U.S. in the top tier?

Most people who consider themselves well-informed about health policy would pick America as a system with relatively high out-of-pocket spending. And they’d be wrong. According to a 2007 study by the Organization for Economic Cooperation and Development (OECD), the U.S. ranks 9th out of 12 industrial countries in the share of total health spending financed out of pocket, at about 13 percent. That’s slightly lower than in Canada, a dreamland for many government-monopoly advocates, where patients directly pay for nearly 15 percent of medical services. The share exceeds 20 percent in Italy, Portugal, and Spain, and reaches about one-third in Switzerland. Greece tops the list at 43 percent.

As North Carolina and the rest of the nation move into the thick of the 2008 political season, health care promises to be a popular topic. Barack Obama and Hillary Clinton are already debating which of their plans is the best pathway to universal coverage. In our state, gubernatorial candidates such as Beverly Perdue, Richard Moore, Fred Smith, and Pat McCrory have talked a lot about comprehensive reform and how to serve the uninsured population through policies ranging from expanding government health programs to reforming the tax code to promote personally owned health plans.

One good rule of thumb is to doubt those who proclaim that health-care issues have simple solutions or that there is some way for reformers to score a free lunch by spending a lot less, getting a lot more, and hurting no one in the process. Careful analysis and valid international assessments of national health systems confirm that tradeoffs are no less inevitable in health care than in other economic sectors. Governments that use taxes, regulations, and monopolies to restrain health spending end up limiting patient access to care and reducing the real incomes of medical providers – the average French physician earns the equivalent of $55,000 a year, for example, compared to $146,000 for the average U.S. general practitioner and $271,000 for the average U.S. specialist. If the goal is to slash doctors’ incomes, at least be honest about it.

To start with, it’s important to shed any preconceived notions about the American health-care system as a free market and European or Japanese health care as a government monopoly. The story is far more complicated – and interesting – than that. Obviously, given that the U.S. does not have government-run health insurance for the able-bodied, non-poor adult population, the share of health care spending that flows through government in the U.S. is lower than in Britain, which has a system verging on true socialized medicine. But the U.S. proportion isn’t zero. Nearly half of all American health spending is by governments – Medicare, Medicaid, and other programs. Canada’s share in 70 percent. Most big European nations have shares between 70 percent and 80 percent.

Taking the share of government health care in the U.S. up by 20 points, to Canada’s level, would be a big (and in my view unwelcome) change. But it wouldn’t be quite as radical a change as some liberals and conservatives seem to think.

Moreover, the share of health care accounted for by government programs is hardly the only indicator of the extent of market control or decontrol. While America has less government insurance, we impose more significant licensing regulations on medical providers and institutions than do some of our competitors, where nurse practitioners and other lower-cost alternatives are more readily available to consumers. Furthermore, America’s generous tax deductions for health care distort markets for insurance and service provisions in ways that are not always present in Europe.

On the other side of the ledger, be wary of those who equate “universal coverage” with “universal care.” Plenty of people residing in European countries where they are guaranteed, by law, to have “free” health care are less able to secure a doctor’s appointment or receive a medical procedure than the average American is.

Before North Carolina or national politicians go plunging into a new round of “reform,” they should study more carefully what other countries actually do, how their policies affect the quality and availability of medical services, and whether Americans would ever accept the constraints on liberty that European-style health insurance would necessarily bring.

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Hood is president of the John Locke Foundation and publisher of CarolinaJournal.com.