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Volume 24, Number 10
October 2004

Private Enterprise Grants Us Life
by William Anderson

I recently became a heart patient, something that a former collegiate distance runner finds hard to accept. One day, I am of the belief that I am invulnerable to heart disease, and the next day finds me in a cath lab having angioplasty to unblock three arteries, a sobering turn of events.

My article, however, is not about the shock of facing medical reality; instead, it is about facing another, even more serious reality. If we had the medical system that a number of politicians and newspaper editorial writers in this country have been demanding, I very likely could have died. To put it another way, if we had the medical system here that our Canadian neighbors "enjoy," I have no doubt that either I would be on death’s door or already in the grave. Since such a statement surely will unleash a bevy of hate mail from some neighbors to the north, I need to explain my points.

I had been experiencing chest pains for about a month (and doing nothing, since I was invulnerable), and my wife finally laid down the law. After an exam in the emergency room at a local hospital on a Friday afternoon, the doctor told me that she was concerned and told me that a room was being made ready. On Saturday, a cardiologist told me I would have tests Monday morning, and then he would determine what would be the next step; it turned out that the next step was angioplasty, not open heart surgery, for which I am very grateful.

Being an economist, I could not help but take a deeper look at this whole matter, first dealing with the costs involved and then examining how things would have been done elsewhere. Our medical insurance here at Frostburg State University is quite good, so I do not have to be worried with being burdened by eternal debt. There is no doubt that an enterprising politician would quickly point out that I was lucky; individuals not covered by insurance might face different circumstances. However, the political classes always add, a better system would be one in which everyone had medical coverage. Thus, whether one is a college faculty member or an unemployed factory worker, one would have universal access to medical facilities; it would be the best combination of social justice and social efficiency.

Furthermore, I recently attended a conference in Vancouver, Canada, a country that enjoys "universal" medical coverage for all citizens. As Al Gore and others who have been running for public office have declared, the best "solution" for medical care problems in this country would be for the adoption of the system that is employed by our northern neighbor. That being the case let us examine what would have happened had I been a Canadian citizen or resident facing the same situation that recently confronted me.

Many Canadians with whom I spoke told me they were "quite proud" of their universal system, but not for its ability to care for them. Instead, they seemed to believe that the system itself bestowed moral benefits because, ironically, everyone suffers as well as everyone else.

Assume I were a patriotic Vancouver resident with chest pains. If I were to go to the emergency room, I almost surely would spend many hours before a doctor would see me, such is the case with "free" care. Once I were examined, the following is what is likely to have happened: the doctor would have recommended me to a cardiologist, who would have been happy to give me tests.

However, instead of seeing the cardiologist within a day, I would have been told to go home and wait (and wait) for the appointment. (The only reason I had to wait two days here was that I was admitted to the hospital on a weekend when the cath lab was closed.)  Given the present state of affairs in the Canadian system, most likely I would have not been examined for blockage of the arteries for about six months.

In the interim, I would have to take medicine and hope that I not have a heart attack. In my case, we were dealing with three 90 percent blockages of the arteries. Had I been forced to wait for half a year, the chances are good that I would have had heart failure.

To say that this would not be the case in Canada would be disingenuous. Newspapers there are full of stories about the notorious long lines for health coverage. For that matter, Canadians with whom I spoke in Vancouver both bragged about their system (for the "social justice" aspect), and then told me their individual horror stories of having to wait many months for medical tests like an MRI, something that is available within a day even in my small town.

Where economists such as Paul Krugman, who has heartily endorsed the Canadian system as being both low-cost and highly-effective, go wrong is to make the assumption that the only thing that differs between American care and what takes place in Canada is that the government pays the entire bill north of the border, and pays less to boot. It is the ceteris paribus assumption run amuck. Krugman and others make the dubious assumption that the quality all medical care is equal, be it practiced in the USA, Canada, or Cuba.

In Krugman World, once one assumes ceteris paribus, it is quite easy to determine the costs for the system. One examines the prices paid for dealing with a heart patient in the USA, compares it to the prices paid for doing likewise in Canada, and the Canadian system, according to the method of accounting that Krugman and other like thinkers use, Canada is "less expensive."  Thus, anyone who opposes the implementation of a "single payer" system in the USA does so only because he either is an evil capitalist who is making money from private medicine or is a useful idiot lackey of pharmaceutical firms.

To say that this is a deceptive way of engaging in economic calculation is to give the word "deceptive" a bad name. As already noted, the only way that one can outwardly say that the Canadian system, economically speaking, is "superior" to private medicine (which we hardly have in the USA, but at least some vestiges of private ownership remain) is either to say that it delivers comparable care at lower costs, or delivers superior care.

Yet, because Canadian health care is doled out via socialist principles, there is no way to avoid the long waits in line. Thus, given my example I used at the beginning of the article, there is no good comparison between having an angioplasty within two days of a primary diagnosis and waiting at least six months under the Sword of Damocles threat of a heart attack. Yes, I would imagine that the official prices paid to doctors and hospitals for the treatment in Canada are less than the sets of prices that were paid to the medical practioners here in Cumberland, Maryland, but there can be no comparison for the level of care in the two places. That is because in Canada, consumers of medical care often are forced to bear costs in other ways, including lost time from work, inability to engage in activities while waiting for tests and surgery, and the like. These are real costs, like it or not.

Furthermore, to demonstrate just how perverse this method of calculus really is, keep in mind that had I been in Canada and died of heart failure before I could have been tested, it would have shown up on the balance sheet as a cost savings. In other words, patient deaths become a source of "proof" that the socialist system of healthcare is more "cost effective" than a system of private payment.

The United States does not have a truly private system of medical care, which is true. Third party payments, whether they come from government or insurers, are the norm, and have been ever since Congress created Medicare in 1965. (At that time, private health insurance did exist, but many individuals paid out of pocket for medical expenses. The advent of Medicare hastened the drive for more extensive private insurance.)

Furthermore, medical care in the USA is heavily regulated by state and federal authorities, not to mention the heavy scrutiny that comes to doctors via the Drug Enforcement Agency, which regularly examines prescription lists to see if doctors are prescribing "too much" pain medication. On top of that, U.S. doctors face a voracious tort system that Canadian medical practioners do not have to experience.

(I am not against torts per se, as they serve a very important legal and economic function in an economy like ours. However, I am against the cynical way that the system has been implemented, which is nothing more than a cash cow for trial attorneys who often are able to win their cases using "junk science" as a prop.)

However, in the United States, the medical field still draws large amounts of private investment, which is not simply a mirror image of government "investment," as we see in Canada. Krugman and others have declared that American medicine is high-cost because of the abundance of devices such as the MRI, or even the equipment used for my examination and angioplasty. As I pointed out in an earlier article, this is nonsense.

For those who hold that private investment in healthcare facilities somehow is morally and economically inferior to them being financed with tax dollars, I would urge them to visit a number of private and non-profit facilities in this country, and then visit the same number of Canadian facilities. The differences in some places would be subtle, while they would be quite stark elsewhere.

The reason is simple; in a system characterized by private property and some sort of private payment, capital facilities are assets. The owners can earn a rate of return on them, thus it makes no sense to permit such facilities to deteriorate. Capital in a system like Canada’s however, is a liability. No individual or organization earns income from these things, and payment for their purchase takes away from individual employees, many of whom are unionized.

Take the situation of a hospital administrator in Vancouver. He or she is given a government budget of "X" dollars. To spend some of that money on an MRI machine or something like that would be pointless, since it would not make the hospital – and its employees – better off, and in the short run would make them worse off. The purchase of such a medical device would likely mean no raises for the unionized workers, which would mean the possibility of a strike.

In Misesian terms, we are dealing with the issue of economic calculation, a state of affairs that individuals working within organizations such as medical units must address, political rhetoric notwithstanding. For example, in the recent Canadian nation-wide elections, a number of politicians called for increased government spending for the healthcare system; however, increased spending is not enough to "fix" the system. The principals of that system must know where the money should be spent and for which things, something that is not possible there, given the constraints of the socialist system.

While it is clear that patients in the system would be better off having more access to medical devices such as the MRI, patient preferences and choices simply do not matter in Canada. Patients who complain about the long waits are called selfish and obstructionist, and many Canadians with whom I have spoken consider it a badge of the nation’s "honor" that they had to wait in the typical socialist long lines because at least the system is "egalitarian."

This is not to say that one never receives good medical treatment in Canada, or that all treatment in the USA is first rate. Many individual doctors and nurses in Canada are going to be conscientious professionals. On the average, however, one is more likely to find the better care in the USA, precisely because the profit system is permitted to work at least somewhat.

Many Canadians who have sent hostile email to me have argued that in Canada, at least everyone is entitled to medical care, while (they claim) only wealthy people in this country are able to receive decent attention. While that might be a caricature spread by Canadian (and many U.S.) politicians, it simply is not true. No healthcare system is going to give everyone equal results, but timely access to decent care – and advanced medical devices – is much more prevalent in the USA than in countries with socialist systems.

While what I have written will not convince many egalitarian Canadians (and single-payer advocates in the USA) that there is something perverse about taking pride in a system that forces people to wait in long lines, I would hope never to live under such a regime. Before last week, I would have said these words mostly as an exercise in theory. Today, I realize that I am alive in large part because of private enterprise medicine.


William Anderson teaches at Frostburg State University.


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