Supporters of government-run health care
offer an alluring vision: universal health coverage, free or
inexpensive medical services and prescription drugs, unrestricted
access to care, doctors with complete clinical freedom, and
exemplary quality of care. These advocates of government-subsidized
medicine often claim that the U.S. health care system should move
in this direction so that it will be more similar to the
government-run health care in Canada and Britain. Yet an
examination of health care in both Canada and Britain reveals that
moving American medicine in this direction would be a terrible
mistake.
Although the government-funded health care
systems of Canada and Britain are different, they achieve similar
results. Both systems are characterized by long lines for
treatment, substandard technology, frustrated doctors and patients,
and--most important--government rationing of care. Because
advocates of government-run health care often praise these systems
as a model for the United States, an assessment of how they
actually operate is instructive for Americans who contemplate
reforming the American health care system.
Organizing
Government Health Care.
In the British National Health Service (NHS), there are 115
district health authorities. To a large extent, global budgets are
still in use, with the government giving each health authority a
lump sum of money. The health authority is then responsible for
providing all care to all people within its defined geographic
area. Patients face few or no user fees, although various internal
market mechanisms are in their infancy. In sum, local health
authorities, faced with a fixed budget, decide how and for whom to
spend their money.
The
Canadian system is more like the U.S. Medicare system; it is
administered pricing in fee-for-service. That is, covered medical
services are reimbursed at a set price by the government. Canada's
10 provinces and two territories, in cooperation with the federal
government in Ottawa, set the prices a doctor can charge for each
"covered" medical service. This system is analogous to a health
care system consisting of 12 government-run HMOs with no
competitors.
Canadian hospitals, like British
hospitals, are run on global budgets. The 1984 Canada Health Act
effectively eliminated any co-payments for patients by increasing
the authority of the federal government to withhold funding for
provinces that attempted to charge fees. For all covered services,
there is no charge to Canadian citizens in their own province.
Private insurance or contracting for covered services is expressly
illegal in seven of the 10 provinces and is effectively discouraged
in the other three.
Although the federal government
contributes less than 25 percent of Canada's health care funding,
its ability to influence provincial health policy decisions is
profound. The federal government frowns on attempts to innovate or
introduce free-market reforms. In 1995, for example, Alberta
Premier Ralph Klein implemented reforms that other provinces had
contemplated for years. He allowed clinics to charge fees, to be
paid by the patient, above the official government-set price. The
federal government began docking transfer payments to Alberta,
shutting the experiment down within a few months.
THE FUNDAMENTAL FLAW
There is a problem intrinsic to health care systems run and
financed by government fiat: As a result of government subsidies,
patients do not see the true cost of medical goods and services.
Thus, they naturally demand more than they would otherwise
consume. Obviously, the more
government subsidizes health care, the more pronounced this trend
will be. Increased demand necessarily collides with the limited
supply available.
At
this point, the government must begin to ration care, and because
the government pays for health care, it has the final say on who
receives treatment. Under universal health care, government
rationing is inevitable. Furthermore, the longer government
subsidies are in place, the more acute this problem will
become.
To
illustrate this point, imagine that the government decided that all
restaurant meals should be free, with the government reimbursing
the cost of the meal to restaurant owners. Under such a scenario,
customers would no longer consider price when deciding where to
eat. They would eat out more than they would otherwise, and they
would demand the most expensive food. The inevitable result: long
lines and shortages of food. As for the restaurant operators, their
income, to a large extent, would be guaranteed, and they would no
longer be concerned with providing food efficiently. The
government, facing exploding and unsustainable costs, would begin
to provide less expensive food or be more selective in choosing
which foods it would subsidize. Such discrimination would annoy
both diners and restaurant owners, harm the delivery of food, and
result in lower-quality products.
This
problem--the gap between supply and demand when prices are set by
the government--is inherent in virtually all government-provided
goods or services. Yet when reform-minded critics look at the
problems created by socialized markets, they often call for further
government spending or regulatory manipulation.
Change in
Canada.
In Canada, two camps dominate the debate over health care reform:
the "magicians" and the "spendthrifts," as Dr. David Gratzer, a
Canadian physician, dubs them in his recent book, Code Blue. While each camp prescribes a
different solution to Canada's health care woes, both believe that
increased government involvement in health care will solve Canada's
problems. The "magicians" believe that with just the right amount
of management and the proper regulations, the system will somehow
magically work. The "spendthrifts" simply advocate spending more
money on a fundamentally flawed system. As Dr. Gratzer points out,
both solutions are "like rearranging the deck chairs on the
Titanic."
The
three major parties in Canada--the leftist New Democrats, the
centrist Liberals, and the conservative Reformers--all fall into
one or both of Gratzer's categories. Recently, the trend appears to
be in favor of the spendthrifts.
As
recently as 1994, the Reform Party's leader, Preston Manning, spoke
of allowing provincial experimentation with "user fees,
deductibles, and private delivery of medical services." The Reform
Party abandoned all talk of privatization for the 1997 federal
elections. Instead of advocating genuine bottom-up reform, it tried
to "out-Liberal the Liberals" by advocating both more funding and
higher standards for the Canadian health care system. In other words, the
Reformers became both spendthrifts and magicians.
The
spendthrift mentality exists in the United States as well. Dr.
Marica Angell, the recently retired executive editor of the New England Journal of Medicine, told the
British Columbia Medical Association in July that the Canadian
system is "increasingly making the American system look insane."
She continued that long lines in Canada are easily treatable and
"the problems are not ones that can't be fixed; you just need more
money in [the system]."
Reforms in
Britain.
The debate in Britain over health care is similar.
Earlier this year, Prime Minister Tony Blair's Labor government
announced a 35 percent increase in real spending on the NHS over
the next five years, to be accompanied by several "reforms." Funding for the NHS
increased 70 percent during the Tory years (1979-1997) and even
more in the early 1970s, but this combination "spendthrift" and
"magician" mentality has not cured and will not cure the growing
ills of the NHS.
In
December 1999, the government finally admitted that rationing is
part of the NHS's agenda when it created the National Institute for
Clinical Excellence (NICE). Britain's Health Secretary, Alan
Milburn, explained, "there will always be choices to be made about
the care to be provided," and "NICE will help make the hard
choices, and it will also protect patients from low value or
obsolete inventions." In other words, the magicians are hoping that
a top-down government solution will cure the problems inherent in
the NHS.
Milburn went on to prove his credentials
as a spendthrift as well when he concluded, "what our healthcare
system needs is consistent growth in funding to meet the challenges
it faces." Unfortunately,
neither a regulatory body nor increased funding will cure the NHS's
problems. The flaw that is fundamental to government-run health
care will still exist. Demand will continue to exceed supply,
resulting in government rationing of care.
THE RISING COSTS OF GOVERNMENT-RUN
MEDICINE
Supporters of government-run health care often claim that
subsidized medicine will result in improved health outcomes,
exemplary quality of care, unrestricted access to medical services
and prescription drugs, and doctors with complete clinical freedom.
Yet in Canada and Britain, universal health care has achieved none
of these goals. In fact, it is often less successful at attaining
these goals than the existing system of largely private health care
in the United States, despite its flaws.
Health Outcomes
Many supporters of government-run health care argue that
forcing patients to pay out of pocket for health care services will
dissuade them from seeking necessary treatment, causing their
health to suffer. However, according to one of the largest social
science experiments in history, such user fees do not impair
patient health.
Between 1974 and 1982, the RAND
Corporation followed the medical spending habits of 2,757
non-elderly families (7,703 persons) in six cities across the
United States. The study grouped
the participants into four groups. At one extreme, the families had
no out-of-pocket medical expenses. This health plan completely
covered visits to the doctor, hospital stays, and prescription
drugs. At the other end, families faced 95 percent co-insurance
payments up to a maximum of $1,000 out of pocket.
The
RAND Corporation researchers, led by Harvard professor Dr. Joseph
Newhouse, found that:
Based on these results, the RAND study
reached two conclusions:
Thus, the study found that user fees were
not detrimental; in fact, they produced significantly lower costs
without harming patients' health.
Declining Quality of Care
Advocates of government-run health care often claim that universal
coverage is a fairer system than private health care because it
ensures access to care for all people. Yet these advocates often
fail to mention that access to care is not guaranteed. Because demand outpaces
supply, the government has no choice but to ration care. Absent
prices, the only way to "control" demand is to limit supply, which
entails waiting lists. In many cases these waiting lists are so
long that patients literally die while in line.
Waiting lists for health care in Canada
are notorious for being long and slow-moving. For example, in a
recent edition of the Canadian Medical
Association Journal, Dr. Richard F. Davies, a cardiologist at
the University of Ottawa, concluded that "Canadian patients are
being forced to wait much longer than is really necessary" for
coronary artery bypass grafting (CABG). He cited figures collected
by the Cardiac Care Network of Ontario for the period April 1,
1996, to March 31, 1997. During this time, 1,514 patients were on
the provincial waiting list at any given time. More significantly,
71 patients died while waiting for CABG. In addition, 121 were
taken off the list permanently because they had become "medically
unfit for surgery" due to their extended waiting time, 211 were
removed temporarily, 259 came off for unspecified reasons, and 44
left voluntarily to be treated elsewhere.
Similar revelations are coming out of
Britain. According to The Guardian,
over 1.3 million patients in England alone are on waiting lists for
medical care. The new Labor
government, elected in 1997, promised to tackle the problem;
instead, a year, there were 100,000 more patients on waiting lists.
The Independent Health Association of Britain estimates that, in
addition to the 1.3 million on waiting lists, there are 465,000
British citizens waiting just to get onto the waiting lists.
Prescription Drugs
Stories appear almost daily in newspapers around America about the
cheaper prices Canadian citizens pay for drugs, and American
politicians have responded with proposals to subsidize prescription
medicine. Yet Canadian drugs are not consistently less expensive
than American drugs.
It
is true that some dose sizes of some drugs cost less in Canada, but
it is also true that some drugs are less expensive in the United
States. In the most rigorous academic comparison of international
drug prices yet published, University of Pennsylvania economist
Patricia Danzon found that it was possible to "prove" that
prescription drug prices are 218 percent higher in the United
States--or 171 percent higher in Canada--depending on the variables
included.
Some
drugs are less expensive in Canada because the government fixes the
prices of prescription medicines. Nevertheless, when the government
purchases drugs for its citizens, the government necessarily must
ration those drugs. With no private-sector alternatives, patients
have no choice but to accept what the government--not the
doctor--decides is best. In theory, patients could use their own
money to purchase prescription drugs outside of the government
formulary. In practice, however, this is rare because demand is so
low that few drug manufacturers bother to market their products.
Reduced availability leads many Canadians to head south to the
United States to purchase drugs they cannot purchase at home.
In
six of the 10 provinces in Canada, the non-elderly and the non-poor
have no coverage for prescription drugs. In British Columbia, one
of the four provinces with prescription coverage, patients must pay
the first $800 for drug purchases on their own. The government
picks up 70 percent of costs between $800 and $2,000, and 100
percent of costs above $2,000. This limited coverage extends only
to drugs approved by the province.
In
addition to price controls, health authorities in Canada control
drug spending in two ways: by limiting the number of drugs they
approve and by slowing the approval process. Between 1994 and 1998,
the Canadian federal government approved only 24 of 400 new drugs.
After the federal government approves a drug, the provincial
authorities must approve it before it can appear on local
formularies and be available for use by patients and doctors. In
1998 and 1999, the federal government approved 99 drugs; of these
drugs, the Ontario formulary included only 25.
The
lengthy approval process is also used to control spending on
prescription drugs. For example, Viagra (a drug to treat impotence)
was available in the United States for a year before it was
approved for use in Canada. And while the federal approval process
is lengthy, the provinces also must approve drugs for use. After
approval by the federal authorities, the average wait for approval
of a drug in Nova Scotia is 250 days. In Ontario, it is 500 days.
The
government's interference in the prescription drug markets also
necessitates that bureaucrats control an individual's access to
medicine. There are many examples of the inefficiencies produced by
such interventions--and of the tragedies they produce. Dr. William
McArthur, a Canadian physician, has provided one such story. He
tells of a 64-year-old patient he treated who suffered from peptic
ulcers. These ulcers were being controlled by a drug called
omeprazole, but the government mandated that he be switched to an
older, less expensive drug. Three days later, the man required
hospitalization and a complete blood transfusion. After 10 more
days and several more transfusions, the patient was discharged from
the hospital. When discharged, he was taking the same
drug--omeprazole--that he had been taking in the first place.
This
example is typical of the problems created by government regulation
of the prescription drug market. Indeed, in a recent survey, 27
percent of British Columbia physicians reported that they have
admitted patients to the emergency room or the hospital as a result
of government-mandated substitutions of prescription drugs.
In
Britain, each of the 115 local health authorities receives a fixed
sum from the central government. With that money, each health
authority decides independently which services, technologies, and
prescription drugs to provide. As Dr. David Secher, the director of
drug development for the Cancer Research Campaign, explains, this
results in "a situation where if you live on one side of the street
you may be eligible for expensive anticancer treatment, and if you
live on the other side, you aren't."
District health authorities in Britain
face a dilemma when deciding which drugs to fund. According to
Stephen Thornton, chief executive of the NHS Confederation, an
advocacy group for health authorities and hospitals, "Every time
there is the prospect of a new and effective drug that's going to
help people suffering from cancer, my colleagues running local
health authorities are going to have to think, `What are we going
to have to stop doing in order to pay for that drug?'" Needless to
say, the decision is never easy.
One
of the most insidious effects of price controls on prescription
drugs is the devastating effect on a nation's pharmaceutical
industry. Canada has always had a highly regulated market, and its
drug industry has never been significant. Britain, on the other
hand, was once a global powerhouse in drug production. Today,
however, its influence is diminishing. In 1988, three of the top 10
best-selling new pharmaceutical products were British. By 1992,
only one was. Today, American manufacturers have the top 10
best-selling pharmaceuticals. If the relatively
unregulated American market were to succumb to price controls, it
would not only hurt the domestic pharmaceutical industry, but also
impair other manufacturers around the world who depend on selling
their products in the United States.
Substandard Technology
In the spring of 1999, a banner on Toronto's Gardiner Expressway
read, "Magnetic Resonance Imaging [MRI], Coming Summer 1999." St.
Joseph's, a hospital in Canada's largest city, was finally
acquiring technology that has been used in the United States since
the mid-1980s. In America, the latest technology--Positron Emission
Topography (PET)--is already superseding MRIs. When St. Joseph's might
acquire PET, if ever, is anybody's guess.
The
use of the most modern medical technologies and innovations is
stifled in government-run health care. The newest and latest
services and products are inevitably expensive. Budget-conscious
government bureaucrats are loath to approve coverage of pricey new
technologies as their budgets are always stretched to the maximum.
Thus, providing coverage for a brand-new item means budget overruns
or the elimination of a service currently on budget. Doctors,
scientists, and other innovators recognize that it will take years
for their innovations to be adopted; therefore, they are less
likely to attempt new techniques and procedures or to invent new
technologies.
A
survey of teaching hospitals in Washington State, Oregon, and
British Columbia found that 18 surgical and diagnostic procedures
commonly available in the United States are not available to
Canadian patients. Furthermore,
according to the Organisation for Economic Co-operation and
Development (OECD), Canada ranks
consistently ahead of only Mexico, Poland, and Turkey in available
medical technology. The OECD ranks Canada 21 out of 29 in
availability of CAT scanners, and 19 in MRI availability. In one
particularly telling incident, an Ontario man frustrated at the
long waits for an MRI attempted to book himself into a private
veterinary clinic by listing his name as "Fido."
In
the British NHS, lack of access to modern technologies and
medicines often results in low survival rates for patients,
especially in cases involving cancer and cardiovascular disease.
The World Health Organization (WHO) estimates that every year,
cancer kills 25,000 Britons because of substandard care. As Dr. Tim
Maughan, a clinical oncologist specializing in gastrointestinal
cancer and lymphoma in Cardiff, Wales, has said, "The health
service has been chronically under funded for the last 10 to 15
years and is desperately short of money, and I'm not aware of where
things are worse than in cancer."
Survival rates for cancer-stricken British
patients are markedly lower than for American patients. Consider
the five-year survival rates for:
- Lung cancer (in men): 6 percent in
Britain, 13 percent in the United States;
- Colon cancer (in men): 41 percent in
Britain, 64 percent in the United States; and
- Breast cancer (in women): 67 percent in
Britain, 84 percent in the United States.
Frustrated Doctors
The effect of government-run health care on medical practice is
pronounced and harmful. Despite claims to the contrary, many
Canadian doctors are frustrated and angry; many leave Canada every
year. Young doctors are particularly likely to leave, and many
worry that Canada will face a shortage of doctors in years to
come.
Because Canada has regulated and
subsidized many industries, the "brain drain" is a problem for many
trades there. Prime Minister Jean Chrétien's Advisory
Council on Science and Technology has warned that the flight of the
highly educated is causing serious problems for universities and
the high-technology sector.
This
problem is particularly acute in the health care field. According
to a recently released report from the Canadian Institute for
Health Information, many doctors--especially younger ones--are
leaving Canada for the United States. Over 70 percent of the
physicians who are leaving graduated from medical school in the
past 10 years. Young physicians "are leaving for better working
conditions and more research opportunities," says Dr. Hugh Scully,
president of the Canadian Medical Association. "It would be fair
to say we saw a significant problem," said Chummer Farina,
executive director of the study.
This
trend is especially alarming because budget constraints have led to
the enrollment of fewer students in medical school. Furthermore,
while some doctors immigrate to Canada to work there on temporary
visas, few stay permanently. And older doctors are retiring at an
accelerated rate. The net loss of doctors
is a "very real, continuous worry," says Dr. Scully.
UNEQUAL AND UNFAIR
Advocates of government-run health care often claim that such
systems are "equal" and "fair" because they put all citizens on one
tier. Yet it is preposterous to claim that a one-tier system really
exists in a nationalized system of health care delivery. There
never has been and never will be a health care system in which all
people, regardless of class or condition, are treated equally.
While the rich and well-connected always get better access and treatment
regardless of how the health care system is organized, a
government-run system can add new levels of inequality based on
social standing or political position.
The
evidence on this is overwhelming. Consider, for example, a recent
survey of cardiovascular caregivers in Ontario, Canada. The report concluded
that the politically powerful, the rich, and the potentially
litigious received preferential treatment. Over 80 percent of
doctors and 53 percent of hospital administrators had been involved
personally in a case involving preferential treatment. When asked
what factors contributed to that preferential treatment:
-
Nearly 90 percent cited a patient's
personal connections to the doctor;
-
Nearly 80 percent cited the patient's
standing in the community, where poor care would embarrass the
hospital if the patient were unhappy;
-
Over 70 percent cited a patient whose
prominence could be helpful to the hospital;
-
Nearly two-thirds cited a patient who was
potentially litigious; and
- Over 25 percent cited legitimate medical
reasons, without external pressures.
Other studies have reached the same
conclusion: Those at the top of the socioeconomic ladder in Canada
receive preference and priority. Anecdotally, many
stories exist that confirm the existence of preferential treatment
for the prominent or well-to-do:
-
In August of 1990, Quebec Premier Robert
Bourassa learned that he needed an operation for melanoma. Instead
of waiting his turn in the vaunted Canadian system, he chartered a
plane at his own expense and flew to Washington, D.C., for a
consultation at the National Cancer Institute in Bethesda,
Maryland. In November, Bourassa returned for the surgery. It was a
success.
-
Last year, Vancouver Grizzlies basketball
star Shareef Abdur-Rahim was able to skip over a 984-person
queue--over a year's wait in Canada--to obtain an MRI scan of an
injured knee.
-
Earlier this year, singer Celine Dion was
successfully treated for infertility at a Manhattan clinic--not in
her native Canada.
-
In August of this year, singer Madonna
flew from her London home to Los Angeles for delivery of her baby.
When asked about this by a reporter, she explained, "Come on, have
you ever been to the hospitals in England? They are old and
Victorian."
- Earlier this year, Health Minister Allan
Rock received intense criticism when it was revealed that a wealthy
member of the Moroccan royal family paid $60,000 for heart surgery
in a Montreal hospital. This payment allowed the patient to skip a
waiting list of over 1,000 Quebecers. Sylvie Dore, a hospital
official, said there is nothing illegal or unusual about this
example of preferential treatment. "It is totally legal and happens
all the time," she explained.
Canadians with the financial resources
routinely travel south to the United States to obtain treatment. At
one clinic in Grafton, North Dakota, 80 percent of the clientele is
Canadian because there is no wait for MRI scans there.
Olympic Medical Hospital in Port Angeles,
Washington, is beginning a new program this fall in which its
doctors will travel to Victoria, Canada, to consult with Canadian
physicians before their patients travel to the United States for
treatment. This program was established after a spring 2000 survey
in which a large number of Canadian doctors responded that they
would send their patients to the United States for treatments that
would otherwise be delayed or denied in Canada. "There is a huge amount of frustration with the
Canadian system," according to Eric Lewis, chief financial officer
of Olympic Medical.
Many
American hospitals and clinics along the Canadian border report
booming business from Canadian patients. It is not accurate
to claim that Canada is a one-tiered system in which everyone,
regardless of wealth or community stature, is treated equally.
Unlike Canada, where private treatment for
"covered" services is illegal, Britain has a booming private sector
in health care. It operates outside of the NHS and does so without
any tax subsidies or tax preferences. The private health care
industry is completely unregulated by the British government, and
business is booming. According to the Independent Health Care
Association (IHA), 7 million of Britain's 55 million citizens are
now covered by private insurance.
In
Britain, those who are not covered by private insurance can still
purchase private-sector services à la carte. In 1996,
100,000 Britons paid out of pocket for operations rather than
waiting in NHS lines for treatment. By 1999, that number was
160,000. In 1993, 12 percent of all private-sector heart bypass
operations, hip replacements, and other forms of acute care were
paid for by individuals, not insurance. Today, 20 percent of these
operations are paid for by individuals.
CONCLUSION
Taxpayers are justly frustrated with the unresolved problems of
America's health care system, which subsidizes employment-based
health insurance through tax incentives. Yet Americans should be
wary of politicians who promise that they can provide better health
care services than the private sector can provide.
Supporters of government-run health care
claim that such a system is better for patients and doctors. They
say it would be fairer, more compassionate, and more inclusive and
would deliver higher-quality care than America's existing system of
health care. The reality of government-run medicine, however,
belies this argument. In Canada and Britain, access to treatment is
far from guaranteed, care is rationed by government bureaucrats,
the rich and well-connected receive better care, fed-up doctors
flee the system, and patients are left to suffer.
In
the United States, the health care system, although imperfect, has
done a far better job of caring for far more people at a much
higher level of quality. Policymakers should address the weaknesses
of the current system--by eliminating the health insurance market's
inequities and market distortions created by federal law and state
regulations--and expand access to private plans for the uninsured.
In other words, they should refrain from making current problems
worse.
James Frogue is a former Health Care Policy Analyst at The
Heritage Foundation.