Research essay I did on America's health care problems. Constructive criticism welcome and appreciated.
America's Health Care: Plans, Policies, and ProfitsH.L. Mencken claimed that there is a “simple, elegant, and wrong" solution for every problem (Tanner "Universal Healthcare..."). Today that solution appears to be providing universal health care in the United States. America’s current health care system does have a problem that increases costs and lowers quality, but the problem is not what most people think it is, and universal health care could harm most Americans rather than help.
UNIVERSAL HEALTH CARE
According to a 2005 Harris Poll, 75% of Americans want universal health care (“Heath Care…”). The concept sounds appealing: Everyone gets health care, perhaps even for free, so they can stay out of hospitals and contribute in the workforce. But theory is not reality. As seen in other nations with universal health care, universal coverage does not guarantee "actual access to medical care" (Tanner "Universal Healthcare...").
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In the United States, the supply of medical resources for health care is already strained. Fewer than 2% of all medical students are choosing to specialize in primary care medicine, which manages 80% of all health care needs. In addition, a large number of physicians are scheduled to retire within the next five years ("Primary care shortage..."). Introduce the demand of universal health care to this diminishing supply of medically trained professionals and it is easy to envision mass shortages of every medical resource.
How does universal health care increase demand? According to the law of supply and demand, lowering prices increases demand. The demand for a free product is astronomical: customers will swamp any store that offers free donuts, coffee, movies, etc., even if they do not need it. Customers have incentives to grab a product that they would normally have to invest their resources to get. After all, they can usually turn around and either sell it or exchange it for another product or service. They lose nothing and make a profit.
The supply and demand for health care is no different. Supply is limited by the availability of medical resources, the technology to convert them into medical products, and skilled professionals to administer care ("Universal Healthcare..."). Offering free health care causes consumer demand to skyrocket far beyond the available resources, as described below. And when an industry faces more demand than it can supply, it faces shortages.
Nations such as Canada, Britain, Germany, France, Switzerland, Sweden, and Japan all have some form of universal health care, and they already experience shortages of medical resources. In general, hospitals in these nations are overcrowded and have neither available beds nor enough doctors to meet the need (Stossel "Sick in America..."). In Britain, nearly 900,000 citizens await admission to hospitals, and shortages of medical supplies and available doctors cause the cancellations of over 50,000 surgeries per year (Tanner "Universal Healthcare..."). Heart surgery wait lists times in Sweden can be longer than six months (Tanner "Universal Healthcare...").
Experts point out that systems such as Switzerland's lack incentives for providers and patients alike to "seek out efficient, high value care" ("Universal Problems..."). Patients have no incentive to seek out better prices because they are not paying with their own money. Providers have no incentive to improve their performance because they have no positive reinforcement or reward; governments hold down health care costs by paying providers less (Stossel "Sick in America...").
America has more incentives than other countries, which lead to better health care. Lower income Americans are actually in better health than Canadians of comparable income, and Americans in general wait half as long as Canadian and British patients do for health care ("10 Surprising Facts..."). In addition, Americans have much better access to newer, better technologies than do Canadians or Britons. For example, the United States has 34 CT scanners per million Americans whereas Canada has 12 and Britain has only eight. The United States also has 27 MRI machines per million Americans compared to six each in Canada and Britain ("10 Surprising Facts...").
Americans often have easier access to cutting edge technologies because Americans have invented, and continue to invent, the majority of all health care innovations. The top five U.S. hospitals conduct more clinical trials than all hospitals in any other industrialized country combined ("Franklin Delano Obama"). In addition, American researchers have won the Nobel Prize in medicine or physiology more often than researchers from all other countries combined ("Winners of the Nobel...").
One reason for the low quality of universal health care is because governments must keep costs down by not investing in better care. One British hospital told its employees to simply turn over dirty sheets instead of changing them every day (Stossel "Sick in America..."). The Canadian Adverse Events Study reports that "adverse events” in Canadian hospitals result in 9,000- 24,000 deaths every year ("Universal Problems..."). Nonlethal events keep Canadians in hospitals for a total of over a million extra days per year ("Universal Problems...").
Another reason for the poor quality of medical services in universal health care is the unavoidable rationing of the depleted supply of medical resources. England’s medical rationing is considered to be the “most aggressive… known to the free world” because it delays care to patients unless – or until – they are critically ill ("Obama's Health Care..."). Americans have better access to cancer screening than do Canadians ("Health Status...") and better access to treatment for chronic diseases than do patients in other developed countries ("The Grass Is Not Always Greener...").
What about countries where health care providers “operate as private businesses” (“Heath Care…”) and the government just pays the bills? In those countries the health care is better than it is under government-monopolized health care, but the government is paying all of the medical costs for everyone. It still offers no incentive for the insured customer to shop for better deals and no incentive for health care providers to compete for customers by lowering prices or improving their services. Those countries suffer the same problem as does the medical insurance industry in general, but I discuss that below.
In addition to negative aspects such as shortages and poor quality of medical resources, universal health care costs a fortune. France’s health care system, for example, reported a $15 billion deficit in 2004 ("Universal Problems..."). To cover the cost of universal health care, many nations maintain “sky-high taxes” ("Obama's Health Care..."). In 2007, America's average personal tax rate was 28.3 percent of the GDP compared to Canada's 33.3 percent, Germany's 36.2 percent, England's 36.6 percent, and France's 43.6 percent. Japan's tax rate equals that of the United States, but its debt last year was 170 percent of its GDP, three times more than that of the United States ("Obama's Health Care...").
How bad is universal health care? Citizens from nations with universal health care, including citizens from Spain, the United Arab Emirates, Jordan, and even people such as the Archbishop Desmond Tutu and prime ministers from Italy, actually come to the United States to get health care (Stossel "Sick in America..."). The less fortunate are forced to simply watch as even minor medical problems become life-threatening while they await care; some people die in the queue ("Obama's Health Care..."). Citizens even resort to performing procedures themselves; for example, citizens in Britain have been known to pull their own teeth using pliers and vodka (Stossel "Sick in America...").
Why is universal health care so expensive? In many nations, the government monopolizes health care, and provision of private health care is illegal. Because monopolies have no competition, they do not have to cater to consumer demand. Such governments can afford to waste the taxpayers' money because the taxpayers have no legal alternative.
But now more and more Canadians are going to private, for-profit clinics, even though they are illegal in Canada (Stossel "Sick in America..."). Canadian doctors face such a demand for quality health care that a new clinic emerges every week; even the President of the Canadian Medical Association has opened one (Stossel "Sick in America...").
But how do private companies provide better quality care than the government does?
PRIVATE, FOR-PROFIT COMPANIES
One reason why two-thirds of Americans want universal health care is because they want to avoid the stigma of “greed.” Most people scorn privatized health care because it "profits from sick people."
But what about other industries that profit from misfortune? What about funeral homes that profit from dead people and their families? What about military suppliers that profit from the spoils of war and instruments of death? Although unpleasant, we need funeral homes to dispose of the dead and military suppliers to provide a means of defense. The only way that these service industries can survive without the government monopolizing them is through private, for-profit companies.
In the movie Wall Street, Gordon Gecko claims that “greed, for lack of a better word, is good.” Gecko was right to say “for lack of a better word” because the word “greed” has a negative connotation. It means "an excessive, extreme desire for something, often more than one's proper share…" ("Greed definition"). When one takes more than his or her proper share, one also takes part of another person’s share. This is theft, which means that greedy individuals harm others.
Had Gecko’s actions been legal, he could have used the word “ambition,” which has a neutral or even positive connotation. It means an "eager or strong desire to achieve something" ("Ambition definition"). Ambition benefits us because on the other end of the challenge is a reward. Rewards, like a monetary prize at the end of a race, give us incentives to perform our best. Ambition, unlike greed, tends to help instead of hurt because we only reap what we sow. In working toward our goal, we also produce services or goods that others want.
Ambition fuels innovation. Henry Ford did not cut the cost of the automobile by half within eight years out of love but because he wanted to make a profit from selling them (Stossel "Sick in America..."). He became one of the richest people in the world because he created a product that people willingly paid to own. In capitalism, the only legal way for an individual to make a profit is to help others profit. It is a win-win concept.
This kind of motivation produces the best in everything. Take medicine, for example. The government is responsible for four percent of the drugs on the market today (Stossel "Sick in America..."). The other 96 percent of such drugs have been produced by for-profit companies, which perform better than the government because success rewards them and gives them an incentive to work hard, whereas government workers lack such incentives.
For-profit companies meet customer demand more than do nonprofit companies. For example, Jeff Ellis runs a for-profit lifeguard training program at Jeff Ellis & Associates, Inc. After training lifeguards, he surprises graduates with unscheduled drills and even films their performance secretly to test their commitment level. If he catches any lifeguard not doing his or her job, he fires them. Ellis’s for-profit company competes with Red Cross, which provides nonprofit training. Because Red Cross does not routinely test the performance of its graduates, the lifeguards it trains have no incentive to perform well at all times.
Ellis has caught Red Cross graduates on camera leaving their chairs to talk to women, cook hamburgers, or even lounge in the sun (Stossel "Sick in America..."). The lifeguards trained by Mr. Ellis, however, remain vigilant and in their chairs at all times. They know that their performance matters and that they will lose their jobs if they do not meet expectations. In the end, lifeguards trained by the private, for-profit company outperform those trained by the nonprofit company because the former have more incentive to perform well than do the latter. As a result, eighty percent of all water parks in the United States are clients of Jeff Ellis & Associates, Inc., a for-profit company ("About Us").
For-profit businesses outperform nonprofit businesses because they compete with each other and/or similar businesses. When people pay out of their own pockets, they are more likely to watch what they spend than when someone else foots the bill. Private businesses must invest their own money, unlike the government or nonprofit programs. To attract customers, private businesses must compete with one another by catering to consumer demand. They do this by producing better quality services than do their rivals. These high-quality services benefit their customers, who return the favor by paying the company. These benefits arise from the so-called “greed” for profit.
Lasik eye surgery is considered to be cosmetic by health insurance companies, and they will not cover the surgery. Customers must pay out of their own pockets, so they have an incentive to shop for the best deals. Providers have to compete for business, so they must offer cheaper or better services than do their rivals. Since Lasik surgery became cosmetic and companies had to compete for business, Lasik surgery prices have dropped 30% and the quality of the product has improved greatly (Stossel "Sick in America...").
How about a health care example? One doctor named Robert Barry refuses to accept payment for his medical service from health insurance companies. He saves time and money by doing so because he does not have to fill out paperwork or pay extra employees to do it (Stossel "Sick in America..."). Instead, he can invest that time and money in his company, improve services, and increase employee wages. With the money he saves, Barry can afford to provide better service than do his rivals. He profits, and so do his customers.
Critics claim that forcing customers to pay for medical costs themselves will give them an incentive to avoid getting needed medical care. But studies show that individual is the best judge of his or her needs. People with high deductibles take better care of themselves than those with low deductibles (Stossel "Sick in America..."). They must pay more before their insurance covers them, so they make sure that they spend their money on the best deals.
Government monopolies have no competition, so they do not need to cater to their customers. This lack of incentive to improve is why the government produces poor quality programs and services and why the private market excels.
But we have private, for-profit health care companies in the United States… so why do we have health care problems?
HEALTH INSURANCE
Health insurance helps pay for medical care, but it also restricts worker flexibility, hinders businesses, fails to produce high-quality results, and encourages wasteful spending. I will explain each of these below.
How easily can you switch jobs if your insurance is tied to your current employer and you have a need for medical insurance? That need ties you to your job, and if you lose your job then you also lose your health insurance, so you're constantly stressed out worrying about keeping you job. Considering that four out of 10 Americans change jobs every year, that is 40% of Americans who risk losing their health insurance (Stossel "Sick in America..."). In addition, more than half of the employers who offer health insurance do not let their employees choose among various health plans, so the employees cannot stimulate competition ("Why Tie Health Insurance to a Job?").
Health insurance also hurts companies by adding to their cost of operating. GM spent more money on health insurance for its employees than it did on purchasing steel, a factor that led to GM’s downfall (Stossel "Sick in America..."). In fact, employer-based health insurance costs companies more than $75 billion every year in marketing, sales, billing, and other administrative costs ("Why Tie Health Insurance to a Job?").
Workers unions often pressure employers to “take care” of their employees by offering health insurance, but their well-intended requirement backfires. Providing health insurance adds to the employer’s costs, and the employer must offset these costs by either hiring fewer employees, reducing wages, or charging more for the company’s products. If employers left the responsibility for health insurance up to the employee, they would not have to resort to these measures.
Like universal health care generally seems to be, health insurance has proven to be mostly inefficient in providing better health. Several studies have found “no causal relationship" between insurance and health; one study published in the New England Journal of Medicine found that an individual’s insurance status was "largely unrelated to the quality of care" (Tanner "Universal Healthcare...").
Health insurance uses a method than can be called collective redistribution. When an insured customer becomes sick, the health insurance company can 1) drop them, 2) charge them more according to their estimated cost increase, 3) increase premiums for all customers, or 4) earn lower profits. Most companies choose the third method; the more sick patients they cover, the higher the costs become for everyone (Stossel "Sick in America...").
But does the increasing cost of American health care result from caring for the uninsured? According to the Urban Institute, uncompensated care for uninsured patients costs less than 3% of our total healthcare spending (Tanner "Universal Healthcare..."). So it is not necessarily the uncompensated care of the uninsured that makes health care so expensive for the rest of us… could it be the 250 million that are insured (Stossel "Sick in America...")? As stated before, health care costs rise when health care providers have no incentive to lower their prices in order to compete with other companies. Providers have no need to compete when their patients are insured, because customers have no incentive to seek better prices if their insurance company pays for them.
Health insurance companies discriminate against individuals. They give tax breaks, lower deductibles, and lower general costs to employers, but charge individuals up to 10 percent of their income ("New report..."). This makes it harder for the individual to afford a plan that fits their needs without restricting that individual to their current job.
The U.S. government is also causing the rise in health care costs. The government will not cover expenses for certain methods that health care providers use, even efficient ones like using electronic medical records (Stossel "Sick in America..."). Health care providers must either pay for these electronic records themselves or, more often, invest their space, time, and money in filing cabinets and folders. The cost of these resources could be saved by the use of electronic medical records, but the government refuses to cover the expenses and doctors refuse to pay for electronic methods out of their own pockets.
Health insurance also gives its insured customers incentives to spend more. Insured patients often request procedures they do not need just because their insurance company covers them (Stossel "Sick in America..."). Insured patients also tend not to pay attention to prices because they are spending someone else's money. When customers do not search for the best deals, doctors have no need to worry about coaxing them through the door with competitive prices.
In summary, most forms of universal health care drain the supply of medical resources, cause excessive demand, and produce both poor quality of health care and shortages of medical resources. The popular contempt for private, for-profit companies is baseless because they perform a needed service better do than the government and nonprofit organizations. Competition improves the quality of products and services, and the lack of competition in government-run industries negatively impacts both quality and prices. Health insurance often ties employees to their current jobs, increases costs and lowers productivity for the employers themselves, fails to produce high-quality results, and gives their customers an incentive to spend more.
I hope this helps you better understand the causes of America’s health care situation and the possible consequences of the proposed solutions.
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