Liberty For All

by Linda Gorman

Climbing from 3.5% of government revenues in 1965 to over 17% in 1990, the true cost of government health spending has panicked our political leaders. Desperate to control costs, they have mounted a media blitz designed to convince us that while a government takeover of the health care industry may cost more in taxes, the result will be better, cheaper, care. Unfortunately, the facts suggest otherwise. Government controlled medical care has been tried in Canada, Britain, and has always produced lower quality and higher costs.

Quality deteriorates because bureaucrats, not patients, control purchases. Much of the medical care cost increase since World War II has been caused by the explosion of technological progress and the rapid spread of health insurance. Widespread health insurance has made sophisticated care affordable, and we spend more because more can be done.

When patients control spending, they buy medical treatment that promises more life or improves its quality. Spending increases as medical knowledge expands, offering relief for those suffering from previously untreatable problems. This spending has bought life for trauma patients, premature infants, and others whose survival depends on modern medicine’s expensive machinery and highly trained specialists.

When bureaucrats control spending they buy cost control. With new treatments a primary cause of rising medical costs, government can contain costs only if it restricts access to modern treatments and retards the development of new ones. The effect of such rationing falls primarily on the biggest consumers of medical care: the aged and the seriously ill. Politically controlled medical systems emphasize preventative care for the healthy majority while callously disregarding the rest. Healthy bureaucrats and academics tend to applaud the theoretical elegance of this approach. Its practical implications, as the relatives of the Canadians who have died waiting for admission to antiquated hospitals can tell you, are hazardous to your health.

The politicians, of course, would have us believe that they can control costs by reducing inefficiency, eliminating “unnecessary tests” and having such “experts” as Hillary Clinton make “smart” medical choices for us. Much has been made of the claim that a government takeover of the insurance system would save $95 billion a year. This, however, is the maximum estimated savings. Other experts expect cost increases of up to $31 billion. People familiar with the oxymoron “government efficiency” will know which number to pick. Consider the federally-run Veterans Administration, the largest health care system in America. Characterized by long waits, filthy hospitals, antiquated equipment, uncaring administrators, and incompetent staff, the VA has long been a national scandal.

The Clintons have gone for the sympathy vote by emphasizing free vaccines for children. But free vaccines are already available. Government-imposed price controls (including “voluntary” controls imposed by arm-twisting) always produce havoc. If the Clinton plan goes through, wise parents will immunize their children immediately to avoid the inevitable vaccine shortage.

Most outrageous is the constant refrain that “we” spend “too much” on medical care. On what should people spend their wealth if not their health? In 1990, 12.2% of GNP was spent on medical care. If that’s bankrupting America, what about the 9.2% spent on private automobiles in the same year?

People also claim US inefficiency because US expenditures average about $2,500 per person per year while Canada’s are about $1,700. These claims mislead because they fail to correct for obvious differences in the two populations. The US, for example, spends more on medical R&D, has an older population, and a higher incidence of drug abuse and violent crime. US health care spending also includes purchases by Canadians who would rather pay for US medical care than endure “free” Canadian care. When properly adjusted for these differences, average US spending drops below the Canadian level.

Before being stampeded into replacing the decisions of millions of informed consumers and their doctors with the superficial brilliance of a cadre of lawyers, we should try a more promising approach. Health insurers, physicians, hospitals, medical device manufacturers, and pharmaceutical companies operate under a crushing load of unnecessary regulation that discourages innovation and adds relatively little to the quality of care. Some economists estimate that unnecessary regulations increase medical costs by as much as 50%.

Although it lacks the glamorous excitement of introducing yet another grandiose plan, regulatory reform offers a realistic hope of reducing the cost of medical care without compromising its quality.

Originally published by the Independence Institute January 1, 1993.

Linda Gorman is a Senior Fellow at the Independence Institute, a free market think tank in Golden, Colorado and director of the Institute’s Health Care Center. A freelance writer and researcher, she was a weekly columnist for the Colorado Daily in Boulder. Her articles have appeared in local newspapers, professional journals, and publications such as The Fortune Encyclopedia of Economics.