In his great book “Civilization: The West and the Rest,” historian Niall Ferguson identifies what he calls 6 killer apps that made western civilization the preeminent system of government and economics. Number four on the list is Medicine. The seeds of modern medical science, sown in 19thCentury Europe, led to a “major improvement in health and life expectancy.” Now as then, we need a healthy population to ensure a stable society and a productive economy. Given our federal fiscal disaster, the future of the US depends in large part on how much healthcare we want and how we pay for it.
Despite my libertarian leanings, I love Medicare. And I worry that it will go broke before I draw my last breath. We are already in the midst of a fiscal crisis about which neither political party seems to care. Many economists predict another Great Depression unless we tend to it. So, there are a few principles that should guide us in developing a system that extends high quality healthcare to all and does so cost effectively.
First, the government should provide a social safety net. Many Republicans forget it was conservative economist Friedrich Hayek who coined the term “safety net.” In his master work “The Road to Serfdom,” he wrote: “There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security should not be guaranteed to all… Nor is there any reason why the state should not assist… in providing for… common hazards of life against which… few individuals can make adequate provision… The case for the state’s helping to organize a comprehensive system of social insurance is very strong.” That’s why the expansion of Medicaid was the most important element of the Affordable Care Act (ACA). Making it available to middle-class families enabled them to make an informed choice about purchasing private insurance or sticking with a government program.
Second, any new system must address the underlying cost structure. The highly regulated, high cost Fee-for-Service system we have today must be overhauled. The ACA proposed Accountable Care Organizations that would be compensated on the basis of medical outcomes. Absent a mandate, the experiment unfortunately fizzled out.
Those who favor Medicare for All (M4A) don’t seem to care about cost. Their proposal would pay for additional coverage with a tax on the wealthy. The US has the most progressive tax code in the industrialized world. The top 20% pay over 88% of income taxes. In Europe, a large part of government’s budget is covered by a Value Added Tax (VAT), usually adding about 20% or more to the price of goods purchased. Would our so-called progressive politicians propose a regressive tax like the VAT to pay for M4A? I’d like to see them try.
Third, there must be room for competitive enterprises in the system. Capitalist enterprises have innovated new treatment protocols, extraordinary medical devices and amazing pharmaceuticals. Were it not for competition, we wouldn’t have laparoscopy, implanted defibrillators or ACE inhibitors. Scandinavian countries providing free healthcare have no significant pharmaceutical or medical device industries. They keep costs low by negotiating lower drug prices, for example, but rely on innovations from other countries.
And, lastly, everyone should have some skin in the game. I recently pointed to Singapore’s system as an example where consumers spend their own money first in buying healthcare services. Providers respond to competitive pressure from consumers to keep prices low.
How would an alternative system look? We can’t be sure. There are too many entrenched interests making too much money for politicians to mount the courage to overthrow the current paradigm. I would point to one example to give you an idea how a creative approach could improve outcomes. In France, the hospital comes to you. Mobil advanced life support units, staffed by doctors and nurses, back up first responders. The result is better medical outcomes because people promptly get advanced treatment at home and lower cost because fewer patients go to the hospital. Could you see that happening here?
I’m sure you’re waiting for me to tell you how we should design this new system. But, I can’t! I am not sure anyone can. However, I believe that starting with a set of sound principles will lead to a better system than either M4A or the ACA.
WHO WILL LEAD?
The Poll
Recently I created a poll asking if you preferred longer essays like this one or the short takes I’ve been publishing since the beginning of the year. Thank you to those of you who responded. Unfortunately, you are deadlocked 50/50. The poll is still open; so, if you haven’t voted, please do so by clicking HERE. Thanks.
What I’m Reading
Sarah Lawrence College professor Samuel J. Abrams tells us the American Dream is alive and well in the 21stCentury in his essay in the New York Times… The Green New Deal proposed by Democrats will hurt working-class Americans most according to Brandon Weichert… Just finished a great book by Chris Voss, who developed the FBI’s hostage negotiating techniques. It’s called “Never Split the Difference.” Don’t think it’s only for business people negotiating deals. It’s a prescription for dealing with important people in your life too.
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