The Economist on American Health Care

Mining the 7 - 13 March issue of center-left or center-socialist The Economist further, it discusses the American health care system and the attempts of the Obama administration to degrade it with still more socialism. Of course, The Economist does not call it degradation. After discussing the politics of Tom Daschle's tax problems and how that kept him from becoming the Secretary of Health and Human Services and the appointment of Kathleen Sibelius to that position instead, they slam our health care system in the usual ways.

The Economist says we spend $2.2 trillion per year on health care and get "mediocre results." They say Americans die nearly two years earlier than west Europeans. They say that 46 million Americans lack health insurance. They add that ever-rising medical costs could break the budget. OK, let us examine these claims.

First, we do spend much more money on medical research, development, and care than do other countries. Some of this is wasted money due to Medicare and Medicaid and their harmful effects, which are of the nature of the added harmful effects which will come from further government intervention in the health care system. The Economist article mentions the fact that a typical hospital has a profit margin of 48% on each privately insured patient and loses 44% on each patient using Medicaid. When a hospital is losing money on a patient covered by Medicaid or Medicare, their tendency is to respond with charges for items and services which are not used or needed in order to partially compensate for the loss. This is wasteful and increases the cost of Medicare to the taxpayers and for healthcare. This also sets up habits, which are then responsible for increased costs assigned to privately insured patients also. The whole system becomes more wasteful and it starts with the central fact that the Medicare or Medicaid patient has too little incentive to care about the cost of his medical care and the medical care givers are unhappy with being forced to work without fair compensation.

Another important cost is the very high liability of American hospitals and doctors since they are not protected by a government umbrella against being sued as a nationalized medical system would be. This lack of protection does hold the medical profession to a higher degree of responsibility, but of course it comes with high costs. Among them, doctors must be overcautious in following some standard procedures even when they know they may not be best for a given patient and they must over-prescribe medical tests and some operations.

Still another factor is that we do a very disproportionate fraction of the world's medical research and development. This is very expensive. But, it is also an important factor in the growing life span of people around the world, who even in the socialized medicine environments of western Europe and elsewhere derive benefits from our commitment to medical R&D.

The nationalized medical systems of western Europe save money by rationing medical care and by making it slow rather than responsive. They make operations which are optional, but life-enhancing in the eyes of those who want them, unavailable. They also have a greater preferrence for allowing an older person to die rather than perform an expensive operation which may extend their life only a relatively short time. Finally, they are commonly also slower to make use of the latest medical procedures and to acquire new technology when it is still in its expensive stage. The costs of most sophisticated medical equipment comes down fairly rapidly in time, so you save money by waiting until it costs less. Meanwhile, some people die. A system that makes such choices can save money, but there is a very real expense in quality of life associated with this savings.

Finally, America is richer than western Europe on average. When you are richer, you are willing, able, and happy to spend more on your health and on medical care.

But The Economist's second point seems to argue against all I have said above to justify our greater medical expense. The fact that we have a nearly two year shorter life expectancy than western Europeans seems significant. It seems to suggest that the socialist health care systems of western Europe are doing a better job of giving people longer lives at less expense. Let us examine this.

The populations of western Europe are more homogeneous than is that of the U.S. There are growing numbers of Muslims from North Africa, but the European population of Native Americans and Black Africans is much lower than in the United States. There is a genetic component to life expectancy and there are also behavioral components. These are not likely in many cases to be changed by a socialized health care system. For instance, black African American males have an average lifespan which is 6.2 years shorter than that of white men and 8.3 years shorter than the national average. Native Americans average even shorter lifespans than African Americans.

African Americans have a 70% increased likelihood for diabetes. They are about 80% likely to be salt sensitive, while about half of the world population is, and this makes them more prone to high blood pressure. The high incidence of diabetes and salt sensitivity make them more likely to die from heart disease and they do at a 30% higher rate than whites. African American men are most likely to die from homicide, followed by unintentional injuries, between the ages of 15 and 34. African Americans are more likely to be obese and they are the only group with sickle cell anemia and the health problems related to that. Black Americans also make unhealthy eating choices more frequently and make sexual choices which cause them to acquire sexually transmitted diseases in higher rates by far than other groups of the population. So, the net shorter American lifespan is substantially due to genetic and subculture differences which are not a function of the health care system.

More accurately, the number of Americans reported without health insurance was 46.9 million earlier, but it is now reported to be 45.7 million. Obama and the Democrats are still generally using the outdated number to say that the number of uninsured Americans is 47 million. More important, the number of uninsured is really an estimate of all people living in the United States and includes millions of illegal immigrants who are Americans in the sense that they mostly come from North or South America. But it also includes other illegal immigrants from other parts of the world. Furthermore many of the uninsured can afford insurance, but choose not to have it. Some because they are young and healthy. Some because they are wealthy enough to be self-insured.

Indeed, if you have enough income and fairly liquid assets, it is perfectly rational not to have health insurance, which usually has an upper limit of payments and which certainly has a profit margin built into the cost of the insurance. About 2.87% of American households have an income of $200,000 a year or more. If a household has had this level of income for a few years, it may have built up a good nest egg of investments and savings. These about 2.9 million households have an average of 3 people in the household, so there are about 8.7 million Americans who might very reasonably choose to be self-insured. In some cases, some of these households might choose to in effect insure other family members not living in the household as well. So it is very reasonable to believe that health insurance is very optional for as many as 10,000,000 Americans. Because Americans are relatively wealthy, there is a higher percentage of Americans who would choose not to have health insurance than would be the case in most of the world, including western Europe.

Finally, The Economist is worried about our rising medical costs. So am I, but I am sure that they will only continue to rise even more with more government intervention, or if they do not, it will be due to drastic, anti-individual modes of government forced rationing of health care. Our current rising costs are a function of both wasteful current government meddling through Medicare, Medicaid, and the courts and many increased options for our health care offered by new technology and procedural advances. The latter cause is a good one. Another expense increaser is the problem that the rest of the world is more and more opting out of their responsibilities for the development and the costs of new procedures and drugs. America is subsidizing the rest of the world's healthcare in a big way. The only way we can prevent this is to shoot ourselves in the foot.

The article notes that Obama has signed an expansion of the state health insurance for children. He has set aside more than $630 billion over ten years as a "down-payment" towards making health care affordable for everyone, clearly at added expense to many others. And what does it really mean to say he has set this money aside, when he has no such money, but only huge deficits? He also wants to force all parents to buy health insurance for their children. He would not allow insurers to reject covering people for new insurance who have pre-existing health problems, which will raise medical insurance for the healthy. He will allow everyone to buy into the government health plan if they wish. Obama will curb costs by cutting out waste (a precedent breaking new government ability unique to Obama government) and he will encourage healthy living. He will computerize medical records and use this to determine what procedures have the most bang for the buck, so he can ration health care according to his evaluation of what bang is enough for the buck. He will increase taxes further on liquor, cigarettes, and sugary drinks. Restaurants may be forced to serve smaller portions. Companies will be forced to provide gyms for their employees to use and presumably force them to actually use those facilities. What an American concept!

Where is the sovereignty of the individual to be perceived in these plans? Each of our lives is to be micromanaged by our all-knowing government. How delightful. We will all have to live almost 2 years longer no matter how little some of us might like the rules. If only those genetic factors and those lifestyle choices predominantly found in some ethnic groups do not prove too resistant to government rules and mandates, we should have a successful future as western European socialist mimics.