Clive Crook from FT and Peter Orszag are wrong on government health care

I am referring to Clive Crook's article on Medicare and Peter Orszag's article. 

I am a Financial Times temporary subscriber (as in I won't renew my subscription when it will come up). I think FT is a leftist piece. (which is curious since finance should be about markets).

The US system is very expensive, as noted by Peter Orszag today; but it does the job for most Americans. 

What Obama and you have in mind is to replace the balkanized system that every state has with a monster federal system. 

Crook says that a Medicare-for-all system would give US a truly universal coverage and will better control the costs. 

Canadian experience, however, shows the exact opposite - a truly government system is absolutely unable to contain costs. Not only expenses increased from 77 billion CAD in 1997 to 177 billion CAD in 2008, but the quality improvement is nowhere to be found (that is I think the Canadian system at this moment is the worst ever). I lived in Canada until early this year - I know what I am talking about.

 

You must have near infinite patience to wait in the hospital emergency room. As for seeing your family doctor (1 million people out of 13 million in Ontario, Canada don't have one) it takes from a week to a few weeks. However, going from there to a specialist takes a few good months (unless you are connected with the mighty Ministry of Health bureaucracy). From a specialist to surgery it takes a few more months. 

Also, in Canada, there were cases of women having miscarriages in the emergency ward (after waiting a few good hours for a help that never came). Look at this case in Alberta.

What Obama wants to do is to shove some kind of Medicare down everybody's throats. Of course he will say he only wants to improve accessibility and lower costs, but if history is any guide, Obama's talk and actions point in completely different directions. Actually if he really wants to make America competitive (as Orszag claims in his piece) there is a better solution: get out of the business altogether. Don't provide any medical services. Just pay for the handicapped and the elderly to provide their own care from a private hospital/practitioner. 

But this won't fly. Obama's supporters in the nurses unions would not vote for him and he will lose his job come 2012. He would have to go back to community organizing, writing fluffy books and rubbing shoulders with Ayers and Wright. His wife also won't be able to be a trustee to a hospital associated with the University of Chicago, since Obama won't be able to direct pork from taxpayers to the above mentioned hospital. 

What Orszag said today in FT is no news. We all know that the costs of medical insurance is up and it seems (to him) that prices have no chance of abating. And while it's true that US health care lacks in quality (especially from government hospitals), he fails to mention that the runner up regarding costs (Canada) is the worst in OECD in terms of "bang for the buck". US care is more expensive, but it achieves more. From this perspective, I note Orszag's comments as misleading. 

What Orszag suggests is to 

- ration care: reduce it by 700 billion a year. 

How will he determine what is inefficient - he doesn't say. Maybe have a 800 billion dollar a year agency that can do that. 

- cut payments to private insurers 

So the insurers stop ensuring some procedures or better yet go bankrupt and let the government insurer take over.

- cut health deductions for the wealthy. 

The rich don't even use the government health facilities. He also assumes that they won't actually move somewhere else or cut on their work (why work when the government gauges you). 

- cut payments to hospitals for the uninsured 

That's when Orszag shows his real colors. He assumes there would be few uninsured if any, since the government will pay for them with taxpayers' money.

- improve medical records

It was tried in other places (Ontario), where the government spent over 500 million, no work was done, but those in charge got hefty bonuses. 

- changes in incentives (what changes - it's not clear).

Orszag's changes (and by extension, Obama's) don't even scratch the surface. It's like complaining that houses are too expensive when the interest rates are close to zero and sub-prime borrowers need no downpayment. The only solution then is to ask fannie and Freddie to lend more. 

The simple fact of dropping employer chosen health plan would be the best thing possible - for starters. 

What the healthcare system needs is a good dose of competition. Competition for insurers between state lines, a reduction in regulation regarding medical practice and a strong pressure on AMA (American Medical Association) to increase the number of medical students (or better yet, get rid of medical certification from AMA altogether). Also government discrimination against systems where the patients pay a fixed amount of money for care (while all costs are covered by the doctor/insurer). This in my opinion aligns perfectly the interests of the doctor (cut its cost) with the interests of the patient (good care). Tort insurance would also be useful (at least in capping the damages to a reasonable amount)

Milton Friedman wrote this great article in 1998. At the time he noticed that real costs of a day in hospital went from 30 dollars a day (in 1996 dollars) to 1200 in 1996. He also noted that the number of hospital beds per 1000 people went down as soon as the government programs of medicare and medicaid were implemented. The reduction in care produced a bureaucratization and an increase in number of nurses without any tangible benefit. Medical care professionals waste precious hours filling up papers for the government.

The share of government expenditure in healthcare is already 55%. Hardly a free market.

What incentives are there for providers of health services in a government system? None. As you might recall, in the US there was a scandal a few years back that soldiers coming from Iraq with serious wounds were "treated" in a dirty facility with rats (maintained by unionized workers of course). Also a family (I am sure it was not a singular case) was told that their loved one will never walk again, only to be treated in private facility and walk in a few months. 

Everybody can see the problems of the US health system. However, looking at Obama plan (or whatever crums he and Orszag revealed to the underlings), it's clear that their medicine is worse than the disease. 

It's seems to me that politicians enjoy using the machinery of the state to tax unwilling citizens only to redistribute the bounty with the other half (that is their voters). Sooner or later they will run out of other people's money. Then what?