How America’s Health Care Fell Ill

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One possible answer, certainly, is a national health-care service, such as that pioneered in Great Britain after World War II. In such a system hospitals are owned by the government, and doctors and other healthcare professionals all work for the government on salary. The great advantage is that no one has to worry about paying for a major illness; all are automatically protected.

But there are a number of disadvantages. Because medical care is free, the demand for it always exceeds the supply. The only recourse in such a system is to use the government’s monopoly power to ration health care and to hold down major costs such as professional salaries.

Thus in Great Britain people above a certain age who come down with grave but expensively curable illnesses often are not cured, unless they pay for their treatments privately. A twenty-year-old with lymphoma is treated aggressively; a seventy-year-old is made comfortable. Someone who comes down with an unpleasant but not fatal condition must wait to reach the top of the list to be treated. Those who need their gallbladders removed may have to endure a completely fat-free diet—gastronomic purgatory—for as long as two and a half years while they await their turn.

A second disadvantage is that because it is in the government’s interest to hold down salaries as much as possible, many would-be doctors are dissuaded from entering the profession in the first place, and many more emigrate to where remuneration is greater. Great Britain has one of the lowest rates of doctors per hundred thousand of population of any industrialized country. And that rate would be lower still if the United Kingdom did not actively encourage the immigration of doctors from Third World countries. One consequence is that medical research suffers as first-class brains move out. Any system that by its nature retards research in the age of the medical revolution is deeply flawed, for it is at odds with the long-term interests of humankind.

In any event, it is very unlikely that a proposal for a national health-care system could survive the political interests arrayed against it in this country. Many other proposals to reform health care, however, have been advocated in this presidential-election year, including one by President Bush, a sure sign that a serious search is under way at last.

 

Like chicken soup, most of these proposals won’t make matters worse, and by eliminating cherry picking and other obvious abuses they can certainly help. But none of them get to the real root of the problem: the fact that most consumers of medical services in this country don’t pay directly for what they consume, and thus don’t care what the medical services cost.

Here is one very simple proposal that would go a long way to fix that. It costs an American company about $4,500 a year to provide an employee’s family of four with medical insurance having a deductible of $200. A major-medical policy that had a $3,000 deductible, however, could be bought by the company for about $1,500. This policy would protect the family against medical disaster. If the company then put the remaining $3,000 into a “medical IRA” account for the employee’s benefit, and the employee, before retirement, could only spend the money for medical care, you would have an immediate, powerful incentive to care about what medicine costs. You would start asking questions. Doctors and hospitals would have to start answering them.

A more elaborate idea, advocated by the Heritage Foundation (no relation to this magazine), would work as follows. First, individuals rather than companies should be the primary purchasers of health insurance. That could be largely accomplished if the federal government eliminated the corporate tax deduction for medical insurance and provided an equal deduction—or better yet a tax credit for a portion of it—to individuals. If companies were required to pass on in the form of salary the money they had previously spent on health insurance, both the companies and the employees alike would be left just as well off. The companies, in fact, would be far better off, for they would be out of the health-insurance-purchasing business, with its mountainous paperwork.

The system offers little incentive for the consumer to shop around and no reason for any doctor to take a few dollars off the bill.
 

But in exchange for the tax credit, the government should require individuals to carry, for both themselves and their dependents, health insurance of the major-medical variety that protects against catastrophe and to note the companies and policy numbers on their 1040 forms. For those with low incomes the tax credit should be refundable, so if the credit is larger than the income-tax liability, the person gets a check for the difference. For the very poor the government should pay for the major-medical insurance and also provide primary-care insurance, designed to emphasize preventive medicine. This would take away the power of state governments to dictate hospital policy for political purposes.