How Capitalism Will Save Us (56 page)
Read How Capitalism Will Save Us Online
Authors: Steve Forbes
The Golden Rule—“He who has the gold makes the rules”—applies to health care as it does to the rest of the Real World.
For health-care consumers, that means medical treatment is delivered based not on what you, the patient, need or want—but on what someone else thinks you should have.
Healthcare News
reported in 2007 that some British hospitals actually banned smokers and the obese from receiving treatments such as orthopedic surgery. Many people believe smokers and obese people have helped to put their own health at risk. That may be so. But should they actually be denied medical care?
We noted in the introduction to this chapter that the problem with American health care lies in the rigidities imposed on the marketplace by layers of government regulation and bureaucracy. Far from fixing the problems of American health care, a state-run system, with price controls, rules, and rationing, would multiply them many times over.
REAL WORLD LESSON
By imposing price controls and bureaucratic constraints on the medical economy, state-run health care results in declining efficiency and quality throughout the system, as well as the rationing of medical care
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HY IS A PRIVATE-SECTOR HEALTH-CARE SYSTEM CRITICAL TO QUALITY MEDICAL CARE?
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ECAUSE ONLY THE PRIVATE SECTOR CAN FULLY DEVELOP INNOVATIONS AND BRING THEM TO THE GREATEST NUMBER OF PEOPLE
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e noted before and need to emphasize again: U.S. health care is not a free market. It is government dominated and managed. But there is still a private sector. That is why U.S. health care, while expensive, is the most advanced in the world. Americans have higher rates of survival for a myriad of diseases. The highly respected British journal
The Lancet
found in 2008 that Americans have far higher survival rates for thirteen out of sixteen of the most common cancers—the reason that thousands of people come to the United States each year seeking medical treatment. But this lead in technology and quality will recede and ultimately vanish the more government control over health care expands.
This may sound like a political statement. But it is the Real World economics of command-and-control economies. As we have explained, the more government controls a market, the less innovative and quality-conscious people and companies become.
Why? Because state control means that government policies drive prices. Companies and people are prevented from generating the capital to invest in keeping up existing operations and also in developing new technologies. Government imposes rigid “protocols” that micromanage market activity. People are prevented from spontaneously developing new ways to respond to demand and meet patient needs.
This happens not only in health care, but in any market. Remember our example of the Trabant. A product of East German central planning, the smoke-belching sedan was considered advanced when it debuted in the late 1950s. Then it was manufactured unchanged for three decades. The Trabant was so shoddy that it was thought to be made of cardboard; attempts to sell it in Western markets failed miserably.
The Trabant may have started out as a decent car. But without any competition in East Germany’s government-run market, there was no reason to keep improving it. The rest of the world pulled ahead in the auto technology race. In much the same way, the health-care systems of Canada and Europe stagnated after they fell under government control. Rigid government directives, minimal competition, tight funding constraints, and politically driven, punitive taxation kept doctors and hospitals from trying new ways to improve the delivery of health care.
David Asman, anchor of
Forbes on Fox
, experienced Trabant-style socialized medicine several years ago when his wife had a stroke in London. In the
Wall Street Journal
, Asman wrote that while he appreciated the
caring staffers at the British Health Service, it quickly became apparent that their level of skill was far below U.S. standards. Even after administering an MRI, doctors at University College of London Hospital weren’t certain of his wife’s diagnosis. After much string pulling, he managed to get her admitted to Queen’s Square Hospital for Neurology, considered the best neurological treatment center in England. Nonetheless, Asman reports,
The conditions of the hospital were rather shockingly apparent…. [T]he smells wafting through the ward were often overwhelming.
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… Compared with virtually any hospital ward in the U.S., Queen’s Square would fall short by a mile. The equipment wasn’t ancient, but it was often quite old. On occasion my wife and I would giggle at heart and blood-pressure monitors that were literally taped together and would come apart as they were being moved into place. The nurses and hospital technicians had become expert at jerry-rigging temporary fixes for a lot of the damaged equipment. I pitched in as best as I could with simple things, like fixing the wiring for the one TV in the ward. And I’d make frequent trips to the local pharmacies to buy extra tissues and cleaning wipes, which were always in short supply.
In fact, cleaning was my main occupation for the month we were at Queen’s Square. Infections in hospitals are, of course, a problem everywhere. But in Britain, hospital-borne infections are getting out of control. At least 100,000 British patients a year are hit by hospital-acquired infections, including the penicillin-resistant “superbug” MRSA. A new study carried out by the British Health Protection Agency says that MRSA plays a part in the deaths of up to 32,000 patients every year. But even at lower numbers, Britain has the worst MRSA infection rates in Europe. It’s not hard to see why.
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After his wife got out of Queen’s Square, she was briefly treated in one of the city’s few remaining private hospitals. The contrast, Asman writes, was dramatic.
Checking into the private hospital was like going from a rickety Third World hovel into a five-star hotel. There was clean carpeting, more than enough help, a private room (and a private bath!)
in which to recover from the procedure, even a choice of wines offered with a wide variety of entrees. As we were feasting on our fancy new digs, Dr. Cullen came by, took my wife’s hand, and quietly told us in detail about the procedure. He actually paused to ask us whether we understood him completely and had any questions. Only one, we both thought to ask: Is this a dream?
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Upon returning to the United States, Asman writes that the contrast with even Britain’s best hospitals was stark:
The cleanliness of U.S. hospitals is immediately apparent to all the senses…. Cornell and New York University hospitals (both of which my wife has been using since we returned) have ready access to technical equipment that is either hard to find or nonexistent in Britain. This includes both diagnostic equipment and state-of-the-art equipment used for physical therapy.
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The innovation and quality gap between America’s private-sector health care and European state-run systems is apparent in nearly every sector of health care. Europe once led the United States in drug development. But that is no longer the case, as Valentin Petkantchin, research director for the Brussels- and Paris-based Institut économique Molinari, writes.
During the last 20 years, the number of [drugs] launched by European drug firms has been reduced by half, going from an average of 97 [drugs] between 1988 and 1992 to 48 between 2003 and 2007.
As a result, the center of drug innovation has shifted to the United States, where the drug market is generally less restricted than in Europe.
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Why did Europe lose its lead? Price controls and taxes intended to punish “greedy” drug companies choked off the profits that would have generated capital for new drug research. In biotech alone, U.S. private-sector investment between 1989 and 2002 was four times greater than that of Europe.
The fact that our health-care economy continues to permit some free enterprise is the reason that Americans benefit more from new
technologies—even when they have been invented elsewhere. The CT scanner, which provides advanced, computer-enhanced X-ray imaging, was invented in the 1970s in Britain, the land of socialized medicine. But today Great Britain has half the number of CT scanners per patient than the United States has.
A study by the Organisation for Economic Co-operation and Development (OECD) in June 2007 found that the United States leads nearly every other nation except Japan in the availability not only of CT scanners but also of magnetic resonance imaging (MRI) machines.
According to the Cato Institute’s Michael Tanner, far more Americans—44 percent—have access to cholesterol-reducing statins, drugs that protect against heart disease, than patients in Germany, where only 26 percent can get these drugs, or Great Britain, where 23 percent can get them, or Italy, where just 17 percent can.
It is important to emphasize that America’s health-care achievements come from the private-sector portion of its health-care economy. Creativity lags where there is more government involvement—for example, in Medicare and Medicaid. But where the market is least constrained, exciting innovations in health-care delivery are springing up.
According to John Goodman, founder of the National Center for Policy Analysis, these innovations include walk-in clinics in shopping malls that are providing fast, inexpensive service treating colds and providing immunizations and other routine care. No insurance is needed. Other entrepreneurial solutions include telephone consultation services, such as TelaDoc, which provide hard-to-get telephone consultations with a doctor, and mass marketing drugs through big chains like Wal-Mart, which has helped bring down the prices of many drugs.
Prices have come down, and service has improved in medical specialties not covered by insurance—such as cosmetic and LASIK eye surgery. That’s because doctors work harder to please patients who are directly paying for their services. Not only that, Goodman says that prices in these specialties have fallen “despite a huge increase in volume and considerable technical innovation (which is blamed for increasing costs for every other type of surgery).”
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