Economy Health Care is not a Commodity By Ryan McGreal

Published July 16, 2007

With the release of Michael Moore's new documentary, Sicko , the on-again, off-again debate in the US over public vs. private health care has flared up again.

It behooves Canadians to pay attention to this debate, because the same people who, in the US, stand to lose the most if that country adopts universal health care also stand to gain the most if Canada abandons it.

As usual, there is far more heat than light in the debate; and most arguments come down to dogma.

The dogma of private health care is that whatever the government can do, the market can do better. Among those people who trumpet the dogma of market efficiency, mere facts can rarely penetrate their certainty (and in any case, it's not hard to throw so much sand that no one knows what the facts really are anyway).

In any case, even if we accept the dogma of market efficiency on its face, a strong argument can be made that delivering health care is simply a poor candidate for market forces because health care itself is a poor candidate as a commodity.

The principal economic incentive for an insurer is to collect premiums but not pay out benefits. This manifests in co-pays, user fees, risk selection, and service denial for pre-existing conditions - i.e. conditions that are most likely to require medical intervention. Right off the bat, treating health care as a commodity tends to mis-allocate spending away from where it is most needed. Single payer health care is better at prevention and early detection. For-profit drug and surgery providers want to maximize treatment, not prevention, and then insurers respond by finding ways to disallow coverage. The result is an ineffective mishmash of heroic, costly last-minute interventions for those with top-tier coverage and either inconsistent, haphazard service or actual denial of service for lower tiers. Single payer health care rations spending based on medical need, not based on ability to pay. Therefore, limited health care resources are allocated more efficiently to where they are needed most. Single payer health care has much less bureaucratic waste [PDF]. Because companies don't have to worry about who's going to pay, whole business units are eliminated or severely scaled back, and administrative costs drop dramatically. Single payer health care doesn't waste money on profit. Profit is money that goes into the health care system but does not provide health care. It's pure waste, especially since other aspects of for-profit health care add far more inefficiency than market forces can reduce. Because medicine is so complex, it's hard for patients to make informed decisions on purchasing care. To function efficiently, markets require informed, rational agents to negotiate contracts, but the information ratio between patients and providers will always be unbalanced. Doctors and patients should have the final say on medical treatment, not accountants and auditors. American doctors frequently complain that insurers second-guess or overrule their decisions, but the doctors are the experts. Health care is intrinsically labour-intensive. It requires people to deliver and administer, so market-imposed efficiencies cannot significantly improve labour productivity. It is impossible to shop around for a health care provider during a medical emergency. If you suddenly discover that the procedure you need is not covered, or that your insurer doesn't operate in the jurisdiction where you are having your emergency, you are out of luck.

Markets do some things very well; they do other things well when properly regulated; some things they cannot do at all.

An overwhelming majority of Americans supports single payer health care and has done so for a very long time, despite the near-absence of any media reports supporting or endorsing it. If markets always gave people what they wanted, then the US would have a market-based universal health care system.

The fact is that market forces by themselves cannot produce universal health care, since the market by definition will not allocate resources where they do no return a profit. That means sick and poor people are inexorably far less likely to receive health coverage than healthy and rich people.

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan wrote a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. His articles have also been published in The Walrus, HuffPost and Behind the Numbers. He maintains a personal website, has been known to share passing thoughts on Twitter and Facebook, and posts the occasional cat photo on Instagram.

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