Socialized Health Care

We’ve all heard the ongoing news of healthcare reform and by now I think we’re all getting sick of it (no pun intended). Although there are many aspects to this issue, I would only like to mention one to keep it brief. If healthcare becomes socialized, it will kill competition in the industry. Competition is the driving force behind innovation and quality. Without it, firms will no longer be worried about losing business because they are guaranteed being paid. They will receive their annual salary regardless of how many lives they save, or how many diseases they cure. There is no incentive to excel or do better than the next doctor.

There are two examples that will help illustrate this point. The first comes from my brother. He graduated from the Air Force Academy and is now serving in the Air Force. Military personnel are given free healthcare from the healthcare institution on their respective bases. However, my brother has stated many times that he doesn’t even try to go there unless he’s “dying;” and on other occasions he’s said that if he ever did have a serious injury or illness he’d prefer going to a regular hospital. This is because the military doctors are paid on a biweekly basis rather than on performance. He said it creates an environment that “breeds mediocrity.”

The other example comes from one of my friends, who we will call Julie, hails from Albania. Albania was one of the last European countries to do away with communism. As a result, many of the communist practices are still in effect until the new government decides what to do. Julie’s dad has a very bad heart and had to have heart surgery a few years ago. Since doctors are paid a wage by the government, they feel as though they are not being paid enough. So instead of trying to reform it through the government, they request that the families pay them extra to save their loved ones. The family is then stuck with another bill that usually measures in the tens of thousands. Hardly anyone has that kind of money. Since Julie’s family was unable to pay the bribe, the doctor did not do his best to save Julie’s dad and he slipped into a coma for months. He has since recovered somewhat but he is forbidden to do any work, chores, or anything else to exert himself.


Jonathan said...

Adam, I like the point that you made that competition is the driving force behind innovation and quality and without it, firms will no longer be worried about losing business because they are guaranteed being paid. I'll try and keep this from being as political as I can but becoming less innovative kills our economy. We know that the healthcare system isn't 100% perfect but if Mr. Obama is worried about people that can't qualify or don't have money for insurance, then I think he needs to try and fix the insurance system first. I would hate to see our nation become complacent with regards to healthcare break throughs because the doctors just felt is was a job where they clock in and clock out.

Kylie said...

Adam, I couldn’t agree more with your post. You mentioned that quality will suffer in the absence of competition because the doctors are being paid regardless of performance. I would like to add that quality will also suffer due to a lack of motivation to become a doctor. Many individuals who may have wanted to become doctors will lose their incentive to spend the time and money in medical school because of a program that discourages competition and eliminates the desire for improvement. As a firm believer in the necessity of competition, it is difficult for me to see much benefit as a result of a socialized healthcare program.

Rebecca said...

We already experience the withholding of the top-notch medical care. It is called "HMO" and doctors have been in collusion with insurance companies to withhold services for a long time.

So we know it is extremely expensive to get quality medical care. The medical care is so expensive that we want to overhaul the system. An overhaul of the medical system (socialization) will lead to a reduction in the quality of medical care. To get doctors to provide quality medical care will become cost prohibitive... The truth is we could chase our tails for a while here. The lowest common denominator is cost. In that light, I would agree with Jonathan about the insurance system needing overhaul first.

Anonymous said...

two anecdotes does not make a compelling argument.

what plan are your referring to that will socialize medicine? The closest thing in discussion right now would be a public insurance option to allow people that currently can not afford or are denied coverage by the private insurers to have insurance.

Another option being considered is mandated insurance, i.e. every person must have medical insurance. This will potentially reduce average costs because less risky people will be overpaying.

There is no discussion about government run health care.

Rebecca said...

To Anonymous, it seems that if the government is involved in the delivery of health care (other than regulation), directs its inclusions and benefits and subsidizes the cost then the system is a social insurance program.

If you do not like the term "socialized" what would you like to call the proposed public insurance option? And how would you classify Medicaid and Medicare? Are those not socialized medical care systems?

This jist of this post is whatever form medical care takes in the future, the program may not improve the plight of the poor or those currently without insurance. The broken piece in the system is the cost of care and that is an insurance industry issue.

As for the uninsured group, I would argue that there already exists some good options for health care that are ignored (conveniently) in order to push an agenda.

For example, within the State of Utah there are 3 public health care systems for low income families apart from Medicaid.

The first is Children's Healthcare Insurance Program (CHIP). CHIP has year round open enrollment, with no income exclusions for children. CHIP is currently under-utilized by ~300,000 slots as of September 2009.

Next is Primary Care Network (PCN). PCN is for uninsured adults and has a sliding income eligibility which phases in around $31,000 for a family of 4. The quarterly premium for the most expensive plan "C" is only $75.00! Not too bad. If you are poor and uninsured, $300 bucks a year is pretty good and even includes dental!

Finally, HIPP is the high risk insurance pool for the uninsurable because of pre-existing health problems. HIPP is cost prohibitive but has the same guaranteed acceptance as a group plan.

Why is Utah able to offer better levels of care at a lower price? Less insurance industry involvement. Plain and simple.

The idea of mandating health care is ludicrous. How exactly do you tell a family that can't pay its living expenses that it must purchase mandatory health insurance? Will not happen. The only possible answer is "the state will pay for it." (just like they already do with Medicaid and federal Title XIX matching funds) Bingo. Another layer of social program on top of an existing social program.

I would love to know how to mandate coverage. And while you are at it please explain how public insurance will not be socialized health care.

Rachel said...

I agree with Rebecca. I beleive this kind of Socialized helth care plan increase quality medicale cost. If this thing happen than people don`t care about cost and they agrre for any cost but they think if spend money form thire own pocket.I think who don`t have money than they can`t affort high quality medical. I think this kind of helth care paln increase medical cost and make medicla to expensive.I am not agree with Adam post. I think this helth care plan wrost.

Dr. Tufte said...

Adam: how is this related to Chapters 1-3?

I do think all of you who are fond of competition in healthcare to consider all the areas of it in which competition is stifled - either by the government or by the healthcare industry itself.

Aicha435 said...
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Aicha435 said...
This comment has been removed by the author.
Aicha435 said...

I must disagree with your statement, Adam, that socialized medicine will kill competition in the industry; just the opposite is true. The Affordable Care Act—otherwise referred to as Obamacare—relies quite heavily on free market forces to be effective. The government is not taking over hospitals or directly employing doctors, nor are they providing government-run plans to compete with private insurers. A majority of employers will still provide healthcare coverage to employees through traditional means, but they will now have access to a Health Exchange that allows employees to choose the coverage best for them. This actually gives private insurers a level platform wherein they can compete for business. Obamacare may not be perfect, but it’s a step in the right direction.

With regards to your concern for the quality of care, you have made a general assumption about socialized medicine based on one account. For years I lived in a country that had government-run healthcare facilities and I have experienced this “socialized” kind of care first-hand. Not only was I immediately treated, and treated well at that, all services and medications were completely free of charge. I will admit that the government hospital was not nearly as aesthetically pleasing as other private facilities, but the standard of care was the same across the board. Many physicians who work in government hospitals during the day run private clinics at night. My point is that not all socialized medicine is the same, and not all of it is bad either.

Dr. Tufte said...

It's quite alright to comment on old posts.

Having said that, Aicha435's comment was written after Obamacare passed, while the original post and the other comments were written before it was passed.

Aicha435's first paragraph is right on the money. "Obamacare" is essentially a Republican backed health plan from 20-25 years ago. Both parties have moved to the political right, so it is correct to say that Republicans are now against something they more or less invented.

But Aicha435's second paragraph is problematic (and only supported by an anecdote). Most comparisons of care across countries ... hmmm ... don't pass the smell test. The gold standard would be a matched pairs test: match patients with as close to identical conditions as you can, and then measure the outcomes. When done this way, the mixed private/public system the U.S. had wins by a long shot.

Dr. Tufte said...

Aicha435: 50/50

Oops. Forgot the grade!