Liberty and Medicine

Tuesday, July 31, 2007

Centenarian told to wait 18 months for care.

No doubt you’ve heard the old joke about the man who walks into a store to buy something. He looks at the price and complains to the shop owner that they are “ripping people off and the guy down the street has it at half that price.” The shop keeper says to him, “So why don’t you buy it down the street?”

“I would, but they don’t have any.”

National health care is a similar sort of enterprise. They brag it’s a lot cheaper but the shortages (not having any) is a problem. And the plight of Olive Beal illustrates this.

Olive is a senior citizen. That’s a modern euphemism that means she’s old. Her eyesight isn’t that good. She has to use a well chair and she has trouble hearing. She went to the National Health Service doctor who examined her and told her she definitely has to have a new hearing aid. The one she has now doesn’t work for her.

The glitch is that every health service in the world has to ration care. The advocates of socialized services, like the NHS, try to pretend that: 1) this doesn’t happen; 2) if it does happen it doesn’t happen often; 3) that when it happens it is not that significant.

For Olive it was significant. She was told that the she can have a new hearing but she must wait one and half years for it. Apparently that’s not bad for the government system. A spokesman for the Royal National Institute for the Deaf told the Guardian, “I am afraid this is a common problem. In some parts of the country there are over two year waiting lists, which is shocking.”

It may be that the bad publicity about Olive’s situation will bump her to the front of the line so that the British Labour government can show everyone how well the system works. That just means that people already on the list have to wait longer themselves. It doesn’t solve the problem it merely makes it disappear from the headlines.

Olive’s granddaughter, Marie Scott, 52,.... Hold on! Isn’t that a typo? Shouldn’t it be 25? Nope. The granddaughter is 52. Oliver happens to be 108 years old. That’s the only reason she is getting publicity -- unlike the many others waiting for a hearing aid.

There is something absurd in a system that asks a women who is 108 years old to wait another year and a half for a hearing aid. In essence they are denying her the hearing aid. Certainly they are aware that her ability to wait that long is highly doubtful.

No socialized system of health care has been able to get around the rationing issue. When consumption of health care is not directly paid by the consumer the demand for health care will always exceed the supply.

And every nationalized system tries to ration in one way or another. The Canadians and Brits ration health care through the use of waiting periods. In Germany the care is rationed by underpaying physicians, working them long hours and placing a huge percentage of the costs on their shoulders -- that creates supply problems when it comes to physicians.

The French tried to avoid rationing to the current generation of consumers by running up massive debts that will eventually mean rationed care to future generations. They are basically denying care to their children or grand children. In New Zealand they tell you which treatments you may have and which you may not. If what you need is not on the approved list too bad. If what you need is approved you are in luck, provided you can afford to wait.
Another common trait of these systems is spiraling debt. The care is costing more than they can afford. Each year they are finding it more and more difficult to keep the system running.

Another way these countries keep down their cost is that they are subsidized by American health consumers. Here is how that little scheme works.

Pharmaceutical companies spend billions developing new drugs. When they develop something that seems to be effective they seek a patient. The patient allows them to market the product over a span of 20 years and then its public domain. So they have to recoup the costs of that drug, and all the costs of drugs that didn’t work, in that relatively short time period.

The moment they apply for the patient the 20 year time clock starts ticking away. The problem is that it can take almost half that time just to get the drug through the regulatory process. So the time period to recoup their costs is dramatically reduced by bureaucratic inefficiency and regulatory red tape.

Let us now say that eight years down the road they have the approval to market the drug. Let us say it is efficient and effective. It’s a winner. These socialized systems want the drug. But they aren’t particularly interested in the R&D costs, etc. They want to know how much it costs to produce one pill. And they generously offer to pay the producer a small profit on top of that marginal cost.

This is only a profit on the marginal cost of producing pills not on the total cost. And international patient law is set by governments who are the monopoly health care providers in many of the major drug markets. Under that law the government can declare the drug as something needed by their citizens and then ignore the patient. In essence they can then take the total marginal profit income for themselves at the expense of the people who developed the treatment.

With that threat hanging over the head of producers they know that a profit on the marginal cost is better than nothing. But there are still the research and development costs of this drug and for those that weren’t winners. So how do they cover that cost? They sell the same drug at a higher price in the United States. This is what the whole reimportation debate is about.

Of course, if the US put in a similar heath system they could also threaten to confiscate the formulas and discoveries of the pharmaceutical industry. Then everyone would supposedly pay only the marginal costs of production. The problem with that is this means there is no longer any reason to invest in pharmaceuticals. Better to open a taco stand. The net result would be a collapse of the research and development of new drugs. But that keeps down the health care costs -- no new drugs, no new expenses. And the advocates of socialized health care will call that efficiency. And a second goal of the socialists would also be accomplished -- equality. Everyone would be equally denied the drugs that never came into existence. Equality and a low price! Who said socialism doesn't work?

Photo: Olive Beal. I don't know what she's drinking but I think she's going to need a few refills.


Friday, July 13, 2007

Wait and Die. The nationalized health alternative.

A short film, about 8 minutes, discussing how Canada rations health care and the results of that policy.

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Who are the uninsured in Ameica?

A 9 minute film exploring which groups comprised the uninsured in America.


New Zealand's nationalized care spends more, cares less.

New Zealand has one of the pioneering nationalized health services in the world. But, as with all nationalized systems, they ration health care out. There is no other option. Free health care for all is an illusion.

New Zealand uses the standard form of rationing: queues. You can have health care if you can afford to wait for it. If your problem kills you before you get to the front of line that improves the waiting time statistics. Lots of Kiwi voters were unhappy with the growing wait periods. And, in the last election, the ruling Labour government was in deep trouble.

A massive spend-up on programs, along with hundreds of thousands in illegal campaign spending, kept Labour in office but barely.

One of the parts of the massive spend-up was an extra $4.5 billion was on health care. But, Heather Roy, health spokesman for the ACT Party, says that a report from the Treasury department shows that the extra spending has lead to no extra health care!

She quotes a Treasury report, “increased staff numbers have not led to higher outputs.” So, why is that? If the health services can’t handle the care required, and you increase staffing, shouldn’t the number of patients treated also increase? You would think so. But, it really depends on who you hire, and what they do.

Roy noted that while some of the extra $4.5 billion was spent on staff it didn’t pay for “doctors and nurses”. Instead, “the new staff has largely been made up of pen-pushers -- staffing levels at the Ministry of Health’s head office has increased by around 40 percent under this government...”

So, the extra staffing covered management and file shufflers, but not more health care. The government now has more people filing more pieces of paper, but no extra medical care. In fact, with the expansion of clerical staff, the nationalized system, in New Zealand, now has more staff members than hospital beds. As Roy put it, “if every single bureaucrat in the health system fell seriously ill today, there wouldn’t be enough beds to treat them all -- let along anyone else.”

Because the waiting lists were getting embarrassingly long the Labour government came up with an idea to solve the problem. They ordered the district health boards to kick people off the waiting lists. Roy says a document leaked from the Waitemata DHB showed they had been threatened with a $3 million penalty if they didn’t remove 800 people from their waiting lists. They were told to send the patients, waiting for care, back to their physicians instead, even though the physicians were the ones who sent them for specialist care in the first place.

Of course, if Michael Moore made a film on the nationalized system in New Zealand, it would only show empty waiting rooms and pretend none of this was happening. He wouldn't tell people the waiting rooms were empty because the patients were sent back to their physicians so they could start the process all over again.

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Sunday, July 01, 2007

Forced insurance scheme runs into problems.

In one of his previous political incarnations Mitt Romney pushed through a universal health coverage plan in Massachusetts. It is now in operation.

About 10% of the state residents didn’t have insurance prior to the imposition of compulsory insurance. Two-thirds of them still don’t have care. Those who are poor received state insurance at the expense of the taxpayer. They didn’t mind signing up but they weren’t the majority of uninsured.

One of the problems with stats about America’s “uninsured” is that while the total percentage is thrown about it is never broken down. Who are they and why are they uninsured?

One of the policies that politicians pushed through in the past linked health insurance, for most people, to employment. The unions liked that idea, it was a way of forcing through pay increases in the guise of something else. So they pushed hard for employer provided health benefits. Sounds good doesn’t it?

Yet that is one of the reasons people are not insured. The insurance is linked to their employment and people change jobs. When people change jobs their old insurance is cancelled and they have to get new insurance. Sometimes there is a time lag between that job and the next. And during that time they are uninsured. Many of the uninsured in the US were transitioning between jobs. Around 9 million of the uninsured in the US are people between jobs and a third will be reinsured within four months and the remainder reinsured within one year.

But there is another problem that kicks in because of these connection between insurance and employment. People sometimes develop illnesses while on one job. If they change positions and are uninsured that illness becomes a pre-existing condition that is not covered by insurance. The union push to tie insurance to jobs also ties people to jobs. If they change jobs, perhaps taking a better opportunity, they may find they have no health insurance and can’t get it for the very thing for which they need it most.

Another group that often tends to be uninsured are people who can easily afford insurance. The reality is that wealthy individuals don’t need insurance. In fact insurance might well be a bad idea for them particularly if they have been wealthy for much of their life. People who can pay for heart bypass on their own don’t need insurance. For instance Mitt Romney, who pushed through compulsory insurance in Massachusetts, can afford all the health care he wants. He doesn’t need insurance.

A third group of uninsured have been the young who assume they don’t need health insurance. And for the most part that assumption is entirely valid. People who are young and healthy tend not to need insurance. They know that the likelihood of a serious illness over the next 20 to 30 years is minimal. And they’d rather have the cash than the care. The need the one more than they need the other.

And the compulsory system in Massachusetts is finding that of the uninsured “not all are rushing to get coverage. Many of them are healthy young people in their 20’s and 30’s, state officials say.” The state is spending $3 million just advertising the mandatory insurance scheme. As one 25-year-old who is employed told the New York Times, she will choose to remain unemployed and pay the fines the states will levy on her because that is “cheapest and easiest.”

The US as a whole has the same problem. Young, healthy individuals don’t want health insurance. Almost 40% of the uninsured in the country are under 25 years of age and almost two-thirds are under 35.

Again much of the burden for insurance falls on small companies. Employees who work more than 35 hours a week must be offered insurance by the employer. Deb Maquire runs a small pub in Falmouth, She offers insurance to her employees but only a third of them have taken it. It costs them $42 per week bu Maquire has to pay $45 per week for the same employee. Under the compulsory system the other two-thirds will be forced to join and Maquire says her business simply can’t afford to triple the amount they pay out.

One way around this is that smaller companies are cutting people work time. More and more people will be pushed from the private insurance market into the state subsidized system. And the tax burden will have to increase in order to pay for that. But higher taxes mean less jobs and more unemployment meaning more people qualifying for state insurance. Even an analysis prepared by the state legislature indicates that they expect the plan to be in the red to the tune of $160 million within two years.

What is interesting is the amount of force that the state has to use against the uninsured. The Times reports:
In 2008, the penalty for those not insured will be a loss of state tax exemption, worth about $219; later the penalty will be up to half of a monthly insurance premium for each month a person is uninsured. Also, while any insurance is acceptable at first, by January 2009, everyone must have drug coverage.
No doubt people would be more willing to take health insurance is a third party paid for it. The uninsured who did sign up in Massachusetts tend to be people who are qualified for state provided insurance. But that the state has to penalize and punish, rather severely, people who don’t sign up for health insurance does show that a good number of the “uninsured” don't want it.

And there is one additional problem. People who are uninsured tend to consume less health care than they need. No one questions that. But often it is forgotten, or ignored intentionally, that those with third party payment plans often over-consume health care.

If the insurance scheme means that a consumer pays a flat rate per month and a third party insurer pays out for that care the consumer sees any use of the health service as “free”. There is no link between their consumption and and their payments. That is the very link that advocates of universal health care are trying to severe quite intentionally. But the net result is that consumers will then tend to over medicalize as compared to their previous habit of under medicalizing.

All third party payament plans have this problem of perverse incentives. Consumers tend to demand more care than they need and to be less informed about care options available.

As coverage expands consumption of care increases more than was expected. The result of more people chasing a limited amount of care is to push up costs more rapidly than before. This is one of the problems the welfare state systems are facing. Health care costs are skyrocketing and they are finding themselves unable to cope. That forces the rationing that Michael Moore deceptively ignores in parts of his docufraud and simply lies about in other parts.

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