Once again, the health care debate has heated up in this country. Don’t worry, I’m not going to get political. In fact, I think the inflammatory rhetoric from all those in power has caused us to lose sight of some basic economic principles that govern all industries, including health care. And that’s a shame because, until we understand how the health care system works, we will never be able to create a viable solution to the problems we face.
This might be difficult for many partisans to hear, but no matter what side of the political aisle wins this fight, individual health care will still be rationed and inequality will still exist. Why? Because health care is a limited resource. And like all limited resources, where there is a scarcity, rationing, in one form or another, naturally follows. Let’s face it, there are only so many doctors, facilities, and funds to go around. There are plenty of politicians who will tell you that, under their plan, this won’t be the case. Unfortunately, by now we know that Washington’s track record for keeping promises isn’t very good. The simple truth is that rationing will always be a part of the health care system. The only questions are how much? And, to which groups?
In a purely capitalistic society, health care is rationed solely by price. This means your level of wealth determines what treatments or procedures you’re able to receive. Although this system provides heavy incentives to health care providers that can result in technological innovations and higher quality care, the likelihood of inequity and unfairness is pretty obvious. That’s why this type of system, while still existing in many developing countries, is virtually extinct in most developed nations, including the United States.
On the other side of the spectrum is the single-payer system, here the government controls health care and provides coverage to everyone. Rationing still occurs, just in a different form. This time it manifests itself in long wait times for treatment, shortages in cutting-edge technology, and poorly trained personnel. Studies have shown that treatment in this type of system tends to be lower in overall quality. For example, a recent study of the Canadian health care system found that the average wait time for medically necessary treatments was 9.8 weeks – three weeks longer than what physicians consider “clinically reasonable”.* Sadly, similar stories have been in the news recently regarding the U.S Veteran system, where long wait times and poor quality of care has been the norm in too many of our VA hospitals and clinics.
In general, U.S. health care system is a hybrid of both extremes. In our “mixed” system, wealth certainly plays a role in the kind of care you are given. However, government programs and regulations also guarantee that a certain baseline level of care is provided to all residents. The rationing of care in this system is two-fold. Price plays a large role in determining who can afford certain treatments. At the same time, low payouts from programs such as Medicare and Medicaid limit the availability of quality of doctors and facilities and extend wait times to those using these programs.
I’m not going to tell you that I have all of the answers to our health care crisis. I don’t. My point in all of this is to simply show that rationing of health care is unavoidable and that inequality will always exist. If you don’t believe me, just take a look at America’s education system. Do you think everyone here receives the same quality of education?
I believe that, if we can eliminate the emotion and ideology and begin an honest dialogue about the challenges we face, we, as Americans, can develop a solution to the health care crises. But we first have to come to the realization that rationing and inequality are inevitable. Only then can we begin to analyze our options and choose the one that does the best job in providing the highest quality care for the most people. In other words, we have to pick our poison.
Written by Luke Davis, Director, Compliance & Operations
(Past performance is no guarantee of future results. Advice is intended to be general in nature.)
*Fraser Institute 2015 Study “Leaving Canada for Medical Care”