The problem with the health care debate is that we spend too much time on the emotional side of the argument, and not enough discussing the economics of it.
Take, for instance, supply and demand. A universal benefit carries a moral hazard. In the market, price controls the relationship between supply and demand. It fluctuates to keep the two in equilibrium. But what happens when you take away the cost of something? What is there to regulate demand? And without price increases, how do you signal the need to increase supply?
In countries with socialized medicine, people don’t get all the health care they want either. Because we simply cannot afford it. As a society, we are not wealthy enough that everyone can get all the health care they want. So it’s going to be rationed somehow. How is it rationed in socialized medicine? By restricting supply. That’s why you get waiting lists. And why you start to see public pressure building for the government to ‘do something’ about people with poor habits. And why doctors in the NHS get to play truly ugly cames aimed at valuing someone else’s life so they can decide who lives and who dies. Given a 6 month waiting list for a heart stent, do you give it to the 40 year old non-smoker? Or the 65 year old smoker? But what if the 65 year old smoker is more important? Or more politically connected? How do you make the choice without market transactions?
In the market, price controls demand. This does several beneficial things - first, it puts the cost burden directly on the party that uses the service, which makes them less likely to want the really expensive treatments or not run to the ER when they have the sniffles. Second, it ensures that the rich pay more into the health care system than the poor. This is important, because it drives research that eventually trickles down to everyone, and it acts as an incentive for doctors to excel so they can be the ones offering the gold-plated treatment.
In socialized health care systems, you tend to see less incentivism from within the health care community. There seems to be a lot more mediocrity over time. Part of that might be the very existence of the U.S. health care system - many, if not all countries with socialized health care experience a ‘brain drain’ to as their best doctors leave the country and go where the money and status is - in the U.S.
Quality of care also suffers. For example, consider public dentistry in Britain. Everyone may get some kind of care, but try getting cosmetic work. For that matter, try getting service. More and more people in Britain are opting to go to private dentists because there are shortages of public dentists and the treatment typically isn’t as good.
Here in Canada, we have a private dental system - and it works great. There are dentists everywhere, and the cost is very reasonable. I can get in to see a dentist with an hour’s notice in an emergency. Routine appointments are usually booked days in advance, not months. The quality is high.
Our eye care system is private except for an annual eye checkup. And what’s vision care like in Canada? Excellent. I got LASIK surgery done last year for less than $2000. You can get eyeglasses at Wal-Mart for cheap. The cost and quality of contact lenses has been improving dramatically over the years.
Eye surgery, however, is in the public healthcare system. My mother is almost blind. She’s needed various surgeries in both eyes to get her vision back. She’s been going through this ordeal for years, because each time she needs a surgery she gets put on a waiting list for six months. She is 70 years old, can’t see, and she has to go to another city for her eye work, because there is no one qualified in a city of 80,000 people where she lives. The public health care system isn’t working so well for her.
Ten things people believe about the Canadian health care system - but probably shouldn’t.
On the other hand, there is also a problem with private health insurance: information asymmettry. In short, you know how healthy you are, but your health care provider doesn’t. You have an incentive to over-state your health. Therefore, the insurer has to price insurance accordingly. This tends to discourage healthy people from seeking insurance since it’s no longer as good a value for them. That in turn increases the ratio of poor risks to healthy people.
The health care industry deals with this in many ways, mostly by using statistical aggregation and random selection. Worker-provided insurance, for example. If you cover everyone in the country, odds are that the average medical risk is pretty close to the average, and insurance can be priced accordingly. But even with various market adaptations, there is still a market failure here to some degree.
Also, it seems clear today that society is increasingly more demanding that no one be bankrupted by sudden health issues, and that poor people don’t go without treatment at all.
Given all this, my preference is for univeral catastrophic health care coverage with ‘catastrophic’ defined in relation to income. i.e. ‘catastrophic’ might be any treatment over $20,000 for someone making $50,000 per year, but $1 million for someone making $500,000 per year. In other words, sudden medical emergencies or chronic conditions can not destroy you financially other than in the short term (we can argue over what the catastrophic level should actually be).
The vast bulk of the medical system remains privately run. People would buy health insurance on the open market for covering the gap. The insurance would be modestly priced because the insurance company is protected from having to pay out massive claims. But this area still contains the vast bulk of medical care. If you need additional assistance for the very poorest, you can kick in tax credits or even some subsidies for health insurance. The middle class can fend for themselves. They can afford private insurance. If they don’t get it, too bad. They’ll be out $2K if they break a leg skiing, and will just have to work their asses off to pay it back.