Tuesday, March 17, 2009

Case Study: Universal Health Care

Reference Too Many Customers comment:
"If Universal Healthcare slaughters people, 70% of earth population would have been annihilated already."

The largest existing Universal Health Care system, by far, is the Russian Single-Payer system. Putin has more than doubled Russian health care expenditures since 2004, at which time the population was about 170M. The Russian population is forecast to dip below 80M by 2015, a mere 50% decline. The average Russian male life expectancy is currently 51 years and falling.

90M people slaughtered by UHC, in Russia alone. That is roughly double the toll that WWII took on the Russian people.

Ironically, the Russian Constitution grants all citizens "the right" to health care and medical assistance "free of charge," but understaffed hospitals and corruption have left most Russians without access to reasonable quality health care in any form. So even the 45% who are able to survive UHC by2015 will, universally, have no access to quality heath care.

Smaller, more "westernized" universal systems (meaning they freely benefit from U.S. for-profit technology and economies of scale) do better than the world's largest universal health care system, but they wouldn't without for-profit innovation.


  1. I guess the real question is whether or not there are any countries with "universal health care" where the average life expectancy hasn't dropped significantly. I suspect there are such countries, but they are probably rare.

    In any case, something like UHC, for it to work properly at all, would have to be implemented by a completely trustworthy entity -- one which is essentially beyond reproach. It would be laughable to suggest that the U.S. government is such an entity.

    The problem with for-profit healthcare is that the demand always outstrips the supply. I might even go as far as to say that the demand is infinite but the supply isn't. In an entirely laizzez-faire market, if someone's life is on the line, they will probably be willing to pay everything they have to live. And providers would dutifully charge what the market would bear which, in that case, would be everything the person in question has.

    The era of doctors that made house visits and charged affordable prices for personalized health care occurred because the providers (the doctors, in those cases) willingly charged less than the market would bear, because they were part of a community of people who cared for each other. That is a social, not economic, phenomenon, and something that economic "theory" has no ability to account for.

    The problems we're having with healthcare today are at least as much the result of the destruction of our ethical principles as anything else. But just as the economy operates in cycles, so does society itself. I won't be surprised to find society here in the U.S. pulling back together again as a result of the hard times we are about to face.

  2. Great comment, kcb.

    "I guess the real question is whether or not there are any countries with "universal health care" where the average life expectancy hasn't dropped significantly. I suspect there are such countries, but they are probably rare."

    I think it is impossible to say, since every system currently benefits from for-profit innovations. Without a for-profit innovator for, say, the last 100 years, there would be no such thing as "health care" as we know it. Like Russia, the only "universal" thing would be no access to reasonable care in any form.

    "The problem with for-profit healthcare is that the demand always outstrips the supply."

    You can say that about everything in society, not just health care. There is infinite demand for everything all the times, without market pricing.

    Price is where demand meets the reality of supply. Because our system is already socialized to a large degree, price currently has no meaning since so few pay out of thier own pocket. A crises is guaranteed to occur.

    In a fully capitalized system, like the one we used to have, where house calls were possible, price provides any level of service one is willing and able to buy. Conversely, the price is as low as one is willing and able to provide. Thus quality is optimal.

    In other words, health care is no different than any service.

    Ultimately, in any privately capitalized system, the disparity of service between rich and poor is the widest. Also, the "poorest" person in a privately capitalist system can afford a higher level of service than the richest person in a truly socialized system.

    So if "equality" is the measure, then equality always dictates that everyone must be poorer than the poorest person in any "unequal" system.

    The steady state of "universal" anything, is universal poverty. No one is permitted to afford anything, so no one is willing provide anything.

  3. I was responsible for several medical mission trips to Russia in the immediate post-Soviet era in the early 1990's and can personally attest to the horrific condition of medicine at that time.

    Too numerous stories to relate here; suffice it to say we were amazed and saddened at the general state of health and living conditions of average Russians. Was almost overwhelming - and these were the "Soviets" who supposedly were a world power a few years earlier.

  4. fdr, I recently took my daughter for stomach pain to an urgent care. They charged my insurance around $2500 for about an hr service. And my bill was $50. Couldn't believe the charge. If it continues like this, I am sure this is going to collapse ...

  5. A poster above posed the question of life expectancy and universal health care. Canada passed the Canada Health Act in the mid 80s which established a system where general revenues paid for medical attention. Doctors submit bills for services rendered derived from schedules drawn up by the medical profession and government panels to a central provincial processing agency which credits the doctor's account. Insurance companies have no role at this point.
    Recent data show Cdn. life expectancy at birth was 74.9 yrs in 1979. In 2005 it was 80.4 yrs. Data for G7 countries show Japan has the highest life expectancy (82yrs), Canada is second, and the U.S. is last at 77.9yrs. In 2001 Cdn men were expected to spend 88.8% of their life in good health.
    And per capita Canada spends much less than does the pop. of the U.S. on health.
    There are problems with the Canadian model, it goes without saying. There are delays for some procedures, hip replacements, heart bypass, and the like, but the outcome for the majority of users is better, I would argue, than the system currently in place in the U.S.
    You may have a different viewpoint, and that's ok with me. I just write to point out that all universal systems are not like Russia's, with which I am not familiar.

  6. Proponents of Universal Healthcare always talk about how the system will be so much less expensive. You know the lines....."expensive emergency room visits will be reduced"...."preventative care saves money, but the poor will defer the cost, increasing the overall cost"....blah...blah...blah.

    The debate over collectivist ideology aside, WHY THEN does every proposal for UHC involve MASSIVE amounts of increased spending???? I thought it was going to be less expensive!!

  7. I think using the life expectancies of the US vs. other G7 countries is very misleading. The big thing that's never considered when lower US life expectancies are used to condemn our healthcare system are the lifestyles of Americans themselves. We are the most overweight and heavily medicated society on Earth. The Japanese for instance are internationally hailed for the nutritional diets their people maintain. Europeans have similar diets as Americans but they still consume far less junk food not to mention alcohol, cigarettes and recreational drugs (both legal and illegal).

    If Americans continue their present lifestyles life expectancy will continue to decline and no amount of government funded healthcare will be able to stop it.

  8. FDR: your reply to mine doesn't address the core problem I cited: when your life is on the line, you will pay everything you have to stay alive. In economic terms, that *is* infinite demand, even after pricing is accounted for. The same is not true of most other goods or services so your comment about demand for everything being intrinsically infinite is neither revealing nor relevant here.

    I'm in complete agreement that regulation has driven the price of healthcare high, but I would argue that the current system in the U.S. is much more "laizzez-faire" than in most other places elsewhere in the world. And yet we have much higher costs for the same things than elsewhere in the world.

    It is my belief that the insurance providers here in the U.S. have destroyed the healthcare system here in the U.S. by providing the illusion of lower costs to their subscribers while simultaneously paying providers less than they would be able to make otherwise, thus forcing them to charge higher prices to those who would pay out-of-pocket in order to make up the difference. In other words, they are a highly inefficient middleman and I believe they are taking the bulk of the money for themselves. This is made far worse by the tiered system they have implemented, which effectively eliminates the spreading of risk that insurance is supposed to bring to the table.

    The end result is higher prices for everyone who pays, without the associated benefits that higher prices would normally bring.

  9. kcb,

    I agree with you. Insurance companies hold their providers to a set of standardized rates, that are far lower than their provider's normal rates charged to un-insured individual payers.

    While insurance premiums increase for most Americans, healthcare providers themselves are actually getting lesser pay by insurance companies.

    There is clearly two sets of pay standards, giving the false illusion of cost increase.

  10. Lets just face it health care has become the new boom industry.
    It is controller and manipulated for profit.
    Health care is a right in a modern civilized society.
    Once again Government is at heart of the problem by not making sincere decisions for the people that elected them.
    Everything else is BS.

  11. The solution, and only way of removing the current problems is to remove the current structure. Insurance should be outlawed in its entirety. It only serves to add cost to any and all industries it is involved in.
    Anyone thinking that it needs to be socialized or revamped or "FREE" needs to stop thinking that what you have now should be paid for by someone else! Start thinking about how it could work WITHOUT government or a third party (insurance) being involved. There are other ways to receive medical care, and for doctors to be paid that work, and have no third party involvement.

    The whole idea that there must be some government reform implies that there is a just cause for government to be involved in your medical care in the first place. They have absolutely no place in it.

    In addition, the idea of preventive care is cheaper is absolutely insane! How will going to the doctor more often be cheaper? There is no guarantee that going frequently will prevent you from contracting illness, disease or injury, and incurring large medical debt.


  12. I like to compare medial profession to personal security.

    You can rely on the cops, and feel fairly safe. Or you can buy yourselves some body guards and feel really safe.

    But when push comes to shove, it's genetics and how you take care of your body. Likewise, being safe is being aware of where you are and making sure you're worth more being alive to somebody who might want you dead.

  13. Insurance in the general case does serve a useful function when done as originally envisioned: it spreads risk, and makes it possible to take individual risks that are larger than what would be possible otherwise. The average risk increases, and so do the costs, but the nature of some risks is that the reward increases disproportionately to the size of the risk.

    An example of that is aircraft insurance. Aircraft are very expensive pieces of machinery. The cost of losing an aircraft in an accident is very, very high, so without insurance, the only people who could afford to own an aircraft are those who could afford to lose the aircraft in an accident. There are very few such people.

    But the probability of an accident is very, very low. This is what makes aircraft ownership with insurance work: the price of the insurance reflects the total cost of losses due to accidents, but the insurance itself remains affordable because the probability of an accident is very low, so the size of the total losses are very low relative to the total value of all the insured aircraft, and so the insurance represents a relatively small increase in the cost of ownership.

    The problem with health insurance is twofold. Firstly, the risk is *very high*. Why? Because the probability of being struck by an expensive medical condition over one's lifetime is extremely high. Secondly, health insurance (as I discussed previously) as implemented in the U.S. distorts the healthcare market to the detriment of the average person though tiering and other mechanisms. The average person would be better off with a medical savings account, but that only works if the person starts saving very early in life and continues to do so through middle age, which is the period during a person's life when the probability of being struck by an expensive medical condition is very low. The reason a medical savings account would work better is that it eliminates the (very significant) inefficiency of the insurance company.

    The solution to the problem of medical care isn't insurance, it's reducing the actual cost, in man hours, of providing it. That can only be accomplished by eliminating leeches like insurance and by attacking the problem with technology.

    Technology is the only thing that yields a truly significant improvement in productivity. Everything else is down in the noise. If you remove technological improvement from the equation, economics becomes a completely zero-sum game on a per-person basis.


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