Understanding Health Care – Part II

 

In Part I of this series, healthcare economist John C. Goodman listed five things we need to know if we are to better understand health care. He lists:

  • In a Public System, Patient Needs Compete Against Taxpayer Needs
  • Personal is Better than Bureaucratic
  • Competition is Better Than Monopoly
  • Profit is Just Another Cost
  • Markets Work

 

In Part I, I discussed the first two and today we’ll discuss the last three.

Competition Is Better than Monopoly

Competition always produces lower costs and higher quality. Healthcare is no different from this universal market truth. Proponents of Medicare for All discount this truth – or fail to understand how Medicare in its current form is actually administered.

Medicare is a government supported system of healthcare for senior Americans, but it is largely run by the private sector. Traditional Medicare is administered by Blue Cross -Blue Shield, a private healthcare insurance company. More than one-third of Medicare enrollees are actually in private health insurance plans, called Medicare Advantage. Although the government pays most of the premium, these plans are administered by multiple private insurers who compete with one another. If a senior is dissatisfied with one private insurer, they can change to another or even switch back to traditional Medicare. There are choices available. Government-run systems offer no such choices.

This is not to suggest that private health insurance is perfect. But private sector competition works – which is evidenced by the fact that Medicare Advantage plans are the fastest growing segment of senior healthcare. The Brookings Institution concludes that these Medicare Advantage plans have lower costs and higher quality than traditional Medicare.

Profit is Just Another Cost

Profit is considered something evil on the left. The word “profit” appears in the Times editorial several times and always in a negative way. The Dallas Morning News titled its investigative series “Pain & Profit”, as though profit were the cause of the pain. This is misleading in the extreme.

Goodman explains that every single dollar spent in our health care system ends up in someone’s pocket. Every one. That means someone has a financial interest in every spending decision that is made. It is equally true that every single dollar not spent stays in someone’s pocket a little longer. That would be the taxpayer.

If you’re going to understand healthcare economics, you’re going to have to separate emotions from economic facts. There is nowhere on the American dollar that you will find the words, “profit” or “wage” or “gift” or “tax rebate.” A dollar is just a dollar. The bill is just as valuable regardless of how you acquired it.

Next, you must recognize that profit is a cost of doing business. Without profit the business will fail. It’s a cost that cannot be avoided. Liberals want to eliminate the “greedy corporations” but fail to understand that eliminating profit will eliminate the products and services that these corporations provide – including jobs! This is just as true for governments as it is for private business. Governments must also show a profit for their work – or the taxpayers will feel the pain. The costs of capital are the same.

Researchers find no difference between for-profit and non-profit hospitals. Non-profits are run the same way and they pay their administrators the same way. They simply use their profits to increase salaries and build more buildings rather than pay dividends to shareholders. In fact, several studies of for-profit hospitals have found they actually provide more charity care than non-profits in the same market.

Markets Work

Lastly, market capitalism works. It is not perfect; just better than any other system on the planet at distributing economic prosperity across all economic classes. Goodman explains: “The beauty of the marketplace is that it makes it in everyone’s self-interest to meet other people’s needs. The more needs you meet, the more money you make. Ergo, if we want more needs to be met in better ways, we need more reliance on the market in health care, not less. A lot of people on the left hate that idea.”

In a government-run healthcare system, costs are controlled in two ways; delaying access to healthcare by long waiting times and denying access to expensive treatments the government doesn’t consider “worth the money.” In a market-driven healthcare system, competition with other private insurers gives incentives to provide timely access to quality treatments lest their competitors steal their market share.

No system of healthcare is perfect, but a private insurance system gives people choices and competition lowers costs and raises quality. A government-run system like Medicare for All will eliminate all private health insurance, all competition and all choices. It will lower access to healthcare and lower quality, especially for the poor. This is true in every other socialized medicine system in the world and we would be foolish to believe it will be any different in this country.

 

One comment

  1. Nice job Bob!!

    Comment by Hugh Roberts on December 30, 2019 at 1:26 pm