Canadian Club

Single-payer systems may be simpler than ClintonCare, but that doesn't make them good.

Rick Henderson from the January 1994 issue

(Page 2 of 2)

Health-care costs may seem unreasonably high. But providing medical services is not like building cars or assembling computers. As New York University economist William J. Baumol notes, medicine is labor-intensive. For many health services, writes Baumol in The New Republic, quality is "inescapably correlated with the amount of labor expended on their production." Each doctor can only see so many patients per hour.

If capital-intensive businesses continue to get more efficient, says Baumol, such labor-intensive industries as medicine will consume even more of the national income. And that's OK.

While no one knows the ideal level of health-care spending, there are distortions in the tax code that keep medical costs high. Employer-paid health benefits are tax-free, and individuals can't legally join together to negotiate with insurers. So most people expect their bosses to provide health care. Thus, it's easy to consider health care free; individuals pay only 5 percent of hospital charges and 18 percent of doctors' fees out of pocket. We don't try to economize; our employers do. Changes in the tax code could cut costs.

Americans spend proportionately more on health care than residents of other countries because we can and we want to. But we can streamline the tax-funded portion of the medical system. Medicaid recipients could get health vouchers or be enrolled in HMOs. Medicare could also be converted into a voucher system, giving recipients both the incentive to shop for medical services and the chance to purchase extra care or supplemental insurance on their own.

"Only Bill Clinton could make a single-payer system look good," says Cato Institute regulatory analyst Brink Lindsey. Even so, people who want reasonably priced, high-quality health care shouldn't believe Uncle Sam can provide it.

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