Doctoring the Post Office Way

The Health Care Business: International Evidence on Private versus Public Health Care Systems, by Ake Blomqvist, Vancouver, B.C.: Fraser Institute, 1979, 208 pp., $5.95 (paper)

Think there's a crisis in the US health care system? It may be small comfort, but we're not alone. Ake Blomqvist, professor of economics at the University of Western Ontario, has just completed a comprehensive study of health care systems around the world. His conclusions? In Canada, a country with a full-blown system of national health insurance, health "costs are growing at an alarming rate." Ditto Britain, where socialized medicine is a major cornerstone of a cradle-to-the-grave welfare state.

Which system works the best? That's not an easy question to answer. "Health" is not something that is easily quantified, and what statistics there are can be used to support almost any position.

Take life expectancy at birth, for example. The Canadian youngster can look forward to a life span that is a few months longer than his counterparts in Britain and the United States. So it might be argued that Canadians get better health care than the British and Americans.

But Professor Blomqvist argues persuasively that this inference is unwarranted. Life expectancy at age one is also higher in Italy, Spain, and Portugal than it is in the United States. No one would seriously argue that citizens in these countries get better medical care than US citizens do. In fact, it turns out that in modern industrial countries, medical care has only a very minor impact on overall mortality rates.

For one thing, most health care is not of the life-or-death variety. What hospitals mainly do is make people more comfortable by attempting to reduce pain and suffering. In only a minority of cases do they actually prevent people from dying. For another thing, the major causes of death appear to be lifestyle and environment. Our ultimate demise is far more likely to be determined by whether we eat, drink, and smoke too much, by whether we drive too fast, or by where we live than by anything the doctors are likely to do.

To zero in on the real effects of health care, Blomqvist isolated a number of diseases for which lifestyle and environment are likely to be of minor importance and for which medical intervention might make a real difference. These include certain types of heart disease and diseases of the digestive and genito-urinary systems. The findings? As a percentage of all deaths, death by these causes was 5.6 percent in the United States, 6 percent in Canada, and 6.5 percent in the United Kingdom. The statistics lend support to the view that US doctors are doing a better job of keeping people alive than doctors elsewhere are doing.

How about the cost of medical care? In 1974, unit operating cost per-patient-per-day was about $96 in Canadian hospitals. The comparable US figure was $128. But there is another side to that coin too. In the United States and Canada about the same percentage of the population enters a hospital every year. The type of diseases for which patients seek treatment are very similar too. But the Canadian system is far less efficient in administering treatment. While the US patient pays more per day, the Canadian patient stays more days—about two and one-half more days per episode, on the average.

Health economists generally regard length of stay in the hospital as a reliable indicator of how efficient the hospital is. Are there delays in conducting tests and taking X-rays? Are the operating rooms available on schedule? Do patients linger longer because physicians forget to discharge them? Not only does inefficiency prolong hospital stays, but there is evidence that shorter hospital stays actually contribute to the health of patients.

Were the Canadian hospitals as efficient as US hospitals apparently are, Canada could eliminate almost 30 percent of its hospital beds! In fact, the potential savings are probably much greater than this. Patients over 65 years of age make greater demands upon hospitals. On the average, their hospital stays are three to four times longer than hospital stays for other patients. Yet the percentage of the population over 65 is 20 percent higher in the United States than it is in Canada. This makes even more remarkable the difference in length-of-stay statistics for the two countries.

What does all of this mean to the patient? While Blomqvist is cautious about drawing hard conclusions, a reasonable inference is this: For patients of the same age and suffering from the same disease, the total hospital operating cost is probably about the same in both countries. But a good chunk of the Canadian bill pays for waste and inefficiency. In the United States, that money is more likely to be spent on CAT scanners and other medical technology that have life-saving value to patients. In addition, the Canadian patient can look forward to wasting more of his valuable time in the hospital.

There is also another big difference. In Canada, the government picks up the whole tab and pays for it by collecting higher taxes. That difference, Blomqvist finds, is the source of most of Canada's health care problems. Precisely because of national health insurance, no one has an incentive to economize. Not the patients. Not the doctors. Not the hospital administrators.

Patients have no reason to show restraint because medical care is "free" at the point of consumption. Doctors know they will get paid regardless of what they do. Hospital administrators? Well, they face about the same incentives as those faced by the administrators of the US Postal Service.

This book is a valuable contribution to our understanding of the economics of health care. It is well written, well researched, and must reading for any American who believes that national health insurance is a viable solution to our health care problems—or for anyone who wants to be able to dispel the convictions of such a believer.

John Goodman is a professor of economics at the University of Dallas and is the author of books on public policy, social security, and socialized medicine in England.