Canadian Club

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


The mind-numbing complexity of Bill Clinton's Health Security Act has revived interest in simpler alternatives. The early winners of this rhetorical struggle advocate a government-run, single-payer medical system.

In the September 6 Newsweek, Gregg Easterbrook makes a thoroughgoing case for nationalized health care. "National health systems control costs," writes Easterbrook, "and market-based systems, no matter how conscientiously designed, do not." Whether their model is Canada, Germany, or France, Easterbrook and other advocates of a government-run system maintain that such plans will cut bureaucracy, enhance choice, and preserve quality. Consider their arguments:

Simplicity. Right now, the U.S. medical bureaucracy costs proportionately twice as much as Canada's. Easterbrook cites a General Accounting Office study which estimates that a national health system would spend $67 billion less on administrative costs. He admits, however, that this $67 billion would be a one-time saving and would be wiped out by one year's normal health-care inflation.

And it's ludicrous to assume that any government-run system, no matter how lean its initial design, would remain bureaucracy-free. In 1948, Great Britain's National Health Service employed 350,000 staff members and managed 480,000 hospital beds. By 1991, it had 800,000 staff but only 260,000 beds.

Choice. Dr. David Himelstein of Physicians for a National Health Program says a single-payer plan lets individuals choose their doctors.

Sure. You can choose any doctor you want, as long as the doctor is a general practitioner. Since every other Western government caps how much medical money the nation will spend, prospective doctors are funneled into general practice rather than specialties. In France and Germany, the government pays medical-school tuitions. Bureaucrats then decide what type of medicine each physician will practice. (ClintonCare would set up a national board to set the "correct" proportion of G.P.s and specialists in training.) Only 40 percent of physicians outside the U.S. are specialists; 80 percent here are.

That's not a problem if you only need a penicillin shot. But if you have a more complicated illness, you'll probably wait for treatment.

Quality. Easterbrook says cost controls won't necessarily sacrifice quality. He cites an American example in which single-payer works well: Rochester, New York, where Blue Cross covers 80 percent of the population.

But Rochester isn't a single-payer system. A full fifth of the city's medical expenses aren't handled by Blue Cross. In Canada, by contrast, private alternatives are forbidden.

Cost controls also reduce investments in new technologies. Patients suffer. A paper presented at the American Heart Association's November scientific meeting reports that more than twice as many American heart patients get angioplasty as Canadians. While 79 percent of American patients said their health was the same or better than before their heart attacks, only 64 percent of Canadian heart patients made the same claim.

Cost. How do other nations keep costs down? In Canada, each province decides how much it will spend for medicine that year. If the government overspends this year, the province has to make up for it by spending less the next year.

Writes Michael Walker of Vancouver's Fraser Institute, "To meet these restraints, hospitals limit the total number of complicated surgeries," the cardiac bypasses and hip replacements performed that year. "This practice, on a system-wide basis, amounts to rationing."

Some 260,000 Canadians waited for surgery in 1991. The average Canadian must wait five weeks to see a specialist. An estimated 5 percent of Canada's population is waiting for some medical service. This will happen in any health system completely financed by taxes. It could also occur if the cost caps proposed by Clinton are effective.

Single-payer advocates miss the point when they hyperventilate over the costs of American health care. "Suppose the United States cut its health share of GDP to 11.7 percent," suggests Easterbrook, "halfway between present U.S. expenditures and spending in Canada."

Sorry. The U.S. gross domestic product does not belong to Uncle Sam. It represents the combined incomes of 256 million Americans, who should be allowed to spend their money as they choose.

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.