When Governments Offer Empty Health Care Promises, Black Markets Deliver the Goods

From the Third World to the First World, officials can't exempt medicine from the laws of economics.

Many Americans of all stripes are dissatisfied with the expense and byzantine structure of health care in the United States. Handing the job over to the government is the preferred solution of that set that believes that appending ".gov" to things magically liberates them from unfairness, inefficiency, and the big-meanie laws of economics. Sen. Bernie Sanders (I-Vt.), who does a spot-on Larry David impression on the presidential campaign trail, ranks prominently among those who want "a single-payer national health care program" to set things right. Unfortunately, the history of state-provided medicine is one of grandiose promises by politicians, with entrepreneurs stepping up, often illegally, to bridge the vast gap between those empty words and reality.

When it comes to the triumph of state-provided everything, what could beat the example set by North Korea? What is officially the hardest of hard-core communist regimes remaining on the planet boasts that "All natural resources, main factories and enterprises, harbours, banks, transportation means and communication organizations are only owned by the state." When it comes to the provision of healthcare to the inhabitants of this socialist workers' paradise, "the state bears totally the expenses of medical checkups and treatment, bed and board in hospitals, medicines, and even travel costs to and from sanatoria."

When governments make economically improbable promises, the private sector is usually left to deliver what politicians can't. But the Democratic People's Republic of Korea officially has no independent entrepreneurs—they're forbidden by law. Despite that awkward hurdle, by 2008 "the average North Korean family drew some 80 percent of its income from the private economy," according to Andrei Lankov, author of The Real North Korea: Life and Politics in the Failed Stalinist Utopia.

The health care sector has been no exception. In a country where "the state bears totally the expenses" of diagnosis and treatment, the result has been as lousy as everything else North Korea's government provides. So the black market has stepped into to meet the demand for actual care. "Many doctors working in the black markets are retired from state hospitals, unable to make a living on measly wages. Some are without medical licenses and are usually self-taught Korean medicine doctors," reports Daily NK, an internationally well-regarded news source based in South Korea.

Diagnoses start at around the equivalent of $10, with the price of treatment varying as you'd expect. With the total collapse of the state system, even high party officials reportedly turn to black market providers.

Informal medical providers, like other black marketeers, may provide North Koreans with something more substantial than the state's empty promises, but they still face risks.

"The North Korean emerging entrepreneurial middle class is doing alright, they have a good life and they enjoy it," a Russian diplomat told Lankov. "The problem is that pretty much every single member of this social group can be arrested, tried and executed according to the letter of the North Korean law."

Ouch.

Of course, North Korea is the poster child for failed totalitarian states. But comparatively free-wheeling Pakistan has a similar story to tell. Unlike North Korea, Pakistan has a thriving (and legal!) private sector. Then again, it also has a massive informal sector, as entrepreneurs choose to operate outside the reach of the state, driving the shadow economy to equal as much as 91 percent of official GDP.

Most health care in Pakistan is provided independent of the state, and the quality of private medicine can be quite good. But the government runs hospitals and clinics for lower-income Pakistanis, and is experimenting with universal health care in the Punjab. The result is… not so satisfactory.

"[L]ong waits and indifferent doctors and inadequate medical supplies force many patients to resort to local quacks that offer medical care that is at best dubious," writes Syed Mansoor Hussain, former chairman of the department of cardiac surgery at King Edward Medical University in Lahore.

Hussain clarifies that "quacks" might be better referred to as "informal medical practitioners" and that the care they provide is no worse than that in government-run facilities.

In fact, many informal practitioners are medical students and pharmacists, who commonly diagnose illnesses and prescribe medicine, according to a 2008 study. That paper called for "urgent corrective measures," though it fails to address the demand that might drive patients and providers to bypass official channels.

Hussain concedes that "these informal practitioners provide a service to many people," and adds that their ranks include nurses and other types of health workers, numbering as many as 40,000 in Punjab alone. Admitting that driving such workers out of business is impossible, he suggests that their role be formalized.

"Perhaps these people can be registered and provided some basic medical education and training on a regular basis so that they are better equipped to handle simple medical problems," he adds.

Maybe. But if the quality of care that they provide already rises to the level that the state provides, and they're more available, perhaps there's not really a problem at all.

But is the experience in two Third World dumps really relevant to Americans? How much do North Korea and Pakistan have in common with the United States anyway?

Maybe not so much. But Canada isn't that far off from the U.S. in wealth, culture, or geography—and informal medical providers have challenged the state system there and fulfilled promises that politicians couldn't keep. It turns out that prosperous nations can buy themselves a little more wiggle room than poor countries, but they can't purchase exemptions from the laws of economics.

For years, private medicine operated in something of a gray area in Canada, with provincial laws in place that made it difficult for providers and patients to negotiate payments for care outside of the state system. Even so, Dr. Brian Day opened the country's first private surgery clinic in 1995—and rose to become head of the Canadian Medical Association a bit over a decade later.

The legal barriers put in place to discourage private medicine were nothing compared to the shitty quality of care driving Canadians to hurdle those barriers. As the Supreme Court of Canada noted in the 2005 case, Chaoulli v. Quebec, "Access to a waiting list is not access to health care. As we noted above, there is unchallenged evidence that in some serious cases, patients die as a result of waiting lists for public health care."

That decision set aside only Quebec's ban on private health insurance, leaving other provincial barriers in place. But the same pressures that blew apart one province's restrictions drove an explosion in private health care elsewhere. "In British Columbia, private clinics and surgical centers are capitalizing on patients who might otherwise pay for faster treatment in the U.S.," the Los Angeles Times reported in 2009. "Private clinics continue explosive growth," the Canadian Medical Association Journal added two years later, noting that many "private clinics were openly violating" restrictions on billing private parties while contracted with government Medicare.

This year Quebec officials moved to legalize many of the fees that private providers were already charging. That makes sense, since those providers were delivering actual care when the state system could only offer "access to a waiting list."

The U.S. certainly isn't North Korea or Pakistan; it isn't even Canada. But the laws of economics apply here too. The Affordable Care Act—Obamacare—is already running afoul of the Canadian Supreme Court's warning that "access to a waiting list is not access to health care." Two years ago, news reports cautioned that top hospitals were declining to participate in the program. Last year, CNN reported that "In many areas, the largest hospitals are not participating and many doctors are not accepting the coverage."

In fact, small but growing ranks of providers are refusing all coverage. Freed from burdensome bureaucratic overhead, they offer less expensive care in return for direct payment by patients.

Those doctors aren't doing anything illegal, but the Americans who refused to pay the premiums for Obamacare-compliant coverage are breaking the law. Millions of Americans were forced this year to pony up fines to the IRS (which has been tasked with enforcement), with many millions more exempted, and an unknown number just flying under the radar. The penalties were a bargain compared to the inflated price of obedience to the complex and expensive government mandates.

Economies and cultures may differ, but the U.S. faces the same economic pressures that confront the regime in totalitarian North Korea, bureaucrats in poor Pakistan, and elected officials in prosperous Canada. The choices are the same too: They can criminalize medical care provided outside official channels. Or they can recognize and legitimize the arrangements that patients and providers make when governments can only offer Bernie Sanders' empty vow of "a single-payer national health care program" that guarantees nothing more than a spot on a very long list.