POLICY: Private health in the UK muddies the American waters.

I commented in response to a post in DB ‘s Medical Rants about a piece written by the libertarians at the Adam Smith Institute about private health care in the UK. (Don’t worry–they’re nice gentle British libertarians with no guns!). I too got an email requesting a look, so here goes. Their piece seems to be pretty accurate and I had the following comments that are already over at DB’s. So quoting myself:

    There’s a little cheating going on here. Most of what the author is talking about is what’s called long term care in the US. That is funded by a mix of public (Medicaid) and private (mostly cash) sources here, but provided almost entirely by private sector facilities (including for-profit ones). That’s similar to the UK other than the money comes more from the state. In the UK, private provision of standard health services is used mostly as a safety valve so that middle and upper income people can get around the queue for NHS surgery. That’s been around forever, as allowing specialists to see private patients was part of the deal cut in 1945 by which they agreed to support the introduction of the NHS. NHS surgeons in specialties like orthopedics or gynecology can (quite legally) double or triple their incomes doing private work on the side.

    But in the US context this is all misleading. Not even the most radical single-payer advocate believes that the government should provide all health care, they just think that it should pay for it. What this post ignores is that the every country apart from the US provides some kind of universal system of payment for care, usually delivered in a mixed public/private system. In virtually all of those countries you can "trade-up" with your own money to get better amenities or jump the queue in the public system.

As I wrote directly to Alex Singleton at the Adam Smith Institute, the cheating I’m referring to is at the American end–what they from their UK perspective think of as "private" is private sector provision of services that are often paid for by the government. The government here pays for over 50% of care in its role as insurer to seniors, the poor, the military, veterans and its employees.  So what they think is surprising in the UK is exactly what’s happening here in the US in most of the things that they write about in that post (such as government funding for a significant chunk of private long term care via Medicaid). 

Americans tend to be told by the more mendacious among us that universal health insurance (which of necessity requires some kind of government regulation of the insurance system) equals government-based provision of care.  This argument is made with frequent reference to "useless" American government agencies with low social status (like the California DMV) and rather less mention of the pretty effective ones with higher social status (like the US Marines or the NYFD). In fact the UK is pretty unusual even in Europe in having so much government provision of care facilities and services in the acute setting (I think only the Swedish have more), but government provision of care is by no means unknown in the US–once you add up the VA system, county hospitals, and the DOD there’s a big chunk of government provision going on here too. However, overall who owns care facilities or who provides care is mostly irrelevant.  What is important is the financing situation that determines what care is provided to whom.  In most of the UK’s NHS and in Canada there’s a group/community-based decision made on who gets what care in which area (e.g. we’ve got money to do 50 hip replacements this year and we’ll do the 50 neediest).  In the US that decision is almost totally dependent on the type and level of insurance that is attached to the individual patient, so in my hip example you may get 70 done but 30 of them may be medically "unnecessary" and 15 of the neediest may not get done as the patient couldn’t afford them.  (Ignore for the moment that there are other factors at work too such as race and education impacting access to care in every system). So my overall contention with the Adam Smith Institute’s piece is that they should be focusing on how private insurance markets work in health care rather than looking at who owns what beds.

What’s rather more interesting is that Smith himself back in 1776 thought a great deal about what constituted a competitive free market–although current American conservatives have totally forgotten what little they ever knew about that. The great Northwestern professor Edward FX Hughes gives a talk based on Smith’s principles of perfect competition and how they struggle to work in health care. American health care (not to mention defense, agriculture, energy and several other industries) is in fact predominantly full of the mercantilist behavior and government-protected and subsidized oligopolies that Smith was trying to undermine in his modest treatise called The Wealth of Nations.

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