Health Care and Private Enterprise

Interesting read from the New York Times on America’s health care system:

Patients entering church-affiliated nonprofit homes were prescribed drugs roughly as often as those entering profit-making “proprietary” institutions. But patients in proprietary homes received, on average, more than four times the dose of patients at nonprofits.

Writing about his colleagues’ research in his 1988 book “The Nonprofit Economy,” the economist Burton Weisbrod provided a straightforward explanation: “differences in the pursuit of profit.” Sedatives are cheap, Mr. Weisbrod noted. “Less expensive than, say, giving special attention to more active patients who need to be kept busy.”

What just about everyone seems to have forgotten — or doesn’t know — is that the “invisible hand” of Adam Smith that is the underpinning of America’s worship of profit-maximizing enterprises works only when there is no monopoly power or market concentration. Smith abhorred market concentration. America’s economy is characterized by extreme concentration: oligopoly and oligopsony (concentration on both the selling and buying sides of the equation).

We pay a lot for health care but what we get doesn’t match the expense:

Businesses devote almost 6 percent of the nation’s economic output to pay for health insurance for their employees. This amounts to nine times similar private spending on health benefits across the Organization for Economic Cooperation and Development, on average.

AND

We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.

Britain gets universal coverage for 10 percent of gross domestic product. Germany and France for 12 percent. What’s more, our free market for health services produces no better health than the public health care systems in other advanced nations. On some measures — infant mortality, for instance — it does much worse.

Be sure to read the comments.

Oh, and for the record: I’m one of a handful (relatively speaking) of Americans who have had major health issues while abroad. I was in France when I had a life-threatening infection. The quality and type of care I received there versus here: no comparison on cost (nominal) or quality of care (which included at-home visits for a week after my 10 days in the hospital).

12 Comments

  1. Thank you Kathy for bringing this issue to light again.
    Wow!! you had visiting nurses ( at home visits) while in France? I think I got a follow up call like never, from my own doctor OR the hospital after a 10 day stint for a URI. Having worked in medicine my whole life, I was shocked being on the receiving end and seeing just how “barely adequate” all of the care was that I received. When I saw the hospital bill, I was stunned!
    We do pay alot for the little we get, and that is likely to continue in this country as long as we have lobbyists and a free enterprise system of healthcare.

  2. The real abomination of the healthcare “free market” approach is that healthcare is not a choice. When you need it, you need it. Its not a free market if you have no choice in the amount you want to spend or the quality of service, if you don’t have time to make that decision, say for instance you are in a car accident. Free market approach does not apply to healthcare. We need to go back to how things were before the mid 90′s when for profit HMO’s and such were let loose upon the healthcare industry.

  3. The USA with it’s history of wealth, progress, and innovation should have had socialized universal healthcare long ago. That we don’t is both a symptom of dysfunction and failure on a grand scale.

  4. Well, to be fair, the first time a president tried to get universal health care, Teddy Roosevelt was in office. If he couldn’t do it at that time, nobody could. His cousin (FDR) tried later and failed. Nixon and Johnson both tried to no avail. Most readers will probably have either heard about or remember Clinton’s attempt.

    Americans are easily scared into believing that their government will destroy their lives. I’m not really sure why, since, by Constitutional Decree, we ARE the government, but there it is.

  5. Everything Slamfu said! Everything has gone downhill since the advent of HMO’s.

  6. I think y’all should read Kathy’s post a little more carefully, as it points out two important truths.

    First, the for-profit nursing homes are apparently cheaper, at least in the anecdote in the OP. Cheaper doesn’t necessarily mean better, of course, and it may mean the opposite. But our system is both not very good and way too expensive. If the non-profit provider is providing better care that’s even more expensive, is that better than still-not-very-good care that’s cheaper? I’d say it depends who you’re expecting to foot the bill.

    Second, we don’t have a Smithian free market in health care, since as Kathy points out a free market requires healthy competition among diverse sellers and diverse buyers. It is well known that US health care is a monopsyny, in that it’s dominated by a few large buyers. The government pays half the bills, and the single-payer advocates are fighting to have it pay for the other half as well.

    But the seller’s side of the market is not much freer. For just one example, take San Francisco’s recent negotiations with Sutter Health. Sutter runs most of the city’s hospitals, is trying to build a new one, and the city is requiring it fund unrelated city services like public transit and housing for the poor. In other words, industry and government are firmly in bed together, with the city carefully metering competition in the local hospital market, and the notionally-private provider funding the city’s bus system.

    This is the antithesis of a free market, and it’s obviously not going to make hospital stays any cheaper.

  7. Thanks folks, and thanks for the close reading, Dr J. Those points reference nursing home care, which is a subset of total health care costs. US health care is an oligopoly (providers and big pharma) and I would argue oligopsony not monopsony. Even Obama care doesn’t turn it into a monopsony. In some markets, health care providers move towards monopoly or duopoly (one or two hospitals, for example).

    As others note, as a “good” health care services generally don’t have the same characteristics as most traded goods/services.

    Hi, Zusai – thanks for the interesting article although it certainly focuses on, ummm, luxurious treatments. And yes, sheknows, I had home visits (every other day, IIRC) to make sure my incision was still draining properly and not getting infected.

    A note about my stay in the hospital in France – on things that “cost less” than in the US (some reflecting lack of lawsuits)
    * No bucket of plastic things to take home — reusable water pitcher, etc
    * Once I was off of intravenous pain meds, the nurse brought my daily meds to me in the AM. I was expected to take them as directed
    * Once I was given the OK/directive to walk, I was expected to call a nurse and make arrangements. No one coddled me – I was treated like an adult even though I did not speak the language that well. The last time I was in the hospital in the US, in 2010, I had this same expectation re walking – but not back in 2001 when my time in France was followed by time in the hospital here. Yes, I am still alive thanks to modern medicine.
    * No private room (-shrug-)

  8. Germany’s health care system made so much money last year that they had to get rid of the €10 copay in the hopes that they would break even this year. So, France’s problems are a French problem.

  9. I agree they focused on what I would call “luxuries”, but then claimed it was because of those “luxuries” their stats were so good. The problem is that one person’s luxury is another person necessity.

    ““The treatment has done me a lot of good,” says Manfredi, a French retiree who suffers from arthritis and enjoys a three-week retreat at the southern spa town of Dax every year. “I no longer have flare-ups.””

    It’s very difficult to take away benefits once they have been established, and I doubt all the benefits were established at once. Like cuts in any government program, where other people are subsidizing things people want, I doubt this will be easy.

  10. This is the first comment on the article:

    “This article is very erroneous. The France healthcare system is not going broke. The finances are much better than a few years ago, and people are still getting excellent care. A $1000 spa treatment might sound luxurious, but it helps the patient stay out of the hospital which costs more.”

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