Testimony CATO Institute Forum on Health Care

September 29, 2004

by John C.Goodman

*Thank you, Michael, for that very kind introduction. For as long as I've been involved in this issue, I have noticed that people who believe in socialized medicine have invested in a great many myths, and they repeat these myths often to themselves and to others. They have a good number of myths that they believe in about the health care systems of other countries and about our own.

For example, in our own country there are about as many as 14 million people, more than a third of the uninsured, who are in principle eligible to join either the Medicare program, or the SCHIP program (State Children's Health Insurance Program), for free and therefore receive free health care paid for by the government, yet they don't bother to enroll.

To understand why many do not do it, you might travel to Dallas, Texas where I live and go to the emergency room of Parkland Hospital. There in Parkland Hospital the uninsured and Medicaid patients often come to get their medical care. They all come through the same emergency room doors. They all see the same doctors. They get the same treatment. If they are admitted to the hospital they're the same beds.

Now, from the patients point of view there's no real reason to join Medicaid because they get the same care regardless of what plan they're enrolled in. The doctors and nurses get paid the same regardless of who's enrolled in what plan, and in reality the only people who really care whose in enrolled in Medicaid or not are the hospital administrators, because that determines how they get their money. So they actually have paid employees who go through the emergency room and try to get people to sign up for Medicaid. Over half the time they fail. And then for the patients who are admitted, they go literally hospital room-by-room trying to get them to enroll in Medicaid, even they don't always succeed.

Now, next door to Parkland Hospital there is Children's Hospital, and in Children's Hospital, again through the emergency room there are the uninsured children, the SCHIP children, the Medicaid children. They all see the same doctors. They get the same care. They're admitted to the same rooms. And again we have paid people going through the emergency room trying to get people to sign up for the government programs and often not succeeding.

It's not that unusual for thousands of people every year to go to the emergency room for their care. It's a common feature of health systems around the world. It may not be an efficient way to run a health care system, but the same thing happens in Toronto, the same thing happens in London. The difference is that in Toronto we say that the people who are coming into the emergency room are insured and the Canadians take great national pride in the fact that they are getting free care there at the hospital. Whereas in Dallas, we say that these patients are uninsured and we're even ashamed of the fact that they are coming to the emergency room to get care. Even though the care they receive in Dallas is probably better than the care they receive in Toronto. For example if you had a headache, a severe migraine, you might get an MRI scan in Dallas. That would never happen in Toronto or in London.

If you ask the head of Parkland Hospital and his counterparts say in Toronto or in London, "What is the difference in these systems?" I think all three would say the same thing. In Canada and Britain people have a right to health care, whereas in Dallas they do not have a right, and that of course is not true. If you're a citizen of Canada you don't have a right to any particular health care service. You don't have a right to an MRI scan, you don't have a right to heart surgery, you don't even have a right to a place in line. If you're one-hundredth person waiting for heart surgery, you're not entitled to the one hundredth surgery. Other people can and do get in line ahead of you, and from time to time even Americans go to Canada and jump the cue, because Americans can do something the Canadians cannot - Americans can pay for care. So the hospitals love to see American patients come in because that's cash into their budgets.

So there's a certain sense in which Americans have more rights in Canada than the Canadians do. There's also a certain sense in which cats and dogs owned by Canadians have more rights than their owner. In Canada you can buy a CAT scan for your dog, but you're not supposed to be able to buy one for yourself. I pointed this out in the New York Times about 10 years ago and the head of the Canadian medical association accused me of implying that the Canadian system was going to the dogs. I wrote back and said you've got it all wrong, what I was saying that if you're in Canada and you need health care, you might be better off if you're a dog.

Now, most countries with national health insurance make care free to patients and have long waiting lines but they don't keep the records to know how much waiting there is. Britain is an exception. They keep meticulous records, and they even form commissions now and then to study, "Why is it that after all these many years the waiting list never goes down?" In Britain at any one time, there are about a million people waiting to get into hospitals - that comes from the British government. The Canadian number come from the Fraser Institute of Canada and the New Zealand number comes from the New Zealand government.

These people waiting constitute only about one-two percent of the population of these countries, but only 15 percent of the population actually enters a hospital each year. So for a country like New Zealand, that implies for every five people who go into the hospital to get surgery, there is one person waiting for care. Many of the people waiting are waiting in pain. Many are risking their lives by waiting. And there is no mechanism in these countries, there is no market, there's no mechanism to get care first to people who need it first, there's no market mechanism that draws resources out of the areas where the waiting lists are short and moves them into areas where the waiting lists are long.

Another myth has to do with the quality of care that patients receive. The British Ministry of Health has told the British citizens for years that their health system is the envy of the world. The Canadian ministers they all say much the same thing, but the fact of the matter is that in Canada and Britain, the doctors see patients 50 percent more than Americans do and as a consequence they have less time to spend with the patients. In Britain the typical general practitioner barely has time to take your temperature and write a prescription. If you have something seriously wrong with you, you're in trouble. And even if he discovered something wrong with you they may not have the technology to solve your problem.

Among renal dialysis, among people with chronic renal failure, those that get dialysis, the rate is twice as high in the United States as what it is in Canada, three times what it is in Britain. For coronary bypass surgery, the United States is about three or four times what it is in Canada, five times what it is in Britain. Interestingly enough, Britain is the country that invented the CAT scan there back in the 1970s and for a while they were exporting about half the CAT scanners used in the world, probably with the government subsidies. Yet they always bought very few for their own citizens and even today, Britain has only half the CAT scanners per capita that we do in the United States. A similar problem exists developed in Canada. Britain also was the co-developer with the United States of renal dialysis, and yet even today it has one of the lowest dialysis rates in all of Europe. I'm going to come back to that in a moment.

Another myth is that care in these countries care is determined by need and not ability to pay. That's often repeated, but the fact of the matter is in New Zealand today, a third of the population now has purchased private insurance for services that are theoretically available from the government for free. In Australia it's also one third. In Britain, seven million people have private insurance and millions more pay out of pocket for doctor's services at the time the services are delivered. The rule of thumb is if it's serious, you go private.

Yet another myth is the idea that although the United States more on health care - and we do spend more on health care - that we don't get more and that argument is often supported by pointing to life expectancy, which on average is not that much different among developed countries. Infant mortality is actually higher than it is in other countries. So what do we get for our money?

The first thing we need to do is separate those phenomena that have nothing to do with health care from those that do. Here are the life expectancy numbers from different groups within our country. They vary from life expectancy at birth of African American men of 68 years to 81 years for Asian Americans. Nobody in health care thinks that those differences are due to the health care system. Similarly among women we find wide differences in life expectancy. Again, virtually impossible to relate that to health care.

Additionally there are a lot of lifestyle choices that affect one's need for health care. We have apparently an obesity epidemic in the United States, which one can observe by going out on the sidewalk and watching the passersby and that creates health care problems. We have more teenage pregnancy, more teenage child births and that creates problems.

What then would we want to look at if we wanted to compare the efficacy of health care systems? Well, among women who are diagnosed with breast cancer, only one in five die in the United States, compared to one in three in France or Germany, or almost one in two in the United Kingdom or in New Zealand. That's something where medical science can make a difference. Among men who are diagnosed with prostate cancer, less than one in five die in the United States, compared to one in four in Canada, almost one out of two in France, and more than one out of two in the United Kingdom.

I don't put a whole lot of stock in polls, which ask people to rate their own health, but I do think it's interesting for the elderly, because you are going to see in a moment that when there is rationing, the elderly tend to be pushed to the end of the rationing line. That in the United States almost three fourths of senior citizens say they're in good health, and that contrasts with only 55 percent in Sweden, less than half in Germany.

If we fall down, it would be on the discrepancy between the self-perception of health among the middle class and among those of low income. There's a gap in every country and it's wider in the United States, but it's also true that in the United States, our population is less homogenous than the population of these other countries. Perhaps no other notion is more importantly tied to the idea of national health insurance than the idea of equal access to health care. Every prime minister of health in Britain from the day the National Health Service system has started has said that this is the primary goal of the British National Health Service. Similar things are said in Canada and in other countries.

Here again, the British unlike most other governments around the world, studies the problem to see what kind of progress they're making. In 1980, they had a major commission report and gathered the data and discussed the facts and put out a report that said, "You know we really haven't made very much progress in achieving equality to access of health care in our country. In fact it looks like things are worse today in 1980, than they were 30 years ago when the British National Health Service was started." Well, everybody deplored the results of this report and they all promised to do better. And there were a lot of articles written, a lot of conferences, a lot of discussions. So another 10 years passed and they had another report. The next report came out and it said, "Well lo and behold, not only have we not made progress since the last report was done, things look worse today than they were 10 years ago." Now here today, we're long over due for yet a third report and we all know what it's going to say, but it would just be nice to have a formal report to see if our predictions could be confirmed.

One of the more interesting studies is from Canada - more interesting, because it's more precise than any study I know of in other parts of the world - confirming vast inequalities among the health regions of British Columbia. This probably would not surprise most health policy analysts, you just usually don't get this kind of data. But if you had this kind of data you'd find similar inequalities in access to health care all over the developed world. In some cases differences of seven or ten-to-one in service provided in one area compared to another.

Then we have the myth that national health insurance is really an efficient way to deliver health care. I hear this frequently repeated by advocates within the United States. Probably the most telling statistic for hospitals is the length of stay, and generally efficient hospitals get people in and out more quickly. By that standard, the U.S. hospital sector is the most efficient in the world. And I think that by many other standards, it would not be much in dispute that the U.S. hospital sector is far more efficient than the hospital sectors of other countries.

This is a very interesting slide. Remember in Britain at any one time there are one million people waiting to get into hospitals and yet 15 percent of the beds are empty. In the United States the number would be higher, but we don't have a million people waiting to get in. And not only are15 percent of the beds in Britain empty at any one time, but another 15 percent are filled with chronic patients that really don't need the services of the hospital, they're simply using the hospital as an expensive nursing home. But effectively, one out of three beds are simply closed off to acute care patients.

A study compared Kaiser in California with the British National Health Service and concluded that after you make all the appropriate adjustments that they cost about the same. That Kaiser was spending about the same per capita on its enrollees as Britain spends on its population. But the Kaiser enrollees were getting more care. They were getting more access to specialists, getting more services. The implication of this is if the British government would just contract out to Kaiser that they could have American quality care for British prices. But not even the Torries are seriously considering that kind of change.

We often hear that Medicare and Medicaid are real efficient. The government says that Medicare only spends about two percent of its budget on administration, but that ignores all of the costs that are shoved off and shifted to doctors and hospitals. When you incorporate all those costs, it turns out that Medicare is not very efficient at all.

Then we have the problem of racial and ethnic discrimination in this country, which is a problem in this country and has been in the past and continues to be now. But guess what? It's also a problem everywhere else in the world. So, in Canada we have the Cree and the Inuits and in New Zealand it's the Maoris and in Australia the Aborigines. These populations have more health care problems, shorter life expectancy, higher infant mortality, more health care needs and apparently get less health care. When health care is rationed, racial and ethnic minorities usually do not usually do well in the rationing scheme, and that is also true in the United States. When we ration organs minority populations don't do well, compared to other access to health care in our system.

I'm especially interested in the elderly because I find that not only in Britain and Canada, but also in the United States. When people have to triage, and people have to make decisions about who is going to get care and who is not, it's frequently the younger patient that they choose. And when they do surveys of the elderly we find some rather remarkable differences here. The senior citizens in the United States say it is much easier to get surgery, to see doctors, to see specialists, enter hospitals than seniors in other countries are saying.

Myth number eight is that national health insurance does a good job at controlling costs. I used to think it did a pretty good job, but that's before I looked at the evidence. When you control for all things you need to control for, it turns out that over the last 40 years that the rate of growth in the United States is about at the average among developed countries. Now again, we are spending more than other countries spend, but the rate of growth is not that much different from other countries. The outlier here is Canada. Canada really has held it's rate of growth down, but I think they've paid a very serious price for doing so. When Sally Pipes is up here maybe she can tell us a little bit more on what Canadians don't get as a result of that figure.

It needs to be added that in the United States we don't really have a market system in health care. Half the spending is done by government, most of the rest is done by bureaucratic institutions. The cosmetic surgery market is about the only market in health care where patients are really spending their own money and guess what? It works like a real market. People get package prices, they can compare prices and over the decade of the 1990s, the average price of cosmetic surgery actually went down in real terms even though there were all kinds of technological innovations that we're told drive up costs elsewhere.

Then there's the notion that under national health insurance spending priorities are determined by medical need rather than by other factors. Here are some interesting numbers. Remember now there are a million people at any given time waiting for their surgery. According to the World Health Organization 25,000 British cancer patients die every year because they don't get optimal drug therapy for cancer. Yet while there are all those unmet needs, the British ambulance service is carting people back and forth. Taking senior citizens to the drug store to get their prescription, or to the emergency room or for the physical therapy. In general there is about one ambulance ride for every three people in all of Britain. And in many other ways the British government provides lots and lots of services to relatively health people, more than we do in the United States, even as they deny life saving therapies to other people.

Now we come finally to what I think is the most important issue of all. Most of what I'm telling you here today I learned not from right wing critics of national health insurance, but instead from people who believe in it. If you look at my book, there are probably 1,000 different references in that book and 95 percent of them are references to government reports, academic studies, newspaper investigations and in almost every case, the author of those reports is someone who believes in national health care. No matter how many problems that they document, no matter how many failures that they write about they don't give up faith in the system. They don't conclude that what we're missing here is capitalism. You might ask, well why not? Why can't they see that there's a different and better way to do it? The reason is because that they all believe that all the failures that they write about can be reformed away. They all believe that these are blemishes and that the reason they exist is because we just haven't tried hard enough to reform the system and make it work.

By contrast, my argument is that virtually everything that I've been talking to you about today is a problem that arises not by accident, but as an inevitable consequence of the politics of medicine. In other words, it's not the case that the systems of these countries work one way, but could have worked a different way, they are they way they are because it could not have been different. This is inevitably what happens when politicians allocate health care dollars. Why is that these systems over-provide to the health and under-provide to the sick? Well in a typical pool in the United States, about four percent of the patients spend half the money. If you're a politician allocating health care dollars you can't afford to spend half your money on four percent of the voters, four percent that may be too sick to go to the polls and vote for you anyway.

Why is the hospital sector so inefficient? Because it's in the self-interest of hospital managers to be inefficient, it's the chronic care patients and empty beds that are cheap beds, it's the acute care patients that cost money. Why is that the rich and powerful manage to get to the heads of the waiting lines? Because these are the people that control the system. They can change the system. If members of parliament, the wealthy and powerful had to wait for care along with everyone else, these systems would not last for a minute. Thank you very much.