Saturday, June 11, 2011

Note on Healthcare Systems

A friend of mine asked me (and others) to help him form an opinion on healthcare systems via a facebook note, here's a copy and paste of my reply minus some typos and awkward sentences and grey text when the content is too personalized, I wrote on this subject previously here.

Right now western civilization is at or very near an all-time pinnacle in terms of societal productivity. Which means that people in general get more stuff for working less than ever before. How did we achieve this success? the answer I think ultimately traces back to the arrival of Christ but since many dispute that I'll start further down the causation chain at a place that virtually no-one disputes. Our empirical success is born out of capitalism. 

Capitalism takes many of the strongest forces that are innate to man (pride, greed, envy) and harnesses them to achieve something good. Now in order for capitalism to work as well as it is working today we need some special sauce, we need trustworthiness (the culture that made trustworthiness such a prized attribute is, I think, clearly traceable to Jesus, which is why I ultimately credit him for the west's success, the Chinese apparently do as well). If we do not have trustworthiness, then no one can know what the better product is and so there is no incentive to make the best product. All this to say that capitalism, as a system, trends ever upward; so long as the default nature of man remains static and trustworthiness stays above some unmeasurable (by me) threshold. This is why right now there is less poverty per capita than there has ever been before (in "the west" anyway). 

Socialized anything has very different attributes. The defining characteristic of socialized anything is that *everyone* who needs it gets it regardless of what they do. What this means is that there is no incentive for the recipient to look for the best because everyone gets the same. Because the recipient has no incentive to look for the best, the provider has no (or less) incentive to provide the best. Because there is no incentive to look for the best and no or little incentive to provide the best, socialism as a system should trend relatively flat. However that is not the whole story, because even in a socialized system there are those people who control the resources and these people will naturally abuse their power... power corrupts... (now it is possible for someone in power to have such great character that they are largely not corrupted such as Singapore's Lee Kuan Yew but that is the exception not the rule and it only takes one corrupt and powerful leader to destroy a country). Because of this, systems of socialization in general often trend downward. This is why the US beat the USSR with economics despite the latter providing incentive for their citizens through (and I quote) "protracted violence." 

In general, pure capitalism beats pure socialism hands down every time. In practice however systems are almost never "pure capitalism" or "pure socialism" (which I would say is also called communism, communism often being called a form of socialism though many would argue with that. There is no agreed-on definition of the two terms that I am aware of). For instance Deng Xiaoping injected capitalism into communist China which accounts for their economic ascension since then and capitalist Canada has a number of socialist programs.

Now applying this specifically to healthcare in america... Healthcare is a special industry in the context of capitalism because the demand for healthcare is inelastic, meaning demand does not change with price. Elasticity is usually one of two main factors which drive down prices under capitalism, the other factor being competition. Our geniuses in Washington however have inadvertently delegated de facto control of competition to insurance companies which have all but eliminated it. But that is the current state of healthcare and I feel like you're more interested in the moral implications of theoretically going full capitalism or full socialism. 

If we go full socialism, keep in mind that the only reason we can do so is because of the abundance provided by the capitalist engine. Socializing healthcare (as opposed to making it full capitalist) effectively removes it from the capitalist engine and transforms it into a weight that the capitalist engine must support ( though in america it is arguable that healthcare is currently not supporting that engine). This is OK so long as you don't hang so many weights around the capitalist engine that it can't support them. In which case the system collapses and more poverty/death occurs than would have occurred had the society stayed with pure capitalism. We've recently seen examples of this in Portugal and Greece though not extreme examples because they were bailed out by the EU.

I think that the capitalist engine of most western countries is more than up to the task of supporting socialized medicine but the attitude of "let's give ourselves stuff for free because we can" that is often behind the socialization of industries is what scares me. It is an attitude that trends toward an unsustainable situation and is one that I am not sure can be reined in once it's taken hold of a society, the allure of giving yourself something for nothing is strong (see Greece etc.), though I think it might be possible to remedy with education. To summarize, my biggest problem with socializing healthcare (and anything else) is that the price of providing healthcare evenly to everyone is a less secure foundation for the future. The benefit of socialized healthcare is (obviously) that everyone has access to healthcare, an additional benefit in the case of america is that it should be possible to implement more responsible cost control. In addition to this, capitalism would still be driving the development of new drugs and machines because the companies that produce these are still competing normally so healthcare would still benefit indirectly from the fruits of capitalism.

The disadvantage of pure capitalism is that it would not insure that everyone has access to healthcare, though given that capitalism has already reduced poverty to record low levels there is no reason to think that this trend will not continue, in addition it will lead to a continued increase in discretionary income making it more likely that that individual citizens will step up to cover the health costs of the less fortunate, though admittedly this will never cover 100% of needs.

Personally I am not sure what system would be best, the US already has plenty of dead weight on its system and historically speaking it looks like once government grows to 35-40% of GDP the country starts exhibiting signs of serious instability (again see Portugal etc.), which is to say signs of a weak economic foundation. The US federal government spent about 21% of GDP last year but if you include state and local government spending that number is 40%. Is it moral to go full capitalism and maybe save future lives at the expense of what you know will probably be current lives? I don't know. I would be in favor of socializing healthcare for those who are mentally or physically handicapped and perhaps the very young, but when you subsidize it for the able you are subsidizing idleness, anytime you subsidize something, you get more of it. In addition to this, providing healthcare free for the able shifts responsibility from the individual to the government, taking away an individuals responsibilities leads to less responsible individuals and one thing that I am quite sure of is that the best insurance policy a country can have is the character of its citizens.

So all told, tough question. What's not tough is seeing that a country who's government is spending 17% of their GDP on healthcare (America) and does not have socialized healthcare is doing something wrong when a government that has better health statistics (New Zealand) and *does* have socialized healthcare is spending only 8% of their GDP on healthcare.

Anyway I have a challenge for YOU! Clint, Bob and Amy. I want Bob and Amy to read "Nanny State" and I want Clint to read "Money-Driven Medicine". In return I will read one book that each of you want me to read and since I'm feeling generous I will count Bob and Amy as two people instead of one.

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