JAMES FROGUE: My name is James Frogue. I'm
the Health Care Policy Analyst here at The Heritage Foundation, and
I want to welcome you to our panel.
remarkable recent development, the Health Insurance Association of
America (HIAA) teamed up with Families USA, one of Washington's
leading left-wing health policy organizations, to unveil what they
call a Common Ground proposal. In it, they call for massive
expansion of Medicaid, our country's single-payer health system for
lower-income Americans. Specifically, the proposal calls for a
required expansion of Medicaid to cover all persons with incomes up
to 133 percent of poverty and giving the states the option of using
Medicaid and S-CHIP (State Children's Health Insurance Plan)
dollars to expand eligibility for persons with incomes up to 200
percent of the poverty level.
Thus, the time has arrived once again to
take a long, hard look at the actual results produced by
single-payer health care. Many on the left make no secret of the
fact that they want a single-payer health care system here in
America, or in the several states. Indeed, a well financed effort
toward this end is underway right now in Maryland; it is being
spearheaded by the Maryland Citizens Health Initiative.
We're fortunate this morning to have
assembled a very distinguished international panel of experts.
David Gratzer, M.D., is a graduate of the
University of Manitoba Medical School. While in medical school, he
wrote Code Blue, which two years later is already in its fifth
printing. Code Blue won the Donner Prize in 1999 in Canada for the
best Canadian public policy book and carried with it a $25,000
first prize. Dr. Gratzer is also the 1992 World Debate Champion,
having won that title in Aylesbury, England.
Gratzer is currently pursuing psychiatry specialty training at Mt.
Sinai Hospital, University of Toronto. In between his 36-hour
shifts, he is also a columnist for the Halifax Herald and
the National Post, and he is working on a new book as
Tim Evans is Executive Director of Public Affairs for the
Independent Healthcare Association of Great Britain. Members of the
IHA include independent, acute, elective mental health hospitals,
nursing and residential care homes, substance abuse clinics,
pathology labs, and screening units. The IHA is the leading
representative body of the United Kingdom's independent health and
social care sector.
Evans has served as Assistant Director for Defense Studies at the
Adam Smith Institute. He also served as the economic and political
adviser to the Slovak prime minister in the former Czechoslovakia
and as head of the prime minister's policy unit. Dr. Evans has
taught post-graduate studies at London's Guildhall University, as
well as a strategic command course at the U.K.'s premier police
staff college for Anzio. He received his doctorate from the London
School of Economics and Political Science.
Richard Teske is a prominent Washington
expert on Medicaid, Medicare, long-term care, and reform for the
uninsured. For a quarter of a century, he has advised and worked
with international, federal, and state government leaders and many
of the nation's largest managed care, pharmaceutical, biotech,
medical technology, long-term care, and hospital companies.
Richard served for eight years in the
Reagan Administration in a variety of capacities. He represented
the United States at the UN Conference on Economic and Social
Policy; he also served as official liaison to the White House for
the Department of Health and Human Services, principal Deputy
Secretary at HHS, and Associate Administrator at the Health Care
Financing Administration. Subsequently, he was Vice President for
Government Affairs and Public Policy for the international
pharmaceutical company Burroughs Wellcome.
Teske was educated at the University of Minnesota, University of
North Carolina, and the London Business School. He is now a writer,
consultant, and noted speaker on political and health care
THE CONSEQUENCES OF SINGLE-PAYER CARE IN
DAVID GRATZER: It's a great honor
to be able to speak today at The Heritage Foundation. I'm always
impressed by the debates and discussions that come out of Heritage.
I think Americans are very lucky to have such a think tank.
Canadians who went to the United States
five, 10, or 15 years ago, when they would talk about health care,
would speak fondly of the best health care system in the world.
Until very recently, Canadians thought they got it right and always
looked south and shook their heads.
Canadians liked to look south and brag, Americans would come north
and express awe. It wasn't uncommon to find an article in The
New York Times or The Washington Post discussing the
health care system where everything is free, where hospitals are
brand-new, where doctors and patients are absolutely content.
Those days have passed. Americans still sometimes come north
and express awe; Senator Kennedy was in town a few years ago for a
fund raiser. Sometimes Canadian politicians go south and talk up
the Canadian system; our Prime Minister lectured your President
about four or five years ago. By and large, however, the enthusiasm
for the Canadian system has very much waned.
a fan of polls. Of course, one should always take these things with
a grain of salt, but a good poll can be informative.
example, Angus Reid, a well-respected Canadian pollster, asked
Canadians to rate their health care system. When they started doing
this polling in 1991, a clear majority of Canadians gave the system
top marks: excellent or very good. Last year, when they did the
poll again, under one in four gave the system that rating.
Angus Reid has done other polls as well. A
year and a half ago, a poll sent shock waves across the country
when 73 percent of Canadians described their health care system as
being "in crisis." Reid actually went back and redid the poll six
months later: 78 percent of Canadians now thought the system was in
People who have had reservations about the
Canadian system have often talked up ideas that are very common in
other Western countries: user fees being one and two-tier health
care, or the ability to buy private insurance, being another.
There isn't a single politician who
advocates user fees. There isn't a single politician who will
publicly state that they are in favor of private insurance. And
yet, just before the end of last year, a major poll commissioned by
Macleans magazine showed that a clear majority of Canadians
now support user fees. On private insurance, we're divided.
may not seem so incredible, perhaps, to outside observers. But in a
country where no politician is willing to advocate such ideas, it's
quite a remarkable development.
The Health Care Quality Problem
So what has happened in Canada? Why is it that we've gone from
being very bullish on this health care system to having great
reservations? Part of it is that Canadians read newspapers, and it
doesn't much matter whether you're on the west coast or the east
coast; it doesn't much matter whether you're a Globe and
Mail reader, or a National Post reader; every single
day, there are stories describing the system.
just randomly chosen a few stories that have come to light
- The head of trauma care at Vancouver's
largest hospital announces that they turn away more cases than any
other center in North America. He's quoted as saying this would be
unheard of in the United States.
- In Manitoba, which is my former home
province, the premier--the political equivalent of a
governor--concedes that his pledge to end hallway medicine has
fallen short. Hallway medicine is the phenomenon where the
emergency rooms are so filled with patients that people are forced
to lie on stretchers in hallways, often for days. Overcrowding is a
periodic problem. In fact, the overcrowding is worse than last
year. The community is rocked by the death of a 74-year old man who
had waited in the emergency room for three hours and had not been
- New Brunswick announces that they will
send cancer patients south to the United States for radiation
therapy. New Brunswick, a small maritime province, is the seventh
to publicly announce its plans to send patients south. In the best
health care system in the world, the vast majority of provinces now
rely on American health care to provide radiation therapy.
Provinces do this because the clinically recommended waiting time
for treatment is often badly exceeded. Ordinarily, oncologists
suggest that there should be a two-week gap between the initial
consult by the family doctor and the referral to the oncologist,
and then two weeks more from the oncologist to the commencement of
radiation therapy. In most Canadian provinces, we exceed that by
one to two months, sometimes three.
- In Alberta earlier this year, a young man
dies because of the profound emergency room overcrowding. He is 23.
On a winter's night, he develops pain in his flank and goes to the
local emergency room. It is so crowded that he grows impatient and
goes to another. There, he waits six hours. No one sees him.
Exhausted and frustrated, he goes home. The pain continues, so he
finally decides to go to the local community hospital. It's too
late: His appendix ruptured. He dies from the complications hours
Those are some of the examples of the
cruelty of what goes on in Canada. But they don't give you the
flavor of the insanity--and I'll use that term in a nonprofessional
sense--of the Canadian system.
scanners are very difficult to get in Canada. There are long wait
times. In my book, I talk about a political struggle on Vancouver
Island where the wait time for a non-urgent MRI scan was over a
year--"non-urgent" being defined by government officials, not by
physicians. In the province I now live in, Ontario, there are long
wait times for MRIs.
of the problem is that we have so few of these scanners. Canada per
capita has as many MRI scanners as Colombia and Mexico. It wouldn't
be fair to try and compare us to the United States or Western
Europe. And the few MRIs that we have tend to run on bankers'
hours. MRI scanners are expensive to operate. So if an MRI scanner
stops dealing with humans at 5 p.m., there are still hours you
could run the scanner.
many MRI clinics now do to make a little bit of money is rent out
their facilities to veterinarians. There was a story, which caused
quite a scandal, that a London man was expected to wait seven
months for an MRI but his dog could get one in just a couple of
weeks. They, of course, addressed this discrepancy in a very
Canadian way: by preventing veterinarians from booking the off
They're still renting out in some parts of
the country. Where I live now, Toronto, there's an MRI scanner that
was renting out to vets. A patient came up with a clever idea: He
tried to book himself for an appointment under the name of "Spot."
Spot was a good name to choose, because Spot could be seen a hell
of a lot faster than a person bearing a less canine name.
The Fairness Issue
We had an election campaign several months ago, and the state
of our health care system was an issue. Canadian politicians are a
timid lot, and no one was directly willing to criticize the
system's structure. One interesting point raised, however, was that
despite the emphasis on equality and fairness, many people queue
jump. One of the big accusations against the Liberal Party,
Canada's government party, was that members periodically queue jump
and get preferential care.
National Post, one of Canada's national dailies, went to a
number of prominent politicians and asked if they queue jump. They
had done a little bit of work and knew of a clinic where VIPs
received faster care. A reporter asked Senator Sharon Carstairs,
government leader of the Senate, if it was true that her husband
queue jumped. She said that that story was absolutely untrue and
unfounded. Actually, she observed that the sort of surgery he
needed wasn't available in Canada, so they went to the United
States and paid $15,000--an unspeakable act by Canadian
I mention these stories, and very often people ask me if this
is merely sensational journalism. Is the system really that
don't just read about the health care system. I work and study in
it. Frankly, I'm impressed by the efforts of providers within the
system despite the many, many frustrations.
story, however, particularly troubled me: a patient on the
osteosarcoma ward of a Toronto hospital. Basically, she had an
obscure cancer; osteosarcomas are particularly malignant and
particularly rare. She had the primary in her foot, and the
orthopods decided to begin with amputation, then move on to other
types of therapy.
weren't comfortable with amputation until they got an MRI scan.
After they got the MRI scan of the foot, they were willing to go
ahead with the surgery. MRI scans are difficult to get, even in
hospitals. It was a bad time of year. The hospital was very full,
so they planned to do the scan at the end of the week, but she got
bumped for another week.
did the scan and wanted to go ahead with the surgery, except that
operating room time is very limited. To complicate matters, urgent
surgeries like an amputation are often postponed because emergency
cases get priority. The patient was bumped several times. She
finally did get the amputation she needed after three weeks.
Osteosarcoma is a very aggressive cancer, and she could actually
see the lesion growing in her foot. It grew from a sore on her foot
to the size of a football.
should condition all of this by saying that we knew she had
metastasis to her lungs. Her prognosis was poor to begin with. But
she deserved better.
course, all of this is anecdotal evidence. It's very easy to say,
"Well, he's given one horror story and a couple of examples drawn
from newspapers. Is the system really that poorly off?" I'll just
summarize a couple of studies that have gone on recently and then
move to my concluding comments.
Fraser Institute, a major think tank in Canada, does a survey of
2,300 physicians across 12 specialties and asks them to estimate
the wait time between the initial visit with the family doctor to
the surgical therapy. They do this every year. Right now, the
average wait time is 14 weeks. What's very impressive is the extent
to which that has grown; 14 weeks marks a 5.3 percent increase over
the last year, despite the fact that government spending in health
care has grown by 22 percent over the last three years.
Fraser Institute not only asks physicians how long patients wait,
but they ask doctors how long they think patients ought to
reasonably wait. In every single category, patients wait too long,
in the opinion of the physicians.
There was a recent five-country survey of
health care by the Harvard School of Public Health. They asked
specialists across these nations if they felt there was a decline
in the quality of health care. Canada has the dubious distinction
of having highest response rate in the affirmative, 63 percent.
Harvard researchers also looked at wait times, where Canada faired
poorly. There were a variety of scenarios that were given. One of
them was a 50-year-old woman with irregular breast mass, without
lymph node involvement. Obviously, this woman needs a biopsy. In
Canada, patients typically waited the longest; 19 percent waited
longer than a month for a biopsy. That was the highest percentage
of the five countries. Just to put that in some perspective, in the
United States, 90 percent of patients are biopsied within a
last week, the Heart and Stroke Foundation of Canada, traditionally
very supportive of socialized health care, released a major study
on heart attack survival. Five-year survival rates in Canada and
the United States are extremely comparable, but morbidity, meaning
how people felt, was not.
of their findings: After 12 months, 31 percent of patients rated
their health as being better than the month before the cardiac
event. In the United States, 44 percent of survivors felt their
health was better. Researchers attributed part of the difference to
the ability of Americans to get angioplasty and bypass surgery,
which is so difficult to get north of the 49th parallel.
Cancer Advocacy Coalition of Canada is a not-for-profit group. The
entire operation is run out of an office above the garage of one of
the member's houses. They look at wait times and availability of
decided to try and figure out what impact the dearth of technology
and cutting-edge chemo drugs have on cancer survival rates. Drawing
on an international database, they compared mortality rates. So how
many people in each jurisdiction die of different cancers?
findings were really quite striking. One finding: In New Brunswick,
which is the Atlantic province I mentioned earlier that's sending
the patients over the border for cancer care, people are twice as
likely to die from colorectal cancer as a person in Utah.
of the big criticisms of that study is that it doesn't look at
incidence. Without getting into biostatistics, what you ought to do
is not just look at what people die from, but look at how many
people are diagnosed, thus discounting lifestyle. People were
critical of the study.
they did something very sneaky. They actually got a government
biostatistician to provide the incidence. They could thus answer a
simple question: If you're diagnosed with cancer in Canada, how do
you compare in terms of your life expectancy to somebody who's
diagnosed in the United States? Canadian provinces ranked close to
or at the bottom in every single category.
Canadian system is ailing. Why? I believe that Canadian medicare
suffers from a basic economic problem. We have a free-for-all
system, and, as health economists have well shown, costs are driven
up. Patients tend to overconsume health services while providers
tend to oversupply health services. The only way we can deal with
this is to ration through waiting.
like the old Soviet system: Everything is free, but nothing is
readily available. It's very amusing when you're talking about
toilet paper in Moscow in 1975; it's far less amusing when you're
talking about cancer treatment in Toronto in the year 2001.
Message for Americans
I think it would be safe to say that you could have a
single-payer system that's smarter than the Canadian system. You
could have a single-payer system that has user fees. You could have
a single-payer system that allows private insurance. You could hire
better administrators. But I think at the end of the day--and this
would be my message to you Americans--you have to understand that
when the government finances something, it ends up managing it.
is well illustrated by Canadian medicare. Even if we did make the
revolutionary reforms that politicians aren't willing to advocate,
but we kept it as a single-payer system, we would still have bad
health care. Single-payer health care, which effectively means
government-run health care, has three consequences. I will list
them and then cite a Canadian example of each.
Consequence One: Poor
Accountability. There is an extraordinary lack of information about
the health care system in Canada. I'm putting together a book now,
and I asked one of the big health information experts in Canada to
write a chapter for it. As an exercise, he wrote a letter to every
ministry of health in the country and asked about wait times for
treatment. Not if they were clinically reasonable; not how many
people were on wait times; not even the geographic distribution;
just a sense of how long people wait for basic therapies,
treatments, and surgeries. Not a single ministry of health in the
country could respond.
In fact, because our health care system
runs into so many troubles, government often obstructs the flow of
information. In Toronto, where about a fifth of the population
resides, hospitals typically go on redirect and critical care
bypass because of emergency room overcrowding. How did the
government first address this problem? They stopped publishing data
on the frequency of hospital bypasses.
Consequence Two: Politicized
Decision-Making. I'm not talking about just small decisions, but
every decision, the sort of decisions that should be apolitical and
influenced by community needs. In Ontario, where the government is
elected by rural constituents, major hospital restructuring was
initiated. The first thing the government did was announce that
they were going to close hospitals and that there would be no
sacred cows. The second thing they said is that no rural
institution would be touched.
If it seems unfair to pick on Ontario, we
can look at Saskatchewan, a smaller prairie province, where the
government is traditionally elected out of the urban centers. They
too had a major restructuring of their hospital system, and they
started and ended with rural institutions.
Consequence Three: Lack of
Innovation. Bureaucrats are very cautious as a lot. They tend not
to be aggressive. As a result, innovative people within the system
are frustrated. It's difficult to get financial support for
cutting-edge treatments and technologies.
Last month, the National Post ran a
three-part series on cancer care in Canada. One of the stories
focused on a man who was diagnosed with esophageal carcinoma. Given
a 10 percent survival rate in Canada, he went to the United States
and was treated with experimental medicines. Four years later, he's
still alive. He couldn't get that kind of care in Canada, not
because the oncologists aren't well-trained or the nurses aren't
skilled but because funding for clinical trials and experimental
treatments is scarce.
in terms of the larger issue, is the single-payer system
attractive? I think a single-payer system in the short term is very
politically sexy, but I think that there are good lessons to learn
from Canada on why you would not want to do this.
THE EVOLUTION OF HEALTH CARE IN THE UNITED
TIMOTHY EVANS: I want to give you
an overview of the history of British health care, the politics of
the National Health Service, its impact on British health care, and
the re-emergence and the now substantial growth of the private, or
independent sector. I'm going to conclude with an overview of
what's happening in the British private health care system and what
Tony Blair is doing. There's some good news there, and there's some
want to go back to the 19th century, away from some of the popular
mythology, probably led by Charles Dickens in his novels. The
reality in the 19th century was that for every social class, health
care was improving. Britain developed in the 19th century an
extraordinarily rich tapestry of diverse health care institutions.
In the latter stages of the 19th century, there were literally
hundreds of charities, trade union friendly societies, mutuals,
providence associations, and commercial insurers providing an ever
better range of health care products for citizens.
However, as Adam Smith said, when people
get together in any profession or trade, they tend to connive, and
they tend to want to gain legislative favor. This was certainly the
case of the doctors, who in a sense, from their own vested interest
point of view, had a huge victory in 1858 when they set up the
General Medical Council and it won legislative favor. It could
define what a doctor was and what constituted a medical
Rise of the Doctors
Then, in the 1890s, the medical profession, having established
their legislative monopoly, their barriers to entry, set about
trying to persuade the British political class that they were the
most important profession of all. They uniquely held the essence of
life in people's hands. Forget lawyers; forget politicians; forget
doctors called themselves the British Medical Association. If you
read the minutes of their meetings at the time, they said, "We are
medical gentlemen, and we are way above any profession. We
shouldn't really be held down to having to compete for business,
particularly with working-class people who are funding their mutual
funds, or their trade union friendly societies. We should be able
to deal with the lucrative private heath care market in the middle
classes. But surely we should be able to access guaranteed incomes,
tax-funded salaries from government."
really wanted to have their cake and to eat it. They wanted the
lucrative private market, and they didn't want to have to serve
poorer consumers. This was not just about economics nor the usual
corporatism that professional groups try and enter into. This was
also about snobbishness at its worst.
doctors and the commercial for-profit insurers found common ground
in the early 20th century. The commercial for-profit insurers were
terrified that ever more working people were being covered by the
not-for-profit insurers, the mutuals and the friendly societies,
and that these institutions were becoming so successful they would
soon be competing for the lucrative for-profit middle-class private
insured markets. So the doctors got together with the commercial
insurers and urged the Prime Minister, Lloyd George, in 1910 to
pass a national insurance act which would compel every citizen to
pay four pence a month in tax for now-guaranteed government welfare
argument that was put forward was that the market is messy. It's a
market. It's duplicative. For poorer people, surely there should be
one rational, national insurance system. Lloyd George went to the
country, arguing that if they supported him with this bill, then
for every four pence that taxpayers would pay the government,
government would give them the equivalent of nine pence in benefits
because of lower transactions costs and removal of all the messy
and archaic duplication, the economies of scale that would go with
government, et cetera. Familiar?
Well, the bill was passed. It entered law.
Now the doctors could keep their lucrative private insured market
with the middle classes. The poorer people had to pay their tax to
government so they could no longer afford to pay into the mutual
funds or the trade union friendly societies.
Between 1911 and 1915, now accessing tax
funders' money, doctors' salaries on average doubled. The British
left in the 19th century had not been about what we would today
call state socialism. They were heavily influenced by the Rochdale
Pioneers and by the cooperative and mutualist traditions, which I
think sits comfortably with a broad market approach.
Growing Government Role
The British government, now involved in health care and
welfare, decided it had to establish a Department of Health, which
it did in 1919. But by the time of the general strike in 1926, the
entire friendly society-mutualist movement was in peril. Now the
British left turned their backs on their own heritage, on the idea
that worker ownership of health care in a sense was literally about
workers owning their own institutions and their own funds. Now the
idea of public ownership in health care, was equated with state
ownership, and a middle-class, quasi-Fabian Marxist agenda
then move on to the 1940s and the establishment of full-blooded
health nationalization. For most British people, when you talk to
them, it's almost as if the NHS simply arrived one day on a UFO: In
1948, there was British health care. There were magically hundreds
of hospitals. In fact, to create the NHS, the government had to
take into public ownership--it had to nationalize 3,118 independent
hospitals, homes, and clinics.
of those previously independent institutions had been built up over
many hundreds of years. The oldest hospital in Britain, St.
Bartholomew's in central London, was created in the year 1123. It
was in the independent sector well over 800 years. It was
nationalized in 1948-1949, and recently the government wanted to
close it down. It was in the market for over 800 years; it's taken
politicians less than 50 to try and destroy it.
Creation of the NHS
When the National Health Service was launched in 1948, the
politicians were stupid enough to put in black and white their
promise to the British people. They promised that the NHS would
provide all medical, dental, and nursing care. Everyone, rich or
poor, could use it. That was what they put on the leaflet sent to
every home in the country. The promise was, the government was
going to do it all.
However, there was a financial crisis
within six months of its establishment. The government had believed
in 1944 and 1945 that if they were going to create this system, it
would probably cost about £132 million. In its first year of
operation, it cost over £400 million, and the Cabinet had a
architects of the NHS believed that if you could have a free
service and people's health care needs were dealt with swiftly by
the state, after a few months the demand on the services would
actually go down: that if people could have their spectacles and
their inoculations and the surgery they needed, people would be
cured. Then the demand would go down so it would be cheaper.
was a remarkable view of economics: truly unique, I think, in the
developed Western world. By 1948, the first full year of operation,
they had to introduce prescription charges, which were again
revived in 1951 and 1956. So we had rationing by price signaling.
Over the years, we've seen rationing by cash limits; rationing by
queuing, people waiting; rationing by exclusion, all kinds of
services simply not provided on the National Health Service.
NHS did not build one new hospital in the 1950s. In fact, it didn't
build anything until around 1963 and 1964. There was no capital
investment to speak of. Then, in the 1960s and 1970s as rationing
got worse, government found it difficult to pay for the service, so
industrial relations problems abounded. By the mid-1980s, there
truly was a capital crisis.
The Waiting Lists
In the late 1960s and the 1970s, the government had scraped
together a few pennies, and it did manage to build a few hospitals
or a few new wings on some of the Victorian institutions that they
had nationalized. So the politicians began to talk about getting
the private sector to invest capital to build new hospitals. For
every ten years of the existence of the NHS, on average, waiting
lists have gone up by about 200,000 people every decade.
Today, the National Health Service costs
the taxpayers some £50,000 million. Over one million people
are waiting for treatment and surgery and often waiting reasonably
lengthy times: months, and for some surgery, years. There are
probably another 300,000 to 400,000 people waiting to get on the
waiting list because, of course, there's a definition about waiting
lists. If you're on a waiting list, when you've seen a consultant
and you're waiting for surgery, you're not really on the government
waiting list when you're waiting to move from the GP to see the
is out of a population of some 60 million people. If there are a
million, maybe a million and a half people waiting, when I wander
around London, most people are well. Anecdotally, I almost ask
myself the question, "Where is the £50,000 million going?"
Today, the NHS by international comparison has a very, very poor
record in all kinds of important areas such as cardiology, cancer
treatment, and survival rates. Today, rather like corks bobbing on
the tide of history, our political classes in Britain are trying to
manage a service; but whatever they do, the sand just runs through
their fingers, and they're desperately trying to reform the system
and to deal with ever higher consumer expectations.
"Internal Market" Reforms
In the early 1990s, the government introduced what they called
the purchaser-provider split, which is a kind of internal market.
The NHS hospitals were given what was called trust status, and
general practitioners were freed up somewhat to purchase their
services from different hospitals, hospitals out of their area, and
in some cases do a little bit of purchasing from the private
sector--although if you were an NHS manager and you really wanted
to be a high flyer and have a good career, that probably wasn't
in the 1990s, we continued to see the increasing contracting out of
services. First it was laundry in state hospitals that went to the
private sector. Today, it's all kinds of things: path services,
also have a program now attached to the NHS called the Private
Finance Initiative. The government has owned up to the fact that it
can no longer afford to build any new hospitals. If the NHS
actually wants to build a new hospital, it has to seek finance from
the private sector. Then, when the private sector has built a new
NHS hospital, the NHS will effectively rent it under a lease for a
certain number of years. It's a kind of off-balance-sheet
think there is a case that, sometimes in Britain, whereas the
Conservatives on the right are trusted with industry and they tend
to be trusted historically with economic issues, the Labor Party is
trusted with the human services: education, health, policing in
many ways. In that sense, if you are going to continue to perform
the NHS, it has to be done perhaps under a Labor government because
if they contract out a service, if they want to perform a
partnership with private banks, if they want to perform a
partnership with the private sector, Mr. Blair says, "It's okay
because you know we in the Labor Party believe in health care." The
British public are more prepared to buy that than perhaps they
would from a wicked, cold-hearted Conservative.
It's with that in mind that my organization has signed a
historic deal with Tony Blair and his minister of health recently
which is called the Concord Act. The Financial Times called this
the most important document in the 50-year history of our National
Health Service. It's called "For the Benefit of Patients." What it
really means is that if you are an NHS patient and you need an
intensive-care bed, or you need some form of elective surgery or
whatever and you can't, perhaps, get it in time, the NHS is now
encouraged to mobilize the services available in the private
There's a huge agenda of clinical
governments, a revalidation for medical professionals, but there
is, fundamentally, a broad acceptance of the mixed economy in
health and social care now in Britain. I want to touch very briefly
on the size and scope of the independent sector.
Rise of the Independent Sector
Under the radar of popular politics and the crisis that has
over the years befallen the NHS, we have indeed seen the
re-emergence and the growth of an independent sector. If I now look
at 230 independent hospitals that we have, the 70 independent
mental health and substance-abuse units, or the 15,000 nursing and
residential homes, then I see we again have a total of 460,000 beds
in the independent sector.
compares with the National Health Service and with local
authorities on long-term care provisions. They have a total of
356,000 beds. So in a world away from the promise of 1948, when the
government was going to do it all, you can see there has been a
significant evolution on the side of provision.
- The independent sector now employs
three-quarters of a million people. It provides over 85 percent of
all residential community care, and it undertakes 20 percent of all
- Some 14 million people in Britain make
some sort of regular financial contribution to health care. There
are 7 million people who have private medical insurance; in
addition, there are another 7 million people who have what are
called the health cash benefit funds, or critical illness, or
permanent health insurance, or they simply self-fund. This is not
to mention the vast number of people who now seek private dentistry
or alternative therapies.
- In 1981, the independent sector was doing
around 200,000 surgical procedures a year. In 1997, when Tony Blair
was elected, we were doing around 900,000 surgery procedures a
year. Today it's over a million.
Today, in the cultural wake of what has
already happened, in a sense, the Prime Minister accepts the
individual's right to choose independent health and social care.
There is a commitment to keeping the purchaser-provider split in
the National Health Service, and through the Concord Act, the NHS
can contract ever more with private providers. Ever more private
finance is going into the NHS under new forms of public-private
partnerships. Labor even encourages local authorities now to turn
to the private sector to provide long-term care.
Consider the rhetoric of the left and
right. If you get any British Conservative politician to talk about
health care, the Conservative will talk about the importance of
individualism, personal responsibility, choice, enterprise,
building a property-owning democracy. Any New Laborite will talk
about community, the importance of self-help, their belief in
diversity, in welfare provision and health care provision, how
everyone must have a stake in the society they're a part of, and
how the government wants to build a partnership with the private
Diversity or choice: How could you have
choice without diversity? Self-help or personal responsibility:
What's the difference? Have you ever known an enterprise that
didn't enter into partnership with consumers that have contracts?
The rhetoric that the left are overlaying on our health and welfare
debate is a rhetoric that is enabling the continuation of positive
- Today in the U.K., we're seeing a dramatic
increase in the number of people who are turning away from the NHS,
and many people who have no private medic insurance are simply
self-funding. One in five people who go into British private
hospitals just take their credit card or cash, or it's the family
clubbing together to buy Mom a heart bypass or Dad a hip
replacement. Probably nearly 200,000 surgical procedures a year now
are done on that basis.
- We're seeing a dramatic increase in number
of people covered by the health cash benefit schemes. Five years
ago, 3 million people were covered by those schemes. Today it's
probably between 5 and 6 million.
- We're seeing a continuation in the growth
of private medical insurance, probably about 2 percent a year in
- We're seeing recently the launch of
private prescriptions for even NHS patients. For example, if you
want Viagra, the NHS will no longer pay for it. You have to go
private in many instances.
- We've seen the NHS independent-sector
Concord Act. We're seeing the continuation of contracting out of
NHS work. I believe in the next few months we're going to see the
introduction of private management teams into what will be called
or deemed the failing of National Health Service hospitals.
Progress Toward Privatization
When you have hospitals in the NHS that are built with private
money, when you have lots of services contracted out, when you have
a partnership with private providers, and then you bring in private
management teams, you are in my book entering the privatized world.
You are really beginning to return the NHS to some sort of
see the future of the NHS as a funder. It will remain as an
important funder in the U.K. for many years. A lot more services
will be purchased by people themselves for insurance or
self-funding. But the NHS as a provider will go into decline. I
think most provisions will return to the independent sector.
Problems with the single-payer system, to
follow what David was saying, include the politicization of health
care, the vast amounts of producer capture, resource misallocation,
irrational rationing, vast amounts of regulation, services not
really reliant upon reputation, but only on position, on uniformity
rules and poor consumer focus. But in an age dominated by the
psychology of consumerism, as in so many other areas of daily life,
the British people are learning to empower themselves in the
market. This is particularly true of younger people in their 20s
and 30s who are no longer prepared to wait for a year for surgery.
Certainly, they don't believe the NHS will be there for them in 10
years time. In the U.K., therefore, the health care system is
evolving away from its "Sovietized" past.
could just briefly, as my last comment, read from a book that I
discovered a little while ago called The British Socialist
Illfare State, written by Cecil Palmer. He wrote this book in
1950 or 1951. It was published in 1952. Very sadly, he died just
before it was published, and he died just before he was going to
come to the United States that year to give a series of lectures on
what he believed the NHS was going to do in Britain and to warn
Americans to keep away from Sovietized nationalized medicine.
dedicated this book "In humble tribute and admiration to
libertarians everywhere, but especially to those whose friendship
and loyalties I possess in Great Britain, the United States of
America, and Canada. Forward, guardians of liberty." And he
of British medicine under socialism is becoming more obvious every
day, even to those who initially and sentimentally gave the
National Health Service Act their enthusiastic support when it
became operative in July 1948. This progressive disillusionment
reflects the financial, structural, administrative, and social
limitations of socialistic legislation in a hurry. The trouble with
theoretical socialism is that although possibly it makes pleasant
reading on an unpleasant Sunday afternoon, it just will not work in
a society which still retains and cherishes the principles of
individualism. As long as I am capable of writing and public
speaking, I will continue to iterate and reiterate that if
socialism will work at all, it will only work under compulsion.
Liberty and socialism are incompatible.
In less than
three years of nationalized medicine in practice, doctor and
patient have discovered, perhaps too late, that social reform and
socialism are not necessarily one and the same thing. I have never
met anyone anywhere prepared to deny that the detection,
prevention, and cure of disease are palpably inescapable
obligations imposed on any society that claims to be civilized.
There is no quarrel about the existence of the problem. The
challenge arises from the method and the manner of its
so proud to be able to read those words from Cecil Palmer, who I
know would love to have delivered that warning in 1952, to
Americans and to Canadians, but he wasn't able to do it. As you've
heard from my talk, we've had to go through many decades of pain
and suffering, and there are over a million people in Britain
waiting today for treatment and care. Please, please heed the
warnings today that he wanted to give you half a century ago.
THE STRUCTURAL PROBLEMS OF SINGLE-PAYER
RICHARD TESKE: It's always an honor
to address an audience at The Heritage Foundation. I think you'll
all agree that we have just heard two fascinating
talking about national health care systems, I'm reminded of a
favorite Monty Python routine. Eric Idle walks into an office.
Behind the desk sits Michael Palin, and Idle--let's call him Mr.
Smith--comes in and says, "I'd like to make a claim on my auto
insurance." Michael Palin says, "Well, what's your name?" Idle
answers, "Mr. Smith."
Michael Palin walks over to the file
cabinet, looks for the policy, and says, "Oh, yes, Mr. Smith, this
is our very finest policy." And Mr. Smith says, "That's fantastic."
Palin says, however, "There is a clause here that this policy shall
remain in effect until such time as a claim is made." Smith says,
"Well, it isn't very much of a policy then, is it?" And Palin says,
"Oh, no, it's our finest policy, unless you have to use it."
Promises of a single national health
system always sound so much better than the reality. That is the
Faustian bargain of all socialized economic systems. Those systems
may start out in different places, as we've heard, but they always
end up in the same place: price controls, rationed access, and
reason for this is very simple. The problem is structural. There
are three essential elements to every health system: cost, access,
and quality. How you handle those three elements determines your
structure, and it determines your outcome. For example, in the old
Soviet-style health systems, in order to preserve egalitarian
communist access and to control costs, quality suffered. Look at
Cuban health care today.
socialized systems of democratic countries, in Canada and Western
Europe, in order to control costs but keep quality high, access to
care had to be rationed, as we just heard. In America, we wanted
both universal access and high quality for both Medicare and
Medicaid. The result was inevitable: Costs soared.
Those two programs, from being essentially
$1 billion programs in their first year of operation, which was
1967, have now soared to almost $300 billion for Medicare and over
$200 billion for Medicaid. As I said, it was inevitable because it
Wilbur Cohen, a former Secretary of Health, Education, and
Welfare, and also one of the chief architects of the Social
Security Administration, Medicare, and Medicaid, explained the
reason for Medicaid's uncontrolled growth: "Many people since 1965
have called Medicaid the sleeper in the legislation. Most people
did not pay attention to that part of the bill. It was not a
secret, but neither the press nor the health policy community paid
any attention to it."
inevitable result: President Lyndon Baines Johnson, the author of
the Great Society programs, was calling attention to the cost
overruns before he even left office in 1969. In fact, we were
spending by 1970 what was projected that we were going to be
spending in 1990.
in the 1970s, typically, we instituted health planning areas,
certificates of need, peer review, wage and price controls, and
construction moratoriums on hospitals and nursing homes. In the
1980s, it was new federalism, program swaps, deregulation, and
hospital and physician fee freezes, and then national fee
schedules. In the 1990s, we tried targeting specific new
populations that greatly expanded government coverage--pregnant
women and children, the uninsured, and the children's health
program, for example.
Bureaucracy and Red Tape
We looked for "managed competition" to be the solution du jour
in the early 1990s. In reality, managed competition was neither
managed nor competitive. What it was, was the ultimate conclusion
of all socialized entitlement programs: rationed care. This is
because these programs are defined benefits programs. Again, this
problem is structural. The bureaucratic levers to control access,
quality, and costs are changes in eligibility, benefits, and
reimbursement. Bingo, whoever said "bureaucracy."
defined benefits program, eligibility and benefits are fixed and
universal. It's costs that are variable. This means that if you are
eligible, you are entitled to all the benefits, regardless of the
costs to the government or the taxpayer. Thus, the name
"entitlement program." Politically, it is almost impossible to cut
benefits or eligibility, as we heard earlier today. Note the
present pressure for expanded benefits like pharmaceutical
coverage, or moves to guarantee access like the patients' bill of
it usually falls on providers and reimbursement to control costs.
But wage and price controls, no matter what their name, always have
an impact on quality, again as we heard today.
are a long way from the 1970s attempts at cost controls.
Eventually, we must ration access to care because it is inevitable.
This devolution into a rationed and price-controlled system with
poor quality has already occurred in America. It is called
Medicaid. As John Iglehart, the editor of Health Affairs,
has said, "Medicaid's architects," of which Wilber Cohen was
program that would provide poor people with mainstream medical care
in a fashion similar to that of private insurance. As the decades
have passed, that vision has largely faded and several tiers have
emerged. Mainstream medical care is provided to people with
Medicare, or private insurance, but poor people must continue to
rely on providers that make up the nation's medical safety net.
Remember: Because it is structural,
Medicare is following Medicaid into rationing.
In addition to working in health care, I've also worked in the
information technology field. We are witnessing a brave new world
where, as I call it, the chip marries the cell. Most troubling is
that the financing of our entire health care system may collapse
with the cost of new scientific discoveries such as the mapping of
the human genome, stem cell research, slowing the aging process,
and cloning. The costs will be as astronomical as the philosophical
Finally, the aging of the population means
an absolute and real fivefold increase in long-term care spending
by the year 2020. Note that half of all long-term spending comes
from Medicaid. Also note that one-fifth of all present state
spending is for Medicaid. If you multiply 20 percent times 5, you
come up with 100 percent for Medicaid for state budgets. This means
that the Medicaid program and long-term spending alone could
bankrupt every single state government within a generation.
Families USA and the Health Insurance Association of America to put
an increased burden on this already overburdened government program
is unconscionable. We should be looking at creative ways to
stimulate private sector coverage. It appears that the arrogance
and snobbery of the British physicians in the late 1800s who didn't
want to treat the poor has now been transferred to the Health
Insurance Association of America because they don't want to cover
the poor. That's the only way I can rationalize that.
At the end of the day, there is only one philosophical
alternative to single-payer systems: a consumer choice-oriented,
market-based plan called the defined contribution approach. In the
defined contribution approach, costs and eligibility are fixed. It
is the benefit that is variable.
have already seen changes in the private pension field like this.
In the old days, everybody's pension plan was being calculated, and
it was a defined benefit. So many years, so many this, so many
that: one size fits all. Employers had to get away from that, and
they went to a defined contribution approach where they gave you a
defined contribution, called a 401(k) in most instances, and said,
"Okay, here is your money. You invest it the way you want to. This
is my contribution to your retirement. I'm not going to guarantee
it through this old defined benefit program."
We've already done it in pensions, it's
now time to do it in health care. A system broadly similar to the
Federal Employees Health Benefits Program for private and public
health care programs is the only philosophically coherent and
politically viable alternative to single-payer plans.
no mistake: There is no halfway measure in between. As Dr. Evans
noted, socialism and liberty are incompatible. If we don't turn to
this defined contribution approach, we will be stuck with a
socialist, defined benefits welfare entitlement approach. It will
be our very best plan--unless you have to use it.