The Heritage Foundation

Executive Summary #1398 on Health Care

September 26, 2000

September 26, 2000 | Executive Summary on Health Care

Executive Summary: A High Price For Patients: An Update On Government Health Care In Britain and Canada

Supporters of government-run health care offer an alluring vision: universal health coverage, free or inexpensive medical services and prescription drugs, unrestricted access to care, doctors with complete clinical freedom, and exemplary quality of care. These advocates of government-subsidized medicine often claim that the U.S. health care system should move in this direction so that it will be more similar to the government-run health care in Canada and Britain. Yet an examination of health care in both Canada and Britain reveals that moving American medicine in this direction would be a terrible mistake.

Though the government-funded health care systems of Canada and Britain are different, they achieve similar results. Both systems are characterized by long lines for treatment, substandard technology, frustrated doctors and patients, and--most important--government rationing of care. Because advocates of government-run health care often praise these systems as a model for the United States, an assessment of how they actually operate is instructive for Americans who contemplate reforming the American health care system.

Fundamental Flaw
There is a problem intrinsic to health care systems run and financed by government fiat: As a result of government subsidies, patients do not see the true cost of medical goods and services. Thus, they naturally demand more than they would otherwise consume. Obviously, the more government subsidizes health care, the more pronounced this trend will be. Increased demand necessarily collides with the limited supply available.

At this point, the government must begin to ration care, and because the government pays for health care, it has the final say as to who receives treatment. Under universal health care, government rationing is inevitable. Furthermore, the longer government subsidies are in place, the more acute this problem will become.

To illustrate this point, imagine that the government decided that all restaurant meals should be free, with the government reimbursing the cost of the meal to restaurant owners. Under such a scenario, customers would no longer consider price when deciding where to eat. They would eat out more than they would otherwise, and they would demand the most expensive food. The inevitable result: long lines and shortages of food. As for the restaurant operators, their income to a large extent would be guaranteed, and they would no longer be concerned with providing food efficiently. The government, facing exploding and unsustainable costs, would begin to provide less expensive food or be more selective in choosing which foods to subsidize. Such discrimination would annoy both diners and restaurant owners, harm the delivery of food, and result in lower-quality products.

This problem--the gap between supply and demand when prices are set by the government--is inherent in all government-provided goods or services. Yet when reform-minded critics look at the problems created by socialized markets, they often call for further government involvement.

Both health care systems in Canada and Britain are characterized by:

  • Waiting Lists. Advocates of government-run health care often claim that universal coverage is a fairer system than private health care because it ensures access to care for all people. Yet these advocates often fail to mention that access to care is not guaranteed. Because demand outpaces supply, the government has no choice but to ration care. Absent prices, the only way to "control" demand is to limit supply, which entails waiting lists. In some cases, these waiting lists are so long that some patients literally die while in line.

  • Rationed Prescription Drugs. Stories appear almost daily in newspapers around America about the cheaper prices Canadian citizens pay for drugs, and American politicians have responded with proposals to subsidize prescription medicine. Yet Canadian drugs are not consistently less expensive than American drugs.

Some drugs are less expensive in Canada because the government fixes the prices of prescription medicines. Nevertheless, when the government purchases drugs for its citizens, the government necessarily must ration those drugs. With no private-sector alternatives, patients have no choice but to accept what the government--not the doctor--decides is best. In theory, patients could use their own money to purchase prescription drugs outside of the government formulary. In practice, however, this is rare because demand is so low that few drug manufacturers bother to market their products. Reduced availability leads many Canadians to head south to the United States to purchase drugs they cannot purchase at home.

  • Other Problems. The Canadian and British systems suffer from substandard technology, frustrated doctors, and a vast array of perverse incentives, all of which contribute to low-quality patient care. The problems have progressively worsened in recent years, and their prospects for improvement are not encouraging absent fundamental restructuring--exactly the kind of reform that is too politically difficult to tackle.

Conclusion
Supporters of government-run health care claim that it is better for patients and doctors because it would be fairer, more compassionate, and more inclusive and would deliver higher-quality care than the American system of health care. The reality of government-run medicine belies this argument. In Canada and Britain, access to treatment is far from guaranteed, care is rationed by government bureaucrats, the rich and well-connected receive better care, fed-up doctors flee the system, and patients are left to suffer. In the United States, the health care system, although imperfect, has done a far better job of caring for far more people.

James Frogue is a former Health Care Policy Analyst at The Heritage Foundation.

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