American healthcare reform is merely a warm-up for the rest of us

Those opposed are accusing US President Barack Obama of attempting to set up death committees to kill the aged.  Those in favour suggest that their opponents are delusional traitors.

Welcome to the debate over US healthcare reform.  The world’s wealthiest nation is in a lather over a proposal that hasn’t even been officially formulated yet.  Both sides yank in the UK’s National Health Service as proof of their cause.

The US system costs 16% of GDP, and leaves some 15% of the population uncovered by healthcare.  The UK system of national health covers everyone, and costs 8.4% of GDP.  Life expectancy in the US (a crude measure of the benefits from healthcare) is 77.8 years, while in the UK it is 79.1.

However, in the US five-year mortality rates for cancer are dramatically better than in the UK.

Healthcare in the US is both rapid and effective; however, it is not available for everyone.  This lack of comprehensive care turns up in the life-expectancy rates.  In the UK more people have care, but it is of a slightly lower quality.

Those without access to healthcare already have their life-expectancy effectively rationed. They’re demanding the right to have any care at all.  Those that have healthcare are in the majority and are voters. They are scared of seeing that care rationed or downgraded.  If any government cut the care they are used to then that government will serve precisely one term.

The debate about rationing life expectancy is a red herring. Capitalist systems already ration scarce things through high prices.  It is the structure of paying for healthcare that is critical to the debate. 

Whether governments, insurance companies or individuals pay for care, the money is ultimately derived from company profits and individual salaries.  Expanding cover to everyone without also grappling with the costs will leave a tremendous financial burden in its wake.

There are only two choices in paying for any good you want:

1. You pay for things you want;
2. Someone else pays for things you want;

If someone else pays, you immediately open up a can of worms. Say we were talking about motor-cars. Everyone wants a nice car, but not everyone can afford it. Self-selection means that the wealthiest get the nicest cars. Is that fair? But what about chemotherapy? Should everyone get the same chemotherapy? It isn’t universally available. The best surgeons and treatment are scarce and expensive. So how should a scarce resource be allocated to the best place for it?

Should it be a list, and whoever gets in first – prince or pauper – gets treated first? How will you stop the bribery and corruption that may result from such a system?

Second, how will you pay for it? The wealthiest – for whatever reason – are frequently the most productive members of society. Their taxes will pay for this healthcare system. However, if you bias against them – no matter how slightly – they will either die or move to countries where healthcare is their choice. Either way, your healthcare system will rapidly become unaffordable.
Most of the controversy is based on the assumption that healthcare is a zero-sum game. Either the poor pay, or the rich do. But innovation and competition introduce the prospect of a positive-sum game. Prices can come down through better systems and practices.

There is no lump of healthcare that has to be divvied out any more than there is a lump of labour or lump of food. Innovation is a bit like the loaves and the fishes of the New Testament; it can make a little go a lot further than you would ever expect or imagine.

The terms of the healthcare debate have to be about universal access to a basic standard of care, and ensuring competition to yield innovation and price savings. And that is it.