Thursday, May 20, 2010

Ideas Kill

Ideas have consequences and one consequence is that, when implemented, certain ideas can kill.

Two recent stints of sitting six-plus hours in the emergency room of a local hospital stimulated thoughts on the state of socialized medicine today. As a marketing professor, the first sarcastic comment that came to mind was just how little the hospital staff cared about their paying customers who were sitting agonizingly in those oh-so-comfortable chairs. Beyond this, I had to ask, “Where is the excess capacity—of doctors and examining rooms—to be called upon to meet high demand?” Supermarkets, after all, promptly open additional registers when more than three customers are waiting in line to check out. Of course, this last just as promptly usually generates from the medical profession the indignant response “We’re not a business! How dare you!!”

The answer to my question is that, by design, there has been no excess capacity in medicine since at least the mid-nineteenth century. The goal of the licensing monopoly created by the American Medical Association (1, 2) in 1847 was to restrict supply in order to increase the income of a certain type of doctor. The 1910 Flexner Report (1, 2) led to a further restriction of the supply of medical schools. Regulation and taxation of for-profit hospitals throughout the twentieth century drove most out of business, leaving such institutions to be taken over either by an arm of the government or by government-sanctioned and protected nonprofit organizations. That is to say, to be taken over by those idols of customer service, the bureaucrats.

Nonetheless, the system has not been as bad as it is today. In the 1950s, when I was a child, our family doctor made house calls and twice, once after a bang on my head and the second time after I suffered a baseball in the eye, the doctor met my father and me at the hospital where more resources were available than in the doctor’s office. There was no wait when we got to the hospital and my father paid for all of this out of his pocket—we had no medical insurance. And, oh yes, my father was not wealthy. He worked as a clerk in the post office. The connection between seller and customer was direct and the market performed relatively smoothly.

What has happened in the years since is the solidification of medical bureaucratization that began at its point of inflection during the wage and price controls of World War II.* Health insurance that businesses could deduct from their taxes was the only way wages could be increased. This began the slippery slope of putting the government-regulated cartel of insurance companies between doctors and patients. Medicare in 1965 iced the government takeover of medicine with strict price controls. Skyrocketing costs, shortages, and the charade of billing as much as five times what is actually paid for medical procedures have become the norm.

What kills, in the form of long waits, is price-control-caused shortages and other regulations that restrict innovation and supply. People die waiting to get appointments with doctors, waiting for surgeries, for transplant organs, for drug approvals from the FDA. Think Canada and the UK. One doctor estimates that 80,000 men over a three-year period died in the US awaiting the approval of a prostate cancer drug that was already in use in Europe.

Our adventure in the hospital that I began this post with ultimately had a happy ending, but in the intervening hours of waiting a parade of doctors looked at our daughter offering diagnoses ranging from tendonitis to viral infection to (the correct) bacterial infection, a possibly serious problem if not caught early. The range of diagnoses could only make me think of Jerome Groopman’s book on How Doctors Think, where Groopman points out that 10-15% of diagnoses are wrong. The likely issue in my daughter’s case is that the doctors are so frazzled by lack of time to listen to or take a full patient history that they cannot consider all alternative explanations of the symptoms. The doctors are caught in a bureaucratic web spun by the advocates of socialized medicine. The doctors, as a result, have become no better and no worse than college professors at a state-run university. That is to say, they have become bureaucrats just like me. Some are better than others. The challenge is to find the good ones.

Even before these two visits to the ER, the state of the system had become personal to me. Some twenty months ago I had a date with the cardiologist. My response, therefore, to those who want more government involvement in medicine is simple: “You would have me dead. With your ideas in place twenty months ago, with the increased shortages and waiting time those ideas cause, I might not be here today. Your ideas kill.”

*The seeds of socialized medicine go back to Prussia’s Bismarck. And, according to Melchior Palyi (chapter 4), Bismarck just governmentalized ideas that were plentiful during the medieval guild era.


jicdoug said...

Thank you for the very informative post, Dr. Kirkpatrick.

One difficulty in arguing with those who would further socialize medicine in the US is that they love to point out how good medical care is in countries such as France, Germany, and Sweden (Canada and the UK are fairly discredited now). Although advocates for freedom in medicine can point out how health care in the US has been degraded by government controls, opponents can counter by saying that that result is just due to our quirky system, not government regulation per se. In other words, it's not a matter of principle, but execution.

What we need is an explanation - similar to yours - of the history of the medical care systems in these other countries and how whatever is good about their systems is good despite their systems, not because of them. For example, innovations still occur in these "socialized" systems. Does this mean freedom isn't necessary for innovation?

If you know of any good sources for this kind of information about the health care systems of the more socialized countries, please let us know if you have the time and inclination.

Best regards,
Doug Bell, VA

Jerry Kirkpatrick said...

Thank you for your kind comments. Unfortunately, I don't have any good references other than the Palyi book, which gives a history of the European systems up to about 1950. A solidly researched and easy-to-read update that includes the US is definitely needed.

Your point about execution, not principle, is a good one. That, of course, is the standard line used about all government intrusion into the economy. "Regulation X isn't working because of poor execution, or because the law wasn't written clearly enough, so now we have to amend it with more regulations." The history of the antitrust laws is a prime example.

David said...

Melchior Palyi Compulsory Medical Care and the Welfare State (pdf)

jicdoug said...

Thank you for the link, David. Maybe there's a Ph.D. student out there somewhere working on a good comparative study.

On another note, is the European welfare state finally reaching the end of its ability to live off borrowed production (e.g. Greece)?