Socialised medicine part 2

Rationing in healthcare is complex. The myth of unrationed healthcare in the US is pervasive. Like the rest of the world healthcare in the US is rationed, it’s rationed by payment. Interestingly, health policy under the Bush Administration has been about increasing the level of rationing in the system through shifting costs from insurers to the patient, all part of the theory of “skin in the game”.

This is the real agenda of health savings accounts and the so-called ‘consumer directed’ health plans (other than giving rich Republican voters another tax-break, of course). These have huge deductibles (i.e. the amount each year that you pay out of your own pocket) and large co-pays for services. You can learn more about HSAs here . As an outsider, it is obvious that rationing care by the ability to pay is the purpose and aim of this reform. Henry A. McKinnell, CEO of Pfizer, rather let the cat out of the bag when his first argument in favour of the HSA experiment was as follows
“When you pay for procedures, don't be surprised that you get a lot of procedures.”
(In other words we can reduce the number of (unnecessary? – hmmm discuss) procedures we do. In the rest of the world we call this rationing). However the appeal to personal responsibility hides the fact that HSAs are about rationing to its enthusiasts.

For example, the commentator who condemned socialized medicine for rationing went on to say,
“Health Savings Accounts are a great idea… if your car insurance had to cover oil change, car washes, etc. it would go through the roof”. Effectively, this is an argument for rationing by price and ability to pay, but because your ability to pay is 'your responsibility' the fact that this is rationing is ignored.

The available evidence shows that increased rationing has been the consequence of the HSAs. The Commonwealth Fund noted that about one-third of individuals in such plans reported delaying or avoiding care, compared with 17 percent of those in comprehensive health plans. Now it might be argued that this is appropriate rationing – it is too early to know how the outcomes of patients in consumer directed plans compare to those in traditional plans - but it is very clear from the survey that there is a much higher dissatisfaction level among patients in such plans than those in traditional plans.

Socialised systems ration by declaring some technologies off limits (or delaying their introduction) and/or imposing waits to receive treatment (a time cost). The UK waiting time for elective surgery as a famous example of the latter, and this gets cited regularly, and increasingly inaccurately by US critics of socialised medicine. Interestingly, mean and median waits for surgery were always pretty low – this is a consequence of the fact that the size of the entire UK waiting list was only 3 months worth of elective work pretty consistently for the 30 years prior to 1997. What has changed in the last 10 years is that the very long maximum waits have largely been removed. Curiously, though, access to primary care in the US involves LONGER waits than in the UK. Not only is out-of- hours care much harder to get in the US than most other western countries , but surprisingly a greater proportion of patients could not get a GP appointment within 6 days. Interestingly, socialised Germany does better on waits than anywhere else (even on access to elective surgery). This fits with our experiences. Getting an appointment with a family doctor has proved to be tricky – but you can get a scan tomorrow.

But you might not be covered for it. And this points to an important part of the issue. Socialised medicine tends to give greater structure and co-ordination to systems. At a conference before Christmas I was asked whose system I would rather be ill in. I had to think hard about that. And my answer was, despite all its flaws and weaknesses, and the fact that the absolute best care in the world would be more likely to be found in the US (probably), was the NHS. The reason for this was the relative ease with which I could enter and negotiate the system. I didn’t have to worry about what my insurance covered, and by having my GP is gatekeeper and advocate – plus some knowledge of the system, I would be pretty confident of ending up in the right place. I could find no way of gaining such assurance in the US. The problem with the type of rationing that the US uses is that it is not transparent or rational. This adds two major disadvantages (even excluding the equity issues associated with price). First, because I as the patient am unsure about what is or is not available to me, I either have to carry uncertainty or spend a lot of time and expense chasing through the system working out what the costs are. Something as simple as getting a vaccination for my youngest daughter had the capacity to vary in out-of pocket cost to me by as much as $175 depending upon how I got it done and what I qualified for, and resolving this conundrum required 30 minutes on the phone to my health plan, a continent away. And the problem was they didn’t know this either. So this was a cost to them – and thus ultimately to the consumer.

This increase in cost and inconvenience mirrors the second real problem with the type fragmented and untransparent organisation that socialised systems largely avoid. The transaction costs because of the fragmentation are massive – both in terms of administrative process associated with the flow and collection of money and the micro-management of the care process by agencies external to the doctor patient relationship. This thoughtful and non-partisan piece by a US doctor beautifully illustrates the complexities - nay absurdities - of the situation. In contrast to the 20% of a king's ransom that goes into administering health services in the US, the huge and unwieldy bureaucracy of the NHS consumes substantially less than 10% of its costs (themselves only 40% of US per capita health care costs) in its administrative machinery. I’ll allow that this is an underestimate – if the admin costs were 10% of NHS expenditure - this would mean that the costs associated with administration in the NHS are proportionally 1/5 of those in US healthcare. So the next blow-hard that starts ranting on about the tremendous efficiencies that come from marketised solutions may meet with a quizzically-raised eyebrow from this direction.

Transaction costs, like the exceptionally enthusiastic adoption of new technologies in the absence of much evidence that they are likely to much improve care, is implicated in the inflated cost of US healthcare. Socialised medicine is not a panacea, and I’d be tempted to argue that the US cultural aversion to it makes attempting to introduce it likely to be counter productive. But the defragmentation of services and rational and transparent basis for rationing that it introduces addresses both causes of cost inflation. Achieving a system which has these advantages while recognising the cultural aversion to socialised medicine would be an attractive alternative to the policy of unsustainable and unethical shifting of costs to individuals represented by the consumer directed innovation.