Health care does not easily lend itself to a free market model. When you need it, you need it, and it is inadvisable to put it off, and so you can’t do much comparison shopping. Moreover, you need quality service, not just make do service, which you can decide is all you need when you go out to lunch even if you splurge for good food and service when you take out your wife on her birthday. That is why health care is a profession: all providers are certified as capable of supplying a sufficiently high level of service. Second moreover: you can decide to change restaurants if you get a greasy spoon once too often while, if the health care provider makes a mistake, you might wind up dead. General Electric couldn’t sell many jet engines if its reliability rate was much less than perfect. In health care, where people die even if they get good care, other expedients are necessary to keep up the quality of care, and these will include, in every increasing use, such matters as standardized protocols for all manners of care and increased review of practice. It isn’t easy being a doctor facing a level of scrutiny that most occupations that are considered professional are able to avoid. Think of your accountant or your fifth grade teacher or the lawyer who handled your mother’s will. So people who can afford it pay more for routine care to insure that they will get the very good care they need on the occasions when they need it. Third and perhaps most important moreover: there seems to be an emerging right for all citizens to have minimally sufficient health care, even though there is no right to own a television or an automobile. In most of the world, so as to protect a right, government steps into the breach. The government foots the bill for the health industry out of its tax levies and sometimes, as is the case in Great Britain, the government itself owns the health system.

The system used to finance the health industry in the United States is conceptually different from either a government supported system or a free market system. It is an insurance scheme that developed willy-nilly out of such matters as the negotiation of union fringe benefits in the Fifties. The bright idea behind an insurance scheme is that it makes the payment of health care costs manageable even if it does not, the record shows, cut total health costs. People and their employers contribute payroll deductions that more or less cover the services they will receive, whether those are extraordinarily expensive, as is the case in catastrophic illnesses such as can be the case with cancer or heart disease, or whether those services are relatively inexpensive, which is the case with normal baby care or the occasional case of flu or yearly checkups. Those who use health services less pay for those who use health services more even if that means that payroll deductions have to increase as people get older and sicker and there are more things that can be done to keep people alive longer.

We are about to see another one of our national debates about paying for health care even though the political process has never managed to do more than provide health insurance to some special categories of people, such as the poor and elderly, and to provide health care directly only to veterans, another special category of citizen, via its system of Veterans Administration hospitals. This time the debate will be largely about whether to continue the insurance model, in which case coverage is extended to just about everyone through one or another financing scheme, or to move to a single payer system, where the government pays the insurance premiums for everyone out of tax levies, even while allowing for the actual provision of health care to remain largely the domain of the private health care industry.

I don’t think a single payer system will work very well.  Such a system “socializes” medicine in that a government that becomes the single payer becomes the single controller of the health care system, whether or not it owns the hospitals and has the doctors on salary, because it determines where and how the money in the government’s budget for health care is to be allocated. Liberals will want to give more of the pie to prevention and the poor; conservatives will want to give more of the pie to catastrophic illness and the rich. The middle class would again be caught, as it is in education, in the squeeze between public service that is not good enough (for any of its users) and private services that are, for the middle class, too expensive. The total size of the national health care budget also becomes subject to political debate when there is a single payer system. The total budget for health care can go up or down depending on the pressure for more money for defense or education or roads. Politicizing health care also leads to a two tier system in that people can still go out of system and pay for luxury or more quickly expedited health care, and so the major supposed accomplishment of a single payer system, which is that everyone gets access to care, is vitiated. Those who are less than rich have to take what they are given.

A single payer scheme, it is claimed, will save money because it will end the duplication of services inevitable in free market medicine or even in an insurance based health care system. That is a mistake. The nationalization dividend never works out because the costs of duplication are not nearly as much as the savings accrued through innovation. Yes, more hospitals have MRI machines than at the moment probably need them. That drives up the cost of using an MRI machine. The answer, however, is not to ration MRI machines or MRI procedures so as to cut down costs. Rationing makes sense only in wartime when there is a limited amount of goods because resources have to be directed elsewhere suddenly but temporarily. An extended period of rationing leads to industry stagnation and poorer levels of care. Rather, competition can lead hospitals to do what they are already doing, which is rent MRI machines that visit a few days a week. Innovation due to competition will eventually lead to the creation of cheaper MRI machines that use up less physician time. These can become available to almost any office, just as happened with X-ray machines. Savings will also accrue when physicians cease to do well baby or routine checkups, people encouraged to make use of physician assistants or supervised nurses or even pharmacists so as to qualify for cheaper insurance rates that still provide coverage for high end care when catastrophic events occur. Adam Smith was not wrong about what happens in a market; it is just that markets are constructed and not just found. In this case, people have to be able to take their insurance cards where they please and demand efficient service but not demand luxurious service unless they are willing to pay for it. We should encourage stand free clinics that see multiple patients briefly rather than encourage people to go to emergency rooms where they are over-serviced (the recipients of too many antibiotics) and their insurance companies over-charged (in relation to what a private doctor would charge for care that is urgent but not critical: a respiratory infection rather than a cancer).

The disadvantage of an insurance based system can be minimized by making it a heavily regulated industry. The excess profits that go to the insurance companies in the form of a twenty percent rake-off for “processing forms” and other aspects of administration would be brought down if insurance companies were required to use a universal form or use computer technology to expedite payment to physicians. Standards could be set for what kinds of procedures were to be offered by all insurance plans, which would still leave as a competitive advantage the construction of clever plans such as one, let us say, that left out maternity services and so was attractive to older though not yet elderly people. People need to be able to move their health care coverage as easily as they do their phone service. That would be allowed by intrusive regulation.

Regulation was a good way to deal with railroads and utilities whose large scale operations made them natural monopolies and so not easily subject to competition. The system of regulation lasted from the early twentieth century into the Seventies and Eighties, when liberals like Ted Kennedy negotiated it away to get other things from mostly conservative political administrations. It may be revived as a necessary component for making rational such programs as Gov. Schwarzenegger’s health care plan for California which pieces together a number of funding streams and a number of eligibility categories to provide universal coverage. (The President’s proposal for patching together financing universal health care coverage is dead on arrival because it is no more than a regressive tax; the President is only opposed to taxation when it is the very rich who have to pay.) Regulation to insure that insurance provides what it is supposed to provide is the glue that ties together the pieces; otherwise, recipients are in a catch as catch can system where they can be caught out if they change jobs or are no longer eligible for one category or another. Yes there will still be inequities of payment in a heavily regulated national health insurance plan and the categories of eligibility are not logical so much as ways to capture everyone, but the result can be a system that delivers what Clinton promised in 1993: everyone will have the same card and so gain access to whatever health care they need.