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Why is Nationalized Health Care Popular?

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Gary M C Shiu asks


The real puzzle is: If national health care is indeed that "inefficient" as Arnold claimed. Why is it so prevalent across the world, and why it is so difficult to get rid of?

I don't have a definite answer, but here are some possible ones:

1) National health care, though seemingly inefficient, actually is pretty good compared with the alternatives...

2) The costs of reforming the national health care are high...

3) People are stupid, they do not know the national health care system is inefficient.


This is a good question. In that spirit, let me ask:

If state-run health care is truly efficient, then why is there not a state in the U.S. offering health care coverage to demonstrate that fact? (Imagine it were Maryland offering health care coverage.)

1. Perhaps it would be difficult to keep residents from other states from free riding, although I cannot see why you could not restrict your coverage to legal residents of Maryland.

2. There would be adverse selection, as sick people from other states move to Maryland and healthy people move out of Maryland to low-tax, low-coverage states.

I recently wrote that Massachusetts should adopt single-payer health care. One thing this would do is help resolve the issue of whether state-run health care truly is efficient.

For Discussion. Assuming that state-run health care is efficient, what other factors could cause it to fail if, say, Maryland were to adopt it?


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TRACKBACKS (3 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/422
The author at Life, Liberty and the Pursuit of ... in a related article titled National Healthcare - One State at a Time writes:
    As healthcare gets more and more expensive thanks to governmental meddling, the public is going to become more and more infatuated with “free” healthcare. [Tracked on January 1, 2006 2:40 PM]
COMMENTS (23 to date)
James writes:

I think Shiu leaves out an important alternative: moral sentiment. The net gainers from nationalized health care feel morally entitled to receive care at little or no cost and many of the net losers feel morally obligated to keep subsidizing the health care of others.

Regarding Arnold's question, if a state health care plan promises to provide collectively more than the total that the participants could purchase individually, the difference will become a mounting debt over time and bankrupt the system.

Randy writes:

Because efficiency isn't really the issue. Total cost is. No one is ready to set aside a significant percentage of their income to allow every man, woman, and child currently residing in the US, and those that would be attracted to the US, access to top quality healthcare. Most states have added various free healthcare programs within the limits of their budget.

Mark Thoma writes:

The Oregon Health Plan took a step in this direction under the former governor (a physician). There are plans to go further:

Health-care access for all should be the goal. Oregon absolutely must make progress on its stubborn health-care issues in the next year. With a rapidly growing population and a state health plan that has dropped 100,000 people during the past several years, Oregon's uninsured rate has grown faster than any other state's.

Now about 615,000 Oregonians, including more than 100,000 children, have no health insurance and limited access to basic health care. The Legislature did nothing last year to expand the Oregon Health Plan or curb skyrocketing health-care costs.

Fortunately, individuals are stepping forward.

Three Oregon legislators are gathering signatures for a citizens' initiative that would make access to health care a constitutional right in Oregon. For all three, this battle is personal: Rep. Mitch Greenlick, D-Portland, is undergoing chemotherapy for non-Hodgkins lymphoma; Sen. Ben Westlund, R-Bend, is recovering from lung cancer; and Sen. Alan Bates, D-Medford, is a medical doctor.

Westlund, Greenlick and Rep. Billy Dalto, R-Salem, also are sponsoring an initiative that would raise the cigarette tax to insure every low-income, uninsured child in Oregon.

Meanwhile, a Hillsboro family practitioner, Dr. Evan Saulino, and a registered nurse, Dominga Lopez, are sponsoring a separate measure for universal health care.

Former Oregon Gov. John Kitzhaber is quietly working with top health-care experts in Oregon and throughout the country to prepare an initiative to change the public financing of health care in Oregon and provide basic coverage for every citizen. If Kitzhaber brings his plan to the ballot this year, Oregon could once again lead the nation toward a better and more just system of delivering health care.

quadrupole writes:

The real question with state run health care is who is it efficient for?

I strongly suspect that high income earners will pay more and get less care from state run health care than the current system.

I strongly suspect that low income earners wll pay less and get more care from the state run health care than the current system.

This leads me to believe that any rational high income earner would flee from state run health care, while any low income earner would flee to it.

If the barriers to fleeing are relatively low (which moving to a different state is for many folks) I would expect to see big migrations by earning power into and out of a domain with state run health care.

So in addition to adverse selection by health, you will also get adverse selection by income from a state in the US instituting state run health care.

François writes:

I agree with some of the comments above: efficiency is not the only criterion that should be considered when evaluating a health care system.

Culturally speaking, national/universal [beveridgian] coverage is a means to eliminate – at least in theory – any possibility that an individual would get sick and not access health care. This scenario is totally unacceptable in a vast majority of Welfare states, because sickness chooses its victims randomly.

The questions is also one of life and death: non-universal health care means that an individual can get sick and die without receiving any form of help. A study of the foundation of NHS-style health care systems would show that quite easily, IMHO.

Chris writes:

I think one reason that states have avoided socialized healthcare is that it will almost certainly require pricecaps for medicine and is it legal for a state to impose such caps at the local level?

One issue that won't be taken into if a couple states try out socialized medicine is the impact on R&D. Right now the entire world is a free-rider on US innovation in medicine, a national healthcare system would surely impact the amount of research done domestically - a state plan won't have that same impact.

sickness chooses its victims randomly

Not true. Diet, exercise, smoking, drinking, heredity all are major contributors to health.

Brad Hutchings writes:

3. High price, high talent specialists might leave the state. How long of a commute would it be from anywhere in Maryland to a hospital in another state?

4. Traveling out of state -- a state-run insurance system may not be geographically large enough to contain costs of citizens traveling outside its bounds. No network of Kaiser facilities or Blue Cross affiliated doctors, etc.

MHG writes:

To return to Gary's original question -- why is (supposedly) inefficient nationalised health care so hard to get rid of? -- I'd answer that it's because of the cost of making a change coupled with the profound and enduring sense of entitlement and dependence that nationalised health care encourages.

In other words, "I already paid for it so now I want it" or "why should I start paying for something I already get for free?"

Of course, by getting hung up on sunk costs (which are hardly transparent when the government is spending your money for you) or forgetting about opportunity costs such as absurdly long waiting lists, well, the issue of efficiency hardly gets a look-in, does it? After all, having to begin paying health insurance is a concrete fact, whereas the quality of one's health care remains abstract until the point at which it becomes too late to do anything about it.

In a similar spirit one might as well ask why other inefficient government programs survive for decade after decade. Or, on a somewhat related matter, ask why people don't follow their new year's resolutions.

Daveg writes:

This topic is amusing. You constantly rant and rave about immigration being a positive, moral and necessary thing and that there are no externalities related to immigration from poor countries into the US. Then, in this post you openly acknowledge that the success or failure or a state medical program will depend on whether they are able to restrict other US citizens from entering their state and free loading onto the program.

Incredible.

sean writes:

Adverse selection.

Sick people will move into a state to take advantage of 'free' taxpayer-financed health care.

James writes:

Daveg,

Immigration in and of itself is generally good. Immigration plus welfare state style transfer payments make for a bad combination. There is nothing inconsistent or "incredible" about this position.

daveg writes:

James,

Economists in general, and economists on this blog in particular, choose to ignore the existence of all sorts of welfare style payments as well as other general costs created by the vast majority of the immigration to the United States.

We already have socialized health care in this country. Go to any emergency room in most states but in particular any border state. The medical care is being dished out in spades.

Schooling for illegal children is mandated by the constitution (says the supreme court, although I can find where it says this). So here is another huge program that exists.

And again this doesn't even cover issues like law enforcement and basic infrastructure.

You are delusional if you don't accept that illegal immigrants consume huge amounts of public resources and dollars.

If you accept the premise that a state that offered free medical care would have to restrict access to such medical care to "out-of staters" it is completely inconsistent of you to then claim americans have not rational for wanted to restrict immigration (and in particular illegal immigration) from other countries.

hillary writes:

Nationalized health care is a popular because it is efficient for those who are cognitive misers to stop thinking about the issue.

We have no evidence to suggest that national health care will address the material issues we have with health care in America.

What will national health care address for the nation?
(1) Coverage for all? Is this a real or just a perceived problem?
(2) Greater affordability? How can this be? Please no country comparisons.
(3) Greater efficiency? Why in the world would this happen in the US? We have economic theories to suggest the opposite.
(4) Improved health of the nation? Why? Health is primarily driven by diet, behaviors, and genetics.
(5) Reduced expenditures? Get real! When has lowering the price of a good like health care had such an effect (on planet earth)?
(6) Complete Government control over the behavior of Americans? Very likely. NSA could be redirected to spy on Americans plotting for another slice of cake.

A more important question is to ask those that seek national health care what it is. I am sure that we will see there is no shared agreement.

Chris writes:

DaveG, The problems that you are citing are not problems with immigration, but with socialism. You can easily put a cease to the issue by rolling back social programs.

Sean, Adverse selection is an easily solved problem - only provide coverage for people that have been residents for over a year. Which is exactly what Illinois is going to do for its All Kids program - any child without coverage for a year will be picked up on the state's dime.

I think adverse selection is wildly overstated as an issue. It doesn't seem to adversely effect other insurance systems (ones that actually operate like insurance and not pre-paid healthcare anyway)

Lord writes:

People are stupid

Yes, don't these people realize dying is so much cheaper.

Dewey Munson writes:
People are Stupid

Not so. Transfer your assets to the kids then Cry.

Our Congressional leaders? will be happy to send your healthcare bill to ......... ? the yet to be born?.

Actually, the time difference between Supply (of Money) and Demand (for a bypass) makes a solution impossible.

Bernard Yomtov writes:

(2) Greater affordability? How can this be? Please no country comparisons.
(3) Greater efficiency? Why in the world would this happen in the US? We have economic theories to suggest the opposite.

No data please. Just theories, and then only "our" theories.

Marc writes:
Sick people will move into a state to take advantage of 'free' taxpayer-financed health care.
What! You mean we don't already have free tax payer financed health care?

What do you call medicare, medicaid and free emergency room care to anyone regardless of ability to pay. Who pays for all that now, if not the taxpayers?

And all these sick people that will be moving to these states with universal/single payer systems, will they just sell their houses and get new jobs?

That will cetainly be a boon to the real estate markets in all the areas effected, not to mention all the businesses that will pop up to employee those people moving to the areas with free health care, especially since employers (the ones that pay for it now) won't be saddled with the responsibility of paying for the care of those who don't have it.

Sounds like a good idea to me

Tom West writes:

I think national health care reflects the general traits of the citizens in the countries involved. Efficiency (or the lack thereof) has very little to do with it. Citizens in most countries believe that the better off have a right to a materialistically better life, but not necessarily a longer life. i.e. there are some areas that wealth should not influence.

In America, I think there's a more accepting attitude that wealth entitles one to a longer life. I suspect that part of this is a greater feeling in America that anyone can become wealthy, and thus the poor aren't as worthy. The rest of the world doesn't think that wealth and virtue are so closely linked.

(And personally I would say that the "anyone can become wealthy" belief is *more* true in the USA than anywhere else in the world.)

I think national attitudes have a much greater influence than the facts on the ground either towards or away from national health care.

daveg writes:

DaveG, The problems that you are citing are not problems with immigration, but with socialism. You can easily put a cease to the issue by rolling back social programs.

Sigh. But I am talking about reality. There is absolutely no way you are going to change the state of the US law in these areas. If anything, the benefits will get more generous.

And, given that, let’s have no more talk of immigration restrictionists being racist. You have demonstrated perfectly rational reason for wanting to restrict immigration

Chris Bolts writes:

daveg is right about there already being a national state-run healthcare in the U.S., although I beg to differ that the state is handing it out in droves in border states. There is a federal law that explicitly states that if someone goes into an emergency room for healthcare, they cannot be denied, whether they can pay for it or not. This is about as close to a national healthcare system that we will get to in this country, although some governors of some states are trying to expand coverage (the governor of Illinois just recently signed into law national healthcare for all children of low and middle income families).

François writes:
Patrick R. Sullivan writes (quoting my "sickness chooses its victims randomly") : Not true. Diet, exercise, smoking, drinking, heredity all are major contributors to health.

Wrong, because many of these contributors are not actively self-inflicted on personal choice. Smoking kills yet passive smoking may actually kill more. Foetal alcoholism can hardly be blamed on the unborn child.


By randomly I should have precised I understood: not based on personal choice.

Oh, and by the way, the Landsburg case is giving an example of why public health is popular.

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