Healthcare Monopoly 6: Cuba Socialism

Cuba's healthcare socialism is being touted by some health NGOs and academics here as a possible "model" for the Philippines. They like the service monopolization and big spending on healthcare by the socialist government there.

Among those who gave praises for the Cuban state monopoly "political will" in healthcare was Dr. Reynaldo Garcia, a life scientist academic and manager of technology and innovation at the same time. He is  the Director of the Technology Transfer and Business Development Office of the University of the Philippines (UP) System and a Full Professor at the National Institute of Molecular Biology and Biotechnology in UP Diliman. He got his PhD in Molecular Biology at the Australian National University (ANU) and his business degree (Master’s in Bioscience Enterprise) at Judge Business School and the Institute of Biotechnology of the University of Cambridge in England. 

During the 9th Science, Technology, Innovation, Knowledge and Entrepreneurship (STIKE) Kapihan Series on the subject, Technology Transfer and Healthcare last September 27, 2012, at the Asian Institute of Management (AIM) organized by the Dr. Stephen Zuellig Center for Asian Business Transformation, Dr. Garcia showed these slides below, among others.. My discussion of his talk on tech transfer and IPR is here, IPR and Medicines 25: Patents, Diagnostics and Technology Transfer (October 08, 2012).

The four charts show that (a) illiteracy rate in Cuba declined fast, (b) infant mortality as of 2000 was as low as that in the US, (c) physicians per capita is more than double that in Latin America and the US, and (d) life expectancy at birth similar to that in the US as of 2004. Lower photo shows free healthcare in Cuba.

Dr. Garcia also said that Cuba has the biggest biotech facilities in the developing world. There was no year indicated, but I think this was in late 2000s level. In terms of vaccine development, Cuba was also high tech.

And more vaccine R&D capacity, as of 2007. Cuba is known for good quality cigar exports, smoking is prevalent, so its government developed a vaccine against lung cancer.

I have high regard for the academic and professional credentials of Dr. Garcia but I cannot agree with him do not think that state monopolization of various health services -- from medicines and vaccine innovation and invention to hospitalization care -- is a good thing. Here now are my comments to Dr. Garcia's points above.

One, the good health indicators in Cuba at least as of 2004, do not match with its economic development or degree of industrialization. So data sources may be suspect, not indicated in his slides.

Two, assuming that the high physicians per 1,000 population data is correct, more than twice that of the US, I think Cuban government hospitals may simply be bloated with many doctors relative to number of patients. They could be mostly general practitioners with very few specialists.

Three, free healthcare is being done in many developed economies with nationalized or government monopolized healthcare system, and the result is almost always the same: demand is much much larger than supply, resulting in either (a) healthcare rationing like some patients waiting for days, weeks or even months to get free healthcare, (b) lousy services like seeing patients only for two or five minutes, write drug prescriptions then call the next patient, and/or (c) huge fiscal deficit and public debt as healthcare is a bottomless pit of spending. Cuba could be suffering from any or both of such malady.

Four, it is good news that the Cuban government has invested in medicines innovation and almost surely, generic production. But not being subjected to competition and international healthcare accountability system, I doubt if cases of adverse drug reactions (ADR) and similar problems are being appropriately addressed, like drugs recall and compensation of the adversely affected patients. Patients have no or little options anyway, there is only the government as sole drug distributor and/or manufacturer.

In contrast, in a competitive environment, if an innovator company produces a new drug, supposedly effective but has several ADRs and side effects, the company does not wait for huge public outcry or multiple lawsuits, it has to recall and pull out such immediately before more damages can happen and its entire corporate brand will be destroyed.  

In some reports though, hundreds of Cuban doctors have been migrating to other countries. From The Vincenton Post,

In 1998 there were already 400 Cuban doctors practicing medicine in South Africa’s rural areas. By 2004, there were about 1200 Cuban doctors working in African countries, including inAngola, Botswana, Cape Verde, Côte d’Ivoire, Equatorial Guinea, Gambia, Ghana,Guinea, Guinea Bissau, Mozambique, Namibia, Seychelles, Zambia, Zimbabwe, andareas in the Sahara.” (Source: Perez, L.A., Krull, C. and Marino, S.C., 2010, Cuban Studies 41. PA: University of Pittsburgh Press, pp. 92). 

Meanwhile, Venezuela's dictator Chavez is drying of cancer in a Cuban hospital. From the Investors.com, Hugo Chavez Hit by Cuba's Surgical Strike.

In July 2011, during (a)... summit in Caracas, Brazil's President, Dilma Rousseff, told a few of her colleagues — in private — that Chavez was likely to die as a result of 'his excessive paranoia rather than as a consequence of his serious — yet treatable — cancer,'" wrote Venezuelan consultant Pedro Burelli in a newsletter.

"What she meant to say," Burelli added, "was that by choosing secrecy in Cuba over medical competence at the Sirio-Libanese Hospital in Sao Paulo (where she had been treated successfully for lymphatic cancer) Chavez had condemned himself to a shorter life."

Burelli noted that it corresponded to his own sources, who told him that Chavez's chosen successor, Foreign Minister Nicolas Maduro, flew to Brasilia to meet with Rousseff and her oncologist.

He presented the diagnoses from Caracas and Havana and the Brazilian specialist "considered it treatable under world-class protocols available in his center."

Maduro signaled interest. But the Chavista regime then demanded to pretty much take over the 400-bed hospital, which the Brazilians rejected. "From that moment on the patient was doomed," Burelli wrote....

Too bad for Mr. Chavez, He's got lots of money from petroleum socialism and when he became seriously ill, health socialism in Cuba may not be able to save him. Another news from yahoo: 
Cuba to free doctors from onerous travel rules

By Andrea Rodriguez, Associated Press | Associated Press – Tue, Jan 8, 2013

HAVANA (AP) -- Cuba is eliminating longstanding restrictions on health care professionals' overseas travel as part of a broader migration reform that takes effect next week, an island doctor told The Associated Press on Monday.

Hospital directors learned of the new policy, which takes effect Jan. 14, in a Saturday meeting withHealth Minister Roberto Morales and word of the change was relayed in hospital staff meetings, according to the doctor, who attended one of the subsequent gatherings.

The minister's directive: "A doctor will be treated like any other citizen starting now and can exit freely, as long as the destination country allows it" by issuing an entry visa, said the physician, who spoke on condition of anonymity because he was not authorized to talk to foreign journalists.

"Apparently it has been completely repealed," he said. "No restrictions of any kind.

By indirectly imprisoning many Cuban doctors in their own country, their government has prevented them from acquiring more training and specialized education with more foreign practitioners, using more modern facilities, medications and other  treatment. 

I hope that more economic freedom for their people like free mobility across countries will be tolerated by the Cuban socialist leaders. Similar one-party system China and Vietnam already allow this.

Ultimately, I hope to see more political, economic and personal freedom be experienced by more people around the world. Especially from the clutches of dictatorial and totalitarian governments.
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See also:

Healthcare Monopoly 1: France and Canada September 05, 2010
Healhcare Monopoly 2: United Kingdom, February 17, 2011
Healthcare Monopoly 3: China, July 20, 2011
Healthcare Monopoly 4: Taiwan's NHI, December 05, 2011

Healthcare Monopoly 5: Canada, April 09, 2012

Healthcare Monopoly 5: Canada

Before my discussion, a backtrack of what I wrote last August 28, 2010:

Canada's Healthcare Monopoly

Canada's "free healthcare" system is often envied here in the Philippines and many other developing countries. However, there are also a number of Canadians who fly to Manila and other cities in the developing world to seek quick medical treatment. So one may wonder why such things happen.

There is a good article recently, Why We’re Paying More For Health Care and Getting Less, by Mark Rovere and Brett Skinner, August 16, 2010, on Canada's healthcare system. Portions of the report here.

The Canadian Medical Association (CMA) recently published a paper about the worrisome condition of Canada’s health-care system. Its report concluded that the growth in government spending on health care is unsustainable, and that medicare is failing to provide adequate access to high-quality medical goods and services.... Yet a glaring omission in the CMA report was the lack of discussion about the root causes.... Canada’s health system failures are caused by the government’s monopoly over medical insurance, the centrally planned allocation of medical goods and services, and the lack of consumer exposure to the cost of using health care....

An annual Fraser Institute survey of Canadian physicians shows that in 2009, patients waited approximately 16.1 weeks from the time they obtained a referral from a general practitioner to the time they received treatment from a specialist.

Ultimately Canada should look to the Netherlands and Switzerland, two countries that have taken market-oriented health reforms even further. The Dutch and Swiss have universal coverage without government delivery of health insurance. Both countries combine a universal mandate to purchase private health insurance with public subsidies for low-income people so that all can afford to obtain coverage.

In a wikipedia discussion on Healthcare in Canada, one table showed the following:

1. Percent of health costs paid by Canada government, 70 percent.

2. Versus 81-82 percent by the governments of Japan, Sweden and UK, and

3. And only 45.4 percent paid by the US government.

Those figures are high, like 70 percent. This means that patients and/or their companies shell out only 30 percent (or less) for their health costs. For monopolists, the natural tendency is to jack up the price of their goods and services. The public, the patients, have nowhere else to turn to anyway.

Free market groups in Canada, like the Fraser Insitute, propose that they go to more market-oriented health reforms. Yes, they should.

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This story is repeated at the local governments level. Here's an article from The Globe and Mail,
http://www.theglobeandmail.com/news/opinions/jeffrey-simpson/the-fiscal-tyranny-of-health-care-ber-alles/article2348187/

JEFFREY SIMPSON

The fiscal tyranny of health care über alles

JEFFREY SIMPSON | Columnist profile | E-mail

From Friday's Globe and Mail

Published Friday, Feb. 24, 2012 2:00AM EST

... Sixty per cent of B.C.’s new spending over the next three years ($1.5-billion of $2.5-billion) will be for health care. As such, this budget is a template for what’s happening across Canada: health-care über alles.

What happens to every other department when health care takes so much? Budgets are either cut in absolute terms or in real terms – that is, after inflation. Those cuts are made even though the B.C. government is raising health-care premiums (a form of tax) so that they will bring in $360-million more in three years, and raising the corporate tax rate.

The drip-drip of health care spending über alles can be seen another way.

In the B.C. budget, a document shows government expenses since 2005-2006, then projected to 2014-2015, a period of nine fiscal years. During that period, health care spending will have risen at 4.9 per cent yearly (after inflation) compared to 3.3 per cent for education and 3.4 per cent for social services. That gap doesn’t seem like much in a year, but multiply that gap over nine years, and it yawns.

Nine years ago, health care was 38 per cent of B.C.’s operating expenses. At the end of the period, it will be 42.2 per cent, assuming the herculean restraint projected for the next three years. And while health care rises to 42.2 per cent, everything else falls as a share of provincial spending (except transportation). Per capita, health care rises from $2,950 to $4,106, whereas education rises from $2,124 to $2,510.

B.C. is lucky in one sense: It will have a budgetary surplus next year, in contrast to Ontario and Quebec. In those provinces, a much worse fiscal position intensifies pressure on spending – especially in Ontario, where the deficit is large and Premier Dalton McGuinty has ruled out tax increases.

B.C. does share Ontario’s goal of holding health care increases to 3 per cent a year, although Ontario commissioner Don Drummond recommends 2.5 per cent. Both provinces will have their hands full, because curbing public spending where providers defend their turf is exceptionally difficult.

Consider B.C.’s K-12 education budget: Enrolment of students is down, but costs are not.

Or consider its justice budget: There has been a 33-per-cent decline in provincial criminal court cases over the past six years. (Is the Harper government, with its “tough on crime” agenda, listening?) And yet, according to the budget, adult criminal justice costs have increased by 35 per cent despite “improvements and the implementation of a number of reform initiatives to increase efficiencies and alleviate pressures.”

Court cases down by a third; costs up by a third. Go figure.

One reason, the government says, is “the entrenched culture and the traditions of the system.” The same words could be used to describe the health care, K-12 and university systems, which explain in part why these are so hard to change and why efficiency gains, the panacea of reformers everywhere, are so difficult to achieve.

These B.C. trends were below the headlines, but they are apparent across the country. Health care eats up a larger share of budgets at the expense of other programs. Efficiency gains are sought everywhere but achieved with difficulty. Everywhere but Alberta, taxes have to pay for health care while balancing budgets.
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Uhh-ohh, note that tern, "entrenched culture and traditions of the system" of the bureaucracy. The cost to taxpayers is rising although the number of agency clients is declining. There is a natural tendency for the bureaucracy and a monopoly provider, in healthcare for instance, to keep costs high. And the public will have no choice but keep paying for the system via taxation and mandatory health contributions.

Healthcare monopolization is wrong. People should go for more choices, more options, more freedom, in healthcare.
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See also:

Healthcare Monopoly 1: France and Canada September 05, 2010
Healhcare Monopoly 2: United Kingdom, February 17, 2011
Healthcare Monopoly 3: China, July 20, 2011
Healthcare Monopoly 4: Taiwan's NHI, December 05, 2011


Healthcare competition 1: Switzerland, August 28, 2010

Healthcare competition 2: Singapore, August 29, 2010
Healthcare competition 3: Hong Kong, September 02, 2010
Healthcare Competition 4: Solving Info Assymetry, September 08, 2010
Healthcare Competition 5: Thailand, September 24, 2010
Healthcare Competition 6: United States, May 05, 2011
Healthcare Competition 7: Moral Hazards in Healthcare Subsidies, May 24, 2011
Healthcare Competition 8: Centralization vs. Deregulation of Healthcare, December 31, 2011

Healthcare Monopoly 4: Taiwan's NHI

The last presentation during the Conference of Generic Drugs in Asia (CGDA) 2011 held in Taiwan three weeks ago was made by Atty. Ivan Liu of YesChain Pharma Group, "To the Rescue of Taiwan NHI: Generic drug policy reformatted". Here are the main points that Ivan made:

Taiwan's National Health Insurance (NHI):
- launched in 1995 and has won international recognition since then
- covers 98 percent of Taiwan's 24 M population
- reimburses almost everything, including outpatient care, lab tests, prescription drugs, dental, TCM, day care for mentally ill, nursing home care, even magnetic resonance imaging (MRI) scan and organ transplant
- patients enjoy ready access to all levels of healthcare providers without suffering from wait lists seen in advanced countries

However, there are a number of problems and risks to NHI:
- explosive growth in reimbursement, from $6 B in 1995 to $18.7 B in 2011 (3x over 16 years)
- ratio of NHI reimbursement/GDP: 2.66 percent in 1995 to 3.9 percent in 2011
- with flat premium rate, yearly deficit warranted, $2 B loss accumulated since launching
- without change, NHI bankruptcy is guaranteed but politically not allowed

So the 2nd generation NHI was promulgated in January 2011: generate an extra $0.66 B annual income through broader based for premium calculation and 2 percent (hike) supplemental premium
- criticized for raising only income but downplaying wastes and non-essential reimbursements
- heavily attacked by employers and high income residents because they will pay the largest portion of premium increase.

Drug reimbursement policy is problematic:
- drug reimbursement in 2011 alone $4.7 B
- drugs/total reimbursement ratio is 25 percent, vs. OECD countries' average of only 15 percent
- 25 percent of dispensed drugs, virtually free upon filing prescriptions, wasted by patients (estimates by hospitals and pharmacies)
- more drugs dispensed means higher profit for big hospitals because
(a) they prefer branded to generic drugs,
(b) generics share only 20 percent of prescriptions while the same share 65 percent of all NHI reimbursed prescriptions
(c) fat margin as big hospitals exercised concerted procurement and big bargaining positions, get lowest drug prices while NHI reimbursement is fixed.
- thus, NHI as a social insurance acts like private insurance.

Ivan thinks the hike in premium is unnecessary -- if savings compared to the projected income increase of $0.66 B can be made:
- if NHI will reimburse branded drugs only at the price of generic drugs (of same active ingredients, dosage, form)

Ivan recommends the following for the Department of Health (DOH) and the big hospitals:
- Investigation Bureau, up to 5 years imprisonment for illegally benefitting a 3rd party (foreign pharma companies)
- Control Yuan has jurisdiction to designate corrective measures to DOH and impeach derelict government officials
- Fair Trade Commission (FTC) bans concerted action without prior approval, penalty up to $3 M
- Government Procurement Act prohibits big hospitals' concerted procurement singling out non-patented brand name drugs.

Over dinner that day (November 20, 2011), I sat next to Ivan and discussed with him my observations about his presentation as there was no more time for Q&A that afternoon. I said that it never fails, if you give something for free or at highly subsidized price, demand will always be larger than supply. The result where S > D is almost always a product or service deficit. That deficit has to be financed by the service provider -- in this case the Taiwan government -- through borrowings, what else.

He agreed. That is why the Taiwan government wants to raise the premium, which he and many others oppose. I go with his proposal: if wastes (by patients) and over-reimbursement (or over-pricing) by big hospitals and other healthcare providers can be controlled or at least minimized, the deficit can be addressed and erased and hence, there will be no need to raise the annual premium or subscription payment.

Aside from health, Ivan and I also discussed many other things, like intellectual property rights (IPR) but his specialization is on IT, not pharma IPR; political philosophy, bureaucracy, etc. Nice chat, Ivan, thanks.

So for me, here are the important lessons based on the Taiwan NHI:

1. Health insurance monopolization and nationalization almost always attracts wastes and inefficiencies. One important solution is to deregulate the health insurance sector, allow private health insurance to compete with government insurance, and do not force or coerce people to become members of the government NHI.

2. Healthcare competition will discourage and limit wastes and inefficiencies. If health insurance A will prioritize branded and expensive drugs and charge higher premium compared to health insurance B, C and D (the latter companies or groups prioritize cheaper generic drugs at lower premium), so be it.
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See also:

Healthcare Monopoly 1: France and Canada, September 06, 2010
Healhcare Monopoly 2: United Kingdom, February 17, 2011

Healthcare Monopoly 3: China, July 20, 2011 

Healthcare competition 1: Switzerland, August 28, 2010

Healthcare competition 2: Singapore, August 29, 2010
Healthcare competition 3: Hong Kong, September 02, 2010
Healthcare Competition 5: Thailand, September 24, 2010
Healthcare Competition 6: United States, May 05, 2011 

PhilHealth Watch 7: Deregulate PhilSick, October 09, 2011

Healthcare Monopoly 3: China

There was a good article in BBC last weekend,

Middle class China turns to private health insurance
BBC, July 18, 2011

Middle class China turns to private health insurance

By Linda PresslyReporter, BBC News

Over half of all healthcare in China is paid for by the consumers themselves

Healthcare - and how you pay for it - is one of life's big worries. In China few people have private health insurance but the market is growing.

Polly Deng is 30 and lives with her husband and her mother, Lu Xiao Dang, in Shanghai. Polly's mother has just returned home after a stay in hospital.

"She was in hospital for 12 days having an operation on her foot. It was a minor operation, so we hope she's going to be fully recovered within three months," she says.

Continue reading the main story

The cost of Lu Xiao Dang' procedure was 5,000RMB ($773). The Chinese government's health insurance scheme paid for 60% of the cost of the operation.

She paid cash for the other 40% and will claim this against her additional private health insurance - although she does not know if she will be compensated for the full amount.

Polly picked up the health insurance habit from her mother. She belongs to the government's scheme, her company's scheme, and she has her own private cover.

Private health insurance is relatively new to China, but it's growing fast.

"Between the years 2000 and 2009 the average annual growth rate of the private health insurance market in China was around 27%. But what you have to remember is this is growth from a small base," says Brian Mi, General Manager in China for IMS Health, a medical market research company.

"It is only a tiny proportion of the population who have any kind of private cover, around 3.5% of the market spend on healthcare is paid for by private health insurance. Over 50% of all healthcare in China is paid for by the consumers themselves."

Private policy potential

Although the number of people with private healthcare policies may be small now, insurance companies see China as a country with huge potential. But there are obstacles to the development of private health products.

Dr Feng Liu: "Too much emphasis on selling the policies and not enough on processing the claims"

One of them is that in the Chinese health system, doctors get a small proportion of their salaries from the state, and have to raise the rest through their patients.

This means there is a high rate of drug over-prescription and diagnostic tests - the more you have, the more you pay. Some insurance companies are reluctant to get involved in a market where cost can be open-ended.

But Dr Feng Liu, the Chairman of the Financial Planning Standards Board of China, says insurance companies offering private health plans sometimes do not operate in the interests of their clients.

"People aren't used to buying health insurance, and sometimes companies encourage people to buy insurance they don't actually need. I think there is too much emphasis on selling the policies and not enough on processing the claims, which always seem to be delayed," he says.

'Healthy China'

Continue reading the main story

“Start Quote

The Chinese government is working on a whole raft of state health reforms. Its Healthy China programme was announced in 2008 with the aim of providing state health insurance for all of its 1.4 billion population by 2020.

Before China's economic reforms began in 1978, there used to be a system of near-universal government insurance cover.

With the move to a market economy, people paid much more for healthcare, one of the reasons why China became a great nation of savers. It is estimated people squirrel away more than 40% of their disposable earnings, some of which will be savings in case of a health emergency.

Although 90% of the population now have state health insurance, it only offers partial cover. Generally outpatient costs are not covered and only 60% of inpatient hospital bills are compensated.

To pay the excess, people use their savings or borrow from family. But there are also cases where families are plunged into poverty and desperation because they cannot afford health bills.

People may buy separate private health insurance to cover the excess cost of healthcare not covered by the state.

Critical illness

Polly Deng has bought a critical illness policy from private insurers, which covers killer diseases like cancer.

"Depending on the policy, critical illness cover costs around $500 a year. It's probably 20% of what people pay in Western countries, but healthcare is less costly in China," says Phuong Chung, Senior Vice-President at Manulife-Sinochem, an insurance company with nearly 15 years experience in the Chinese market.

"In the event of illness, it will pay out around twice your annual salary."

He says this kind of policy - together with life insurance - has become popular with middle class people.

"This reflects the fact that in China people are very good at saving for emergencies. Middle class people often have savings in their homes, bank deposits and equity investments. So the portion of their income they commit to insurance doesn't have to be so high."

With her level of health insurance cover, Polly Deng thinks she has made a good investment.

"When I was at the hospital visiting my mother, there were women there who had paid between 30,000 and 50,000RMB ($4,640 - 7,734) to get treatment for broken legs. It can be very expensive!"

"My friends don't really have a clue about insurance, and I don't want to push them into it. But one day they will understand that it's a good idea."

The opinions expressed are those of the contributors and not held by the BBC. The material is for general information only and does not constitute investment, tax, legal or any other form of advice. You should not rely on this information to make any investment decisions. Always obtain independent, professional advice for your own particular situation.

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A good friend of mine from London, author of several great articles on health policy, and editor of the book, Fighting the Diseases of Poverty, Philip Stevens, noted that "From where I'm sitting in the UK (where we've had 'universal' healthcare since 1946) I can't say I blame the Chinese middle class who buy private health insurance. As our populations age, such promises are going to become increasingly unaffordable as government systems struggle to cope with these generous committments."

The rise of private health insurance is happening in many Asian economies, I think. In the Philippines, almost all medium to big companies, and man national government agencies and big local governments, have private health insurance for their employees. The government-run national health insurance system, PhilHealth, has very limited services.

1. No off-patient service and reimbursement; one must be confined for at least 24 hours in a hospital before one can claim for reimbursement. So if one has a headache or fever and wants to see a physician, possibly undergo some diagnostic tests, get the doctor's advice and prescription then go home, PhilHealth is useless.

2. No annual medical check up. Annual check up is a useful, preventive healthcare. People undergo several tests while they are not sick, to determine the likely disease/s that will hit them in the futur, and so they can prepare or avoid lifestyles that can exaggerate the problem. And PhilHealth does not provide for this service.

3. The procedure for claims and reimbursement is time-consuming and bureaucratic. See for instance my earlier note, PhilHealth Watch 3: Bureaucracy and long lines

4. Being a government-operated system, it is prone to pressure by politicians. Like giving away free PhilHealth cards to certain political supporters of local and national politicians during election period.

In my case, I have been a member of the government-run health insurance system (first Medicare, it lost huge money, replaced by PhilHealth in 1995), been contributing to it since I started working around 1985, and NEVER ever benefited from it, because I was never hospitalized since around 1982. Thus, my (several) private health insurance cards which my past and current employers give me, is more useful.

The growing private health insurance system in China is understandable, and a lesson to ponder for us who live in non-socialist economies. Even a socialist government of China cannot provide full health socialism to its people. I think the same condition can be found in socialist Vietnam too.
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See also:
Healthcare Monopoly 1: France and Canada, September 06, 2010
Healhcare Monopoly 2: United Kingdom, February 17, 2011


Healthcare competition 1: Switzerland, August 28, 2010
Healthcare competition 2: Singapore, August 29, 2010
Healthcare competition 3: Hong Kong, September 02, 2010
Healthcare Competition 5: Thailand, September 24, 2010
Healthcare Competition 6: United States, May 05, 2011
Healthcare Competition 7: Moral Hazards in Healthcare Subsidies, May 24, 2011

Healthcare Monopoly 1: France and Canada

In late July 2009, I wrote this:

The best health care system in the world, just don't get sick

Mandatory health insurance and increased government financing of health care, are among the "key policy interventions" that many governments, rich and poor alike, are undertaking. Such policies are also being peddled by the UN, WHO, and various multilateral institutions.

Competition, not monopolization, of various aspects of health care -- physician consultation, diagnostic tests, hospitals, medicines, etc. -- remains the better, if not the best, way to allow health care providers to cater to various patients with varying health needs and with varying budget. Market segmentation with price segmentation will allow different people to meet their respective supplier of health care, especially medical insurance.

When government steps in to further regulate, consolidate and later centralize and monopolize, health costs would not necessarily go down. On the contrary, it will increase as more bureaucracies will be created to impose and monitor the various regulations and restrictions. Also, the socialized health care system will soon be abused by both patients and health care providers (physicians, clinics and hospitals, drug suppliers, etc.).

My Filipino friend working in Japan told me how some Japanese patients would abuse the socialized and government-managed health care system. Patients pay only around 5 percent of the total hospitalization bill in case of confinement. Some patients who can be discharged from the hospital within 2 or 3 days, are staying 2 weeks or more. Such patients pay only very small, they get excuses from their employers not to report for work, while physicians and hospitals are assured of bigger revenues from prolonged stay of some patients as government payment for hospitalization is assured.

Below is a good article by a Canadian and European authors, describing the adverse effect of State monopolization of health care, citing the Canadian and French system.

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http://blogs.reuters.com/great-debate/2009/07/20/healthcare-reforms-warnings-from-france-and-canada/

Healthcare reforms warnings from France and Canada

By Brian Lee Crowley and Valentin Petkantchin

 

JULY 20, 2009

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CANADA | DOCTORS | FRANCE | HEALTH INSURANCE | HEALTHCARE | PATIENTS | THE GREAT DEBATE

– Brian Lee Crowley is the founding president of Atlantic Institute for Market Studies (AIMS), a public policy think tank in Canada (pictured left) and Valentin Petkantchin is director of research at the Paris-and Brussels-based Institut économique Molinari. The views expressed are their own. –

President Barack Obama’s package of heathcare reforms – mandatory health insurance, public health option and increased federal government financing – is being sold as preserving independent high quality care and choice for patients while keeping down costs. Taxpayers and patients in both Canada and France know better.

Unfortunately, our experience is that once the government gets its nose in the healthcare tent, not only is spending not contained, but health care professionals lose their freedom to practice. Left with few choices, patients face shortages and waiting lists.

Washington’s proposed new public health insurance option, while not imposing Canadian-style single-payer monopolistic public health insurance immediately, will almost certainly lead to that result in the end.

One of two things will happen. If doctors prove reluctant to accept patients covered by the public option and it is thus unable to compete successfully with private insurers, the politicians will not stand idly by.

Physicians’ freedom to practice outside the public option will become increasingly hedged with restrictions, perhaps ultimately ending up, as in Canada, with doctors in the public system being prohibited from taking private patients.

Or, more plausibly, in the short term at least, private insurers will gradually withdraw from the business, incapable of winning against a government-subsidized “competitor.”

In both cases, competition in the health insurance sector will progressively vanish and the U.S. will wake up with a monopolistic-style health insurance system, à la France or Canada.

Consider yourself warned.

Our respective health care systems have proven incapable of reining in rising costs. Health spending in France, while lower than the U.S., is among the highest in the world, whatever the indicator, despite decades of mandatory, subsidized health insurance. After 1988, the public health care system has regularly been in the red, with deficits numbered in the billions of euros. The forecast deficit for 2009 alone: 9.4 billion euros (over US$13 billion).

French officials are scrambling to take more control of the system to bring these costs down, but Canada, where government controls all “medically necessary care,” shows that this is no solution at all. A growing share of Canadian provincial budgets is also swallowed by the health care system, going in 20 years (1983-2003) from 32% to 41% and on the way to 50% in a few short years. As a portion of GDP, and adjusting for population age, Canadian health care spending even ranked ahead of France’s in 2005.

But the oxymoron of government cost containment is not the only problem. In the name of restraining costs – so fashionable currently in Washington – governments are adding further inefficiencies by piling on more bureaucracy.

Since 1996, there is a cap on national health care spending in France and growing pressure on health care professionals in the public system to cut costs. In 2004, patients’ choice of physician and specialist was also severely limited.

Independent private medicine – once one of the main pillars guaranteeing quality and timely care in the French system – is being slowly strangled. At the end of 2008, nurses lost their freedom to practice where they please, while a new law will do the same for physicians by imposing an annual financial penalty if they refuse to practice where the government tells them to. Specialists’ fees are increasingly regulated. The last pillars of competition among providers, and choice for French patients, are thus undermined.

Canada again is a good example of where the logic of such policies will lead the French and the Americans in the future.

North of the border, decades of total government control over health care have led to chronic doctor shortages and waiting lists. Roughly 1.7 million Canadians were unable to find a family doctor in 2007 and have to queue in impersonal clinics where they exist. Yet only a physician can order tests or get a patient in to see a specialist.

Despite continual infusions of fresh tax dollars, waiting times for hospital treatment went from an average of 7.3 weeks in 1993 to 17.3 weeks in 2008, although there was a minuscule decline last year as a result of massive political pressure. The problem is so severe that the Supreme Court of Canada acknowledged in a historical 2005 ruling that patients die as a result of waiting lists for public health care.

Finally, coverage of new drugs is delayed by a year or more for patients relying on the public system. Even with this delay, by October 2007 less than half of new drugs launched between 2004 and 2006 had been listed for payment.

Based on experience in both our countries, government health insurance and government financing inescapably lead to a crackdown on health care providers and bureaucratization of the entire health care system. Americans should look carefully at our experiences before going any further down the slippery slope of state-controlled health care.

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A certain "Dan" commented to my note above, said:

Since health care is a service, A better comparison of health care systems around the world would be to poll consumers from various nations as to what they like and dislike about their systems. This has already been done by various polling companies.
A google search for "heath care poll, Harris" should yield some interesting insights.
The results are surprising for those of us who have always believed that the US system was second to none.

I have a former officemate at CPBO, House of Representatives, Quezon City, who migrated to Vancouver, Canada. She told me that one time she suffered itchy hair/head scalp, she got it after a brief mountain hiking. She went to a government hospital or clinic, the staff and doctor there noted that her condition was not serious, she was told to wait for several months as doctor services have a long queue, and was told to take some medications, gave her prescriptions.

Days and weeks have passed, her itchy hair or head scalp was getting worse, she went back to the doctor but was told that her condition was not serious, told her to come back on the specified date which was several weeks away. Her dandruff was growing thick then plus other maladies in her hair, she could not sleep well in the evening and her work was already affected. Desperate to get treatment, she went to a private physician and paid big amount just to get treated. That action solved her problem.

When things are made free or highly subsidized, expect the demand to be higher than the supply, which will later result in rationing of such goods or services.