Does Socialism Work? Debunking the Myths

David Himmelstein and his wife Steffie Woolhandler are associate professors at Harvard Medical School. Together they are a one-couple team, promoting Canadian national health insurance in the Unites States. They provide the intellectual leadership for the Physicians for a National Health Program. They are about the only academics around whose scholarship routinely gives aid and comfort to the advocates of socialized medicine, unless you count the Commonwealth Fund. They are pleasant (at least to me); they are dedicated; and they are wrong.

I first debated David on a college campus about 15 years ago. My most recent debate with them is reprinted in Annals of Thoracic Surgery. In between the two debates I had an epiphany. I discovered that the worst features of the Canadian system are not the differences with our own system, but the similarities.

But first things first. Since our last debate, new information has become available that helps debunk three widely touted myths.

The Myth of Low Administrative Costs. In a series of articles, all published in medical journals, Himmelstein and Woolhandler (H&W) claim that the administrative costs of the Canadian system are much lower than our own – so much so that we could insure the uninsured through administrative savings alone. However, H&W are not economists. They count the cost of private insurance premium collection (e.g. advertising, agents’ fees, etc.) but they ignore the cost of tax collection to pay for public insurance.

Economic studies show the social cost of collecting taxes is very high. Using the most conservative of these estimates, Ben Zycher has shown that the excess burden of a universal Medicare program would be twice as high as the administrative costs of universal private coverage.

The Myth of High Quality. H&W say that Canadian life expectancy is two years longer than ours, implying that the health care systems of the two countries have something to do with that result. Yet as pointed out in a previous Alert, doctors don’t control our overeating, overdrinking, etc. Where doctors do make a difference, the comparison does not favor Canada. In an NBER study, David and June O’Neill draw on a large US/Canadian patient survey to show that:

  • The percent of middle-aged Canadian women who have never had a mammogram is double the US rate.
  • The percent of Canadian women who have never had a pap smear is triple the US rate.
  • More than 8 in 10 Canadian males have never had a PSA test, compared with less than half of US males.
  • More than 9 in 10 Canadians have never had a colonoscopy, compared with 7 in 10 in the US.

These differences in screening may explain why US cancer patients do better than their Canadian counterparts. For example:

  • The mortality rate for breast cancer is 25% higher in Canada.
  • The mortality rate for prostate cancer is 18% higher in Canada.
  • The mortality rate for colorectal cancer among Canadian men and women is about 13% higher than in the US.

Amazingly, there are quite a few people in both countries who are not being treated for conditions that clearly require a doctor’s attention. However:

  • Among senior citizens, the fraction of Canadians with asthma, hypertension, and diabetes who are not getting care is twice the rate in the US.
  • The fraction of Canadian seniors with coronary heart disease who are not being treated is nearly three times the US rate.

Apparently, putting everyone in (Canadian) Medicare leads to worse results than having only some people in (US) Medicare – ensconced in an otherwise private system.

The Myth of Equal Access. The most common argument for national health insurance is that it will give rich and poor alike the same access to health care. Surprisingly, there is no evidence of that outcome. Indeed, national health insurance in Canada may have created more inequality than otherwise would have existed. (Similar results have been reported for Britain.) The O’Neill’s study shows that:

  • Both in Canada and in the US health outcomes correlate with income; low-income people are more likely to be in poor health and less likely to be in good health than those with higher incomes.
  • However, there is apparently more inequality in Canada; among the nonelderly white population of both countries, low-income Canadians are 22% more likely to be in poor health than their American counterparts.

References are listed below.

Read them and weep.

For Ben Zycher’s study of administrative costs, go to http://www.manhattan-institute.org/pdf/mpr_05.pdf

Even though it’s several years old, the best overall critique of national health insurance is still my own Lives at Risk, written with Gerry Musgrave and Devon Herrick. Go to: http://amzn.com/0742541517

Comments (17)

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  1. Bill Waters says:

    A great article. The Candians also do not count the money spent in crossing the border for high-ticket items like CABG.

    Steffie and David claim a membership of 8000 doctors in their Physicians for Single Payer or whatever. If so, that’s still only 0.09% of our 900,000 doctors. She talked to the local chapter of the AOA Society here a couple of years ago. She’s very nice, but is a religious zealot and I wonder if mere data are interesting to her.

    Daniel Patrick Moynihan said, Everyone is entitled to his/her own opinion but not to his/her own facts.

  2. Peter Pitts says:

    Thanks John. Here’s one for you …

    You mean it isn’t “free?”
    Peter Pitts

    What’s the difference between “universal” health care and “government” health care?

    The sad answer is that the first is a good political sound bite and the latter is not. The truth is that they’re the same thing — and neither is “free.”

    There is no such thing as “health care from heaven.” Just ask the citizens of any nation in the EU or Canada. Better yet, ask Illinois’ Governor Rod Blagojevich whose plan for “free” and “universal” coverage in the Prairie State (designed to be funded via a very un-free $7.6 billion gross receipts tax on Illinois businesses) went down in flames in the state legislature 107-0 … after the Governor came out against his own idea.

    As the Wall Street Journal opined, “’Universal’ government health care has once again returned as a political cause, with many Democrats believing it’s the key to White House victory in 2008. They might want to study last week’s news from Illinois, where Democratic Governor Rod Blagojevich’s tax increase to finance health care became the political rout of the year.”

    Some candidates for the presidency are beginning to get the picture – others not so much. Here’s an article from the New York Times that points out the problems of sound-bite health care plans:

    http://www.nytimes.com/2007/11/25/us/politics/25mass.html?_health&oref=slogin

    There’s no such thing as a free lunch – or “free” health care.

  3. Bob says:

    H&W are a menace. They are very bright, well accepted by the academic world (who parenthetically have never known the burden or cost of private practice), and they are totally WRONG. That makes for a dangerous triad.

  4. Jim Frogue says:

    Good stuff, John. Thanks

  5. Dave Undis says:

    Mr. Goodman:

    Socialism is the basis for the U.S. organ transplant system. It’s a miserable failure. Almost 100,000 people are waiting for organ transplants.
    Most of them will die waiting. Here is my article “Organ Socialism”
    co-written by Professor Lloyd Cohen of the George Mason University Law
    School:
    http://www.lewrockwell.com/orig6/cohen3.html

  6. Charles Gregory says:

    “They [David Himmelstein and his wife Steffie Woolhandler] are pleasant (at least to me); they are dedicated; and they are wrong.”

    Love that, Doc John :-)

  7. Ed Harper says:

    Thanks again for the good work.

  8. John Connolly says:

    The good doctors have been selling their form of socialized medicine for years.I recall exchanging letters with them when I was president of New York Medical College. While they may be nice people and well intentioned, their “research ” is so strongly biased by their belief structure that it is hard to take seriously. They, like many in Congress, seem to be completely unaware of such basics as a free market and of capitalism and continually return to socialistic models that have failed elsewhere. Interestingly, we are probably not that far apart philosophically for I ,too, support universal health care for all Americans, but in a system more like the one proposed by Victor Fuchs and others rather than these tired, worn and ineffective models trotted out by Drs. Himmelstein and Woolhandler.

  9. Linda Gorman says:

    Read your latest blog entry with interest, especially the outcomes discussion. I’ve run across some other outcomes data in the medical literature. There are references to data on surviving childhood cancers (fewer problems with environmental/behavioral effects on incidence), heart attack mortality and morbidity at 5 years in US versus Canada (the GUSTO study: at one year there wasn’t much difference between aggressive US treatment and Canadian medical management. At five years there was). US also has better population blood pressure control than Europe especially in elderly, better blood pressure control for known diabetics than in Canada (36 percent US, 9 percent Canada), better quality of life for spinal cord injury patients than in Canada and Britain, higher dialysis rates than Britain with same kidney disease prevalence. Then there are the waiting lists. A Swedish researcher wrote that the risk of death for patients awaiting cardiac bypass increases by 11 percent for every month in queue. More on waiting lists—section was chopped in final edit for paper for Wisconsin SPN member: Countries with waiting lists have tried a variety of management strategies to reduce mortality. In a 2001 paper discussing whether better waiting list management could reduce Canadian cardiac mortality, Ray et al. commented that “one half of the adverse events occurred among patients within the institutional standard for waiting time…adverse events were distributed among all queues, indicating our inability to adequately risk-stratify patients before surgery…further refinements in the risk stratification process are unlikely to yield a better prediction of patients at risk for waiting-list death or upgrade. Taken together, these data suggest that the unacceptably high rates of death and upgrade that we have demonstrated would require marked shortening of standard waiting times.” Unsatisfactory as the Canadian waiting times are, “waiting times for [Canadian] elective cardiac surgical procedures compare favorably with those of other socialized medical systems. For example, in Sweden and the United Kingdom, waiting times for elective procedures may exceed 1 year. In New Zealand and Iceland, waiting time in of [sic] on waiting times for cardiac surgery >6 months are common.”[1] Table 8 shows that national waiting lists have been growing despite government programs to reduce them. Careful study of the matter suggests that the lists will not be eliminated simply by allocating more money to health care. When governments set prices and budgets for various health care services, they inevitably create systemic resource allocation problems at local levels. These errors are invisible to system planners. In private systems, resources are allocated as local actors see fit. In public ones, physicians and patients must wait for their bureaucratic masters to command information, compile it, study it, and make decisions. By the time the bureaucratic process finishes its cycle, much relevant information has been lost and events may have rendered the offered solution obsolete or unworkable.

    Table 8

    Percentage of patients waiting more than 4 months

     for elective surgery

    1998

    2001

    Australia

    17

    23

    Canada

    12

    27

    New Zealand

    22

    26

    United Kingdom

    33

    38

    United States

    1

    5

    Source: R.J. Blandon et al. 2002. "Inequities in Health Care, A Five Country Survey," Health Affairs, 21, 3, 182-191 as cited in Jeremy Hurst and Luigi Sicilian. July 7, 2003. Tackling Excessive Waiting Times for Elective Surgery: A Comparison of Policies in Twelve OECD Countries, Health Working Paper No. 6, Organization for Economic Co-operation and Development, Paris, France. p. 12.

    A 2002 paper by Fiche, Secure, and White vividly illustrates the differences in care that result when management is private rather than governmental. The authors compared costs and quality for California’s Kaiser Permanente and Britain’s National Health Service. After carefully adjusting for differences in benefits, special activities, populations and the cost environment, the authors concluded that although the per capita costs incurred by the two organizations were within 10% of one another, but that “Kaiser members experience more comprehensive and convenient primary care services and much more rapid access to specialist services and hospital admissions.” They also concluded that the “widely held beliefs that the NHS is efficient and that poor performance in certain areas is largely explained by underinvestment are not supported by this analysis. Kaiser achieved better performance at roughly the same cost as the NHS…”[2] Kaiser simply managed its resources better, allocating hospital beds more efficiently, making better use of highly trained specialists, and providing well equipped physicians who could do what was needed in a single visit. As a tangential concern, I don’t think enough attention has been paid to time series results particularly in the pre and post DRG results in the 1980s. There are a couple of papers from the 1980s that seem to indicate that DRGS simply caused hospitals to discharge patients to skilled nursing earlier. Now that prospective payment has been extended to nursing homes, the outlook could be pretty grim for the elderly even with APR-DRGs, CMS’s GOSPLAN solution to the problem. As far as I can tell, the feds aren’t paying epidemiologists to compare global outcomes pre and post DRGs. It also probably affects ER use. If Medicare patients are going out sicker, it might help explain why they make up a large fraction of frequent ER users. But given the problems of technological change, price change and so on, this is a dissertation, not think tank fodder. It is also interesting that the private sector insurers use experience rating not risk adjustment. As far as I can tell, the government does the opposite. Had a bunch of people looking at me like I had two heads when I pointed this out to the happy central planners on the Colorado Health Care Reform Commission. They were set to argue. Finally the guy who is a health plan lawyer said that yes, this was true. In any case, thanks so much for keeping those of us on the periphery informed.

    Linda Gorman

    Independence Institute

    ——————————————————————————–

    [1] A. Andrew Ray et al. 2001. “Waiting for Cardiac Surgery: Results of a Risk-Stratified Queuing Process,” Circulation, 104, p.97.

    [2] Richard G. Feachem, Neelam K. Sekhri, and Karen L. White. January 19, 2002. “Getting More for Their Dollar: A Comparison of the NHS with California’s Kaiser Permanente,” BMJ, 324, p.135.

  10. Rob Rutledge says:

    The problem with a private health care system is that health care is not like say cereral where the suppliers of cereral (manufactureres) are different from the buyers (consumers). In health care, suppliers (doctors) are typically the same as those that demand the service (consumers usualy follow doctor’s recommendations)….save for review procedures and active consumer engagement / awareness of alternatives.

    This is (one of the reasons) why the per capita spending on health care in the US is one of the highest in the world…not a bad thing…actually a good thing EXCEPT that the spending disproportionately favours the rich. Health care is great in the US if you have money or a very rich benefit plan…heaven help the 40+ million Americans who have neither.

  11. John Dewey says:

    “spending on health care in the US is one of the highest in the world … actually a good thing EXCEPT that the spending disproportionately favours the rich. ”

    Spending for food, shelter, clothing, and higher education also disproportionately favor the rich. We cannot all enjoy gourmet meals of the nation’s finest chefs – the homes with the Pacific oceanfront views – the services of the world’s most talented plastic surgeons. Some form of rationing is necessary. Why shouldn’t price be used to ration such scarce goods? The alternative – rationing by central planners – has met with success … where?

  12. Rob Rutledge says:

    “Spending for food, shelter, clothing, and higher education also disproportionately favor the rich. We cannot all enjoy gourmet meals of the nation’s finest chefs…”

    It is all about values. If one’s value system is that you require money to access basic health care, then money is a basic defining value of a person. Hmmm. Not sure everyone wants to define themself according to the almightly dollar.

    “…Why shouldn’t price be used to ration such scarce goods?” Because money then defines one’s health. Are we not a more advanced community than this?

    “…The alternative – rationing by central planners – has met with success … where?”

    Depends on what you define as success. Is 40+ Million Americans without insurance or the money to pay for health care a successful system? Is the Canadian system where access for basic health is provided with waiting lists (or varying time periods) for selected procedures a better alternative? Two different alternatives with pros and cons for each. To a certain extent, it depends on one’s value system as noted above. Certainly not a black and white issue as conveyed by the author of this blog.

  13. Brilliant John! I’ve been following the thinking of Market Driven reforms in Health Care for the last 4 years. It is amazing to me, that a country that has been so successful following capitalistic ideas, would fall prey to the that devil of “something for nothing thinking” one that promises all, and delivers fire, brimstone and obesity. Please continue your great efforts, you are making a huge and important difference.

  14. Richard Fabiano says:

    I would not be so eager to defend the US healthcare system. It has not in any way substantially decreased the incidence of Cancer, Heart Disease, Diabetes and various Neurological Diseases. Bashing the Canadian system is not the answer for Americans and the labeling of the system as the Socialist model is derogatory. The facts are that both systems are far from the Ideal and a fresh look at healthcare, Disease Care, Preventive Health, Complementary Healthcare and Integrative Healthcare are essential, if we are to be able give all Americans a better Quality Of Life. At present this aspect is the biggest failure of our costly, high tech system. Until a drastically changed philosophy, priorities and emphasis, relative to our research, delivery and prevention of disease, is undertaken immediately, we will continue to patch up this broken inadequate failure of our present Healthcare System. When you consider that americans at 6% of the world’s population consume the greater percentage of the world’s prescription drugs ( I’ve seen percentages as high as 60 or 70%) something is clearly out of wack. Healthcare does not belong in the political arena, it is a humanitarian issue and our failure is nothing short of the obvious. The medical industry is more concerned with protecting the status quo rather than risking the possible consequences of reduced incomes and unnecessary staff—–not patient outcomes—.

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  16. No one mentions the count of Americans with 0 health insurance.
    And let us not forget health care, after all the counting.

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