The devil, we are often told, is in the details. When appraising public-policy proposals, look not at the broad caption—“gun control,” “reinventing government,” “deficit reduction”—but at the minutiae of the legislation aimed at achieving the unexceptionable goal. Therein will the true strengths, or weaknesses, of the proposed policy be revealed.

In accordance with this injunction, the debate over President Clinton’s proposals for reforming our health-care system has been dominated by “experts” and policy wonks who, like the President himself, are never so happy as when they are poring over statistics and the details of this or that new arrangement. The net effect has been to confine discussion to the comparative merits of the Clinton plan as against the single-payer option espoused by certain Democrats, or the four or five other rival reforms espoused by other Democrats or Republicans.

Lost in all this has been the large question of whether a massive transformation of our healthcare system is in truth either necessary or desirable. And discussion of that question has been inhibited, and even for all practical purposes silenced, by the fact that the main participants in the debate—the politicians—have, for fear of seeming callous, accepted the unexamined assumptions that there is a great “crisis” in health care, and that our system is radically flawed and desperately needs to be overhauled.

Therefore I do not propose to analyze the details of Clinton’s plan. They will in any event be altered, perhaps beyond recognition, as the bill wends its way through a skeptical Congress. Instead, I wish to ask whether there is something that can legitimately be called a crisis in the provision of health care in America, a crisis so severe as to dictate a thoroughgoing transformation of our system and one which will inevitably involve, at the very least, a huge expansion of government control over a significant sector of our lives and of the American economy.

The idea that there is such a crisis stems, it would appear, from four sources. The first is the insecurity generated by the most recent recession. Most Americans’ health insurance is linked to their jobs, with employers paying about 86 percent of the total cost: lose your job, lose your coverage; get a new job and you might not get coverage if you have a health problem. During a period of rising unemployment, enough Americans found this prospect sufficiently unsettling to create a constituency for changes in the way health-insurance coverage is maintained.

Then there is the concern over costs. Already claiming 14 percent of our gross national product—a figure high by international standards—health-care costs have also been rising. Many people have convinced themselves that unless something is done, health care will consume an ever-larger share of GNP, leading in the end to the impoverishment of America.

Additional pressure for reform comes from the notion that everyone—no exceptions—should have health insurance as a matter of right. Since somewhere between 37 and 39 million Americans are now widely said to be without coverage, the system must be failing and it must be revamped to provide insurance for all.

A fourth contributor to the sense of crisis is the well-documented liberal bias of the major media. This factor helps to explain one of the great anomalies in the health-care debate: although 75 percent of Americans have been persuaded that there is a crisis (32 percent say the system “needs fundamental changes,” and 47 percent that it “needs to be completely rebuilt”), 80 percent simultaneously report themselves as “very” or “somewhat” satisfied with the quality and cost of their own health care. “This contradiction,” writes Fred Barnes in the premiere issue of Forbes MediaCritic, “can be attributed to the media-generated myths that have shaped America’s view of its health-care system.”

All this has added up to a great political opportunity for the Democrats. The President’s advisers have long been telling him that the Democrats have no future as the party of the poor because the middle-class majority has had its fill of income transfers to what it sees as excessively prolific welfare mothers and ghetto youngsters who prefer looting to learning. To wed the middle class to the Democrats, to prevent the reemergence of the blue-collar Reagan Democrat, the party needs a modern version of Franklin D. Roosevelt’s Social Security system. Enter healthcare reform.

Unfortunately for the President’s political strategists, however, the crisis on which the case for this reform rests—unlike the Depression of the 30’s which made Social Security possible—can be shown to be a synthetic one, and the intended beneficiaries (i.e., middle-class Americans) its biggest losers.



Take the much-heralded 14-percent figure. The approximately $940 billion Americans spent on health care in 1993 did indeed represent a bit more than 14 percent of the nation’s total output of goods and services. By what standard is that too much? Three are generally offered: other nations spend less; in the past we ourselves spent less; and the results we get do not justify the amount of money we put in.

But international comparisons—to begin with them—are notoriously flawed. First of all, we are the richest nation in the world, with more houses, cars, telephones, toilets, parks, and other amenities than most other nations can even imagine. As such, we cannot be expected to deploy increments of our rising incomes in the same way as do, say, the Japanese, 54 percent of whom in the average-income bracket still lack indoor toilet facilities (whereas only 1.8 percent of America’s poor are without such facilities). If we prefer to devote a larger portion of our incomes to top-quality health care, what is wrong with that?

After all, we do not settle for the housing standards that prevail in poorer countries: we insist on central heating and air-conditioning, the latter now installed in nearly half of the homes of even those we classify as poor. Nor are tiny cars with mechanical clutches, common elsewhere, the stuff of which the American dream is made. Neither is spartan health care. Hence we afford ourselves the luxury of making much greater use than other countries do of expensive diagnostic techniques like CAT scans and ultrasound tests.

Another reason why international comparisons mean little is that they give no weight to differences in the quality of service. The Congressional Quarterly cites the fact that “Japan’s government plays a much greater role in private health-care delivery than does the U.S. government” to explain how “Japan keeps its costs considerably lower than those of the United States.” No mention of what Fred Barnes calls “Japanese . . . assembly-line treatment from doctors who see an average of 49 patients a day,” and who perform gynecological examinations on scores of women assembled in a single nonprivate room, as physicians scramble to maintain incomes in the face of too-low per-capita reimbursements.

Such stringent government controls on physicians’ fees do succeed in lowering the recorded cost of Japanese medical care. But because payment is based on patient visits, the doctor keeps the average length of each visit to five minutes, and the Japanese on average make twelve visits per year, or about three times as many as Americans, whose average visit length is fifteen to twenty minutes. These decreases in convenience for patients, and increases in patient time and travel costs, points out Patricia Danzon of the Wharton School, “are excluded from the national health accounts and from public visibility.”

International cost comparisons also ignore queuing and other forms of rationing that reduce recorded costs by forcibly limiting the availability of the service. Like consumer goods in the old Soviet Union, medical services in many of the countries with which America’s reformers invidiously compare the U.S. are cheap but hard to get.

Joseph White, a Brookings Institution researcher whose comparison of America’s system with those of six other nations leads him to conclude that “America’s health-care system must be reformed,” nevertheless concedes that “Britain has restricted capacity severely and makes people wait much longer for services that Americans would consider necessary, than we would accept.” Certainly, the British rule that patients over fifty-five are not eligible for kidney dialysis would not be acceptable here.

We further discover from White that Australia faces both availability restrictions and “spiraling costs,” and that there are “stirrings of dissatisfaction” in France. On the other hand, he dismisses Canada’s waiting lists as the result of “unexpected increases in demand . . . [rather] than . . . intentional constraints on capacity.”

Here White shows no recognition that the shortages caused by government planning and operation are often “unintentional”—planners, immunized from the consequences of the shortages they create by preferential access to goods and services (did a Kremlin bureaucrat ever queue for anything?), rarely match demand and supply with any precision. And Canada’s recent response to unbearable cost increases—a reduction in the services covered—passes without mention in White’s analysis. Nor does he tell us what we learn from Patricia Danzon, who notes that Canadian physicians “work fewer hours as [government-mandated] expenditure ceilings are approached,” thereby shifting the risks and costs of waiting for care to patients—and lowering the recorded cost of health care in Canada. This is not a trivial matter in a country in which 1.4 million people are waiting for medical service, and 45 percent of those queuing up for surgery say they are “in pain.”

Japan, writes White, “has not yet experienced significant complaints about waiting lists.” But that silence may well be due more to stoic acceptance of shortages than to their absence. As for Germany, it achieves its low costs by limiting malpractice suits; by eschewing extraordinary life-prolonging measures for those judged to be terminally ill; by buying fewer pieces of high-technology equipment than Americans typically use; and by price controls. Even so, costs are soaring and the German insurance funds are broke, despite premiums that come to 13 percent of payrolls.



Yet another reason why international comparisons are misleading is that they omit societal attitudes. A prominent British physician described to me how decisions are reached in that country about whether to expend resources in an effort to save a seriously damaged newborn, or to let nature take its course. A hospital staff conference, a quiet meeting with the parents, a decision. In America, in similar circumstances, draconian efforts would be made to prolong the child’s life. So, too, at other stages of life, including extreme old age.

Indeed, it is the very success of these efforts that contributes to the high cost of health care: the dead are no burden to the system; survivors are. The high expenditures incurred thereby do not result from the greed of doctors (real earnings of American doctors have remained constant for the past fifteen years), or the inefficiency of hospitals, or the swollen profits of insurers, or the price-gouging of drug companies. Rather, they reflect a basic American value—mistaken in the view of certain health-policy experts but deeply held: damn the costs, save lives, and use expensive technologies whenever necessary.

Thus, in an interview with the New York Times, Dr. William Castelli, the director of the Framing-ham Heart Study (which has been tracking cardiovascular disease in that Massachusetts town since 1949) observes:

Since the early 1970’s, . . . there has been nearly a 40-percent drop in the death rate from heart attacks and a 58-percent decline in the death rate from strokes in the United States. But the rate at which people suffer heart attacks and strokes has not fallen to a comparable degree. . . . Most people who get heart attacks and strokes don’t die. They live. This is how our country is going broke, paying for the bypass operations, angioplasties, and truck-loads of medicines needed to keep people with cardiovascular diseases alive.

His colleague, Dr. William B. Kannell, adds: “Right now, we’re salvaging more and more people with coronary disease who, instead of dying, are living to develop heart failure . . . , leading to numerous costly hospitalizations and nursing-home care.”

These ultimately expensive life-extending techniques are not forced on patients by doctors in love with their high-tech toys and insensitive to the fact that an estimated 30 percent of our health-care costs are incurred in the last six months of patients’ lives. Ezekiel Emanuel, an oncologist and medical ethicist at the Harvard Medical School, points out that fewer than one out of ten physicians surveyed would put “Grandma” on a respirator if she had a stroke, whereas 40 percent of family members would.

High health-care costs in America also reflect another distinctive feature of our society—the social pathology of our underclass. None other than President Clinton pointed this out to an assembly of doctors at Johns Hopkins: “We’ll never get the cost of health care down to where it is in other countries as long as we have higher rates of teen pregnancies and higher rates of low-birth-weight births and higher rates of AIDS, and, most important of all, higher rates of violence.” And, he might have added, nothing in his own healthcare plan addresses any of those problems.

Because other nations do not have as many crack babies, or bullet-riddled drug pushers, or members of urban gangs as we do, they spend less on health care. America’s relatively high level of medical expenditures on these problems is no more due to faults in our health-care system than Alaska’s relatively high expenditure on heating oil is due to inefficient furnaces. Nor would changing our health-care system help, as the following report in the pro-Clinton New York Times vividly suggests:

In Washington, a sullen young woman named Margaret Williams was dragging her toddler into a medical van. He was more than a year behind on his vaccination shots.

She had no job. She had no husband. She explained in disgust that she had no time to hassle with the social workers and the Medicaid forms that would have given her son free care.

“They want you to run around, and do this or that for nothing,” she said. In the meantime, her son had got rickets.

The costs Williams and her offspring will eventually impose on the health-care system will most likely prove significant. And no reform of the system itself will avoid that cost. Which means that the staggering health problems of the urban underclass provide no justification for a radical change in how we deliver health services. If anything, the opposite is true. Since it is a government-administered system—welfare—that is a major contributor to these problems, the case of Margaret Williams would seem to provide a compelling argument against turning the private health-care industry over to the kinds of bureaucracies that have established their incompetence in related fields.

Yet even if international comparisons were corrected to account for all these factors, what would they tell us? America spends more per student on higher education than any other country in the world—$13,000 per year as against $6,000-$7,000 for 24 advanced-industrial nations. Do the academics who feel our per-capita health-care costs should be brought into line with those of other countries feel the same way about our outlays for higher education? If so, perhaps they would like to begin by capping academic salaries.



The second basis of comparison offered to support the contention that we are spending too much on health care is our own past. In 1960 we devoted 5 percent of GNP to health care; by 1993 we were up to the famous 14 percent. Yet we do not compare the price of a modern automobile—with automatic transmission, heating, air-conditioning, and stereo tape and CD decks, plus safety features including seat belts, air bags, ABS brakes, and crash-resistant design—with the price of a model-T Ford, and then complain about how much more the new car sells for. So why ignore quality changes in medical care? Indeed, ignoring such quality changes leads to a particularly serious misrepresentation of true costs where medical treatment is concerned.

Most people beyond the age of Washington’s current crop of experts can remember when an operation to remove cataracts resulted in a hospital stay of two to four days and an even longer recuperative period at home. That surgery is now typically done on an outpatient basis. Again, as Dr. Ira Cohen, formerly chief of the Division of General Medicine at New York City’s Beth Israel hospital, tells us, in the days when the electrocardiogram was the sole diagnostic tool, the victim of a heart attack could count on a four- to six-week hospital stay; now, improved diagnostic techniques and equipment replace guesswork with information about the extent of muscle damage and other problems, permitting the doctor to discharge the typical heart patient in a week or ten days. Or again, a gall-bladder laparoscopy costs roughly 20 percent more than surgical removal, but a hospital stay of perhaps a week is replaced by an outpatient procedure or an overnight stay, and three weeks off the job by about three to five days. Similarly with kidney-stone operations, where the widespread use of extracorporeal shock-wave lithotripsy has also been making surgery unnecessary, cutting the time in lost work to one-tenth of what it used to be.

Yet, astonishingly, the savings in lost wages nowhere appear in our accounting of trends in health-care costs. Nor do we have any way of measuring the savings in suffering and lost output that result from the higher medical outlays these new techniques often entail. If we did, we might find that health-care costs, properly measured, have not risen as much or as rapidly as the unadjusted data suggest.

Nor, so far as the future is concerned, can we credit the projections that bring us from 14 to 26 percent of GNP by 2030. Such projections all assume that recent trends in health-care prices and in the volume of services consumed will continue indefinitely. But this is unlikely. First, the healthcare industry, circa 1994, is offering an unprecedented range of new products, from diagnostic tools to treatments. Like most new products, they will go through a cycle of rapid growth, followed by falling prices and costs as competition among suppliers emerges, consumers become more discriminating, and cost-saving production and application techniques are developed.

In addition, if faced with the costs of their decisions, consumers might adjust. Failure to acknowledge such elasticity of demand is what produced the forecasts that led President Carter to proclaim an “energy crisis.” But instead of trebling to $100 per barrel, real oil prices have fallen by more than half, as consumers have learned to conserve and to use other, less expensive fuels.



So much, then, for the contentions that international comparisons and cost trends demonstrate that we spend too much on health care. What of the argument that our expenditures seem excessive when stacked up against results?

It is, of course, difficult to gauge just what “bang” we get for our health-care “buck.” But the most commonly used standards are infant mortality and life expectancy, and by those America does badly: we seem to buy less life with more money than do other countries. For example, both Canada (10 percent) and Britain (6 percent) spend far less on health care than we do, but life expectancy at birth is higher, and infant mortality lower, in those countries.

Leave aside important questions about the comparability of these figures, and concentrate instead on the implicit assumption that these differences are attributable solely to differences in the efficiencies of the various health-care systems. To accept that hypothesis is to ignore all other influences—in the case of life expectancy, the fact that motor-vehicle deaths per 1,000 population are 28 percent higher in the United States than in Canada, and the fact that Americans consume 20 percent more cholesterol-laden beef and veal than do our neighbors to the north. Not to mention the effect on our longevity figures of the frighteningly high rate of homicide among young blacks.

As for infant mortality, Nicholas Eberstadt of the American Enterprise Institute shows conclusively that the low ranking of the U.S. is attributable to our higher illegitimacy rates (since unwed mothers of all races and in all income groups are more likely to give birth to low-weight babies). Add the disinclination of black women to avail themselves of prenatal care even when it is easily available and free, and the result is an infant-mortality rate that cannot be blamed on the structure of the health-care system.

In short, against the risks inherent in a radical transformation of that system, we cannot expect as probable benefits longer lives and increased infant-survival rates. Those goals are achievable, but only by major changes in the way Americans live—i.e., by driving, smoking, eating, and shooting less, and marrying more—and in a welfare system that, unlike our health-care system, has a proven record of failure.

Before leaving this discussion of costs, we should keep in mind an important admonition, offered by Robert Reischauer, director of the Congressional Budget Office:

The conviction that health-care costs are too high, are rising too rapidly, and are creating undesirable repercussions is a major impetus driving health-care reform. But we also care about access and the continuity of insurance coverage; about the quality and quantity of care we receive; about consumer choice; about our ready access to state-of-the-art treatments, and the pace at which medical technology advances; even about the amenities that have little or no impact on health outcomes.

Which is to say that “costs are not everything.” A society as affluent as ours properly insists that noneconomic considerations, including steady progress in the use of expensive technologies that reduce suffering, be given weight.



If there is no crisis in health-care costs, is there one in insurance coverage? Here we come to the second major statistic driving the health-care debate: at some point in 1991, the last year for which comprehensive data are available, 37 million people were without medical insurance. (This figure rose to 38.9 million in 1992, a year of relatively high unemployment, and one for which detailed data of the sort used below are not yet available.)

Note: these citizens are not denied health care, nor do they expire on the steps of hospitals because they cannot produce proof of insurance coverage. For hospital emergency rooms provide care to all comers. In fact, nonprofit hospitals, which constitute 88 percent of those in the U.S., cannot legally turn away any patient needing medical care, or unreasonably deny access to all the modern technology hospitals have available. And not just for the duration of the emergency: the hospital that sets a broken arm for an uninsured patient is obliged to see the treatment through. The care may not be luxurious, but neither is it casual. Per-capita health-care spending on the uninsured, pre-Medicare population is about 60 percent of per-capita expenditures on the insured population—a level sumptuous by the standards of other industrial countries.

Nonetheless, if the 37-million figure did mean what it is often taken to mean—that 15 percent (some estimates are as high as 17.4 percent) of our population lives with the unnerving and continual threat of being unable to pay for medical care—there would certainly be grounds for revising the way we provide medical services.

Fortunately, there is less of a problem here than meets the eye. Some of the uninsured are between jobs; some are students entering the labor market. Katherine Swartz, a specialist in health-care statistics at the Harvard University School of Public Health, points out that most of the uninsured are uninsured for only a short period of time. “Almost half of all uninsured spells end within six months and only about 15 percent of all uninsured spells last more than two years,” she told Congressional Quarterly. The chronically-uninsured group in our society, then, numbers closer to 5.5 million than 37 million people.

And probably fewer than 5.5 million. For not all Americans without insurance find that condition imposed upon them. Only 1 percent of those under the age of sixty-five are uninsurable, according to the Employee Benefit Research Institute. More than half of the uninsured are members of families headed by full-time workers; 40 percent of the uninsured have incomes in excess of $20,000, and 10 percent have incomes in excess of $50,000; only 29 percent are below the poverty level. And those with incomes below $20,000 spend several times as much on entertainment, alcohol, and tobacco as they do on health care, which, says Nicholas Eberstadt, they seem “to treat . . . as an optional but dispensable luxury good.” Furthermore, 37 percent of the uninsured are under the age of twenty-five, a generally healthy group—the University of Michigan’s Catherine McLaughlin calls them “the young invincibles”—for whom health insurance is often not a cost-effective buy.

If we put all this together—the 15 percent of the uninsured without coverage for two years, plus some who are uninsured for a shorter time, minus those who choose to be uninsured—we come up with a figure of perhaps 3 percent of the population who—although able to obtain health care—cannot obtain affordable health insurance. The policy question thus becomes: should we perform radical surgery on our health-care system for the sake of that 3 percent?

Before answering with a resounding No, we have to consider the possibility that when the uninsured are treated in a hospital, and cannot pay, the cost of that treatment is loaded onto the rest of us. Hence, says the President, we should get behind a scheme that provides universal coverage, and then hospital charges to the now-insured will decline.

This view may well be wrong. It assumes that hospitals subsidize nonpayers by charging paying customers more than they otherwise would—an assumption that is questioned by, among others, Michael Morrisey of the Department of Health Care Organization and Policy at the University of Alabama. But even if cross-subsidization from the insured to the uninsured does occur—even if, in other words, the uninsured do put a burden on the insured—the cure is simple: subsidize insurance for the truly poor, and compel payment by the voluntarily uninsured. This would be far less risky than an overhaul of the entire system.



We are left, finally, with a relatively simple set of choices. Everyone agrees that any scheme that would turn 14 percent of the economy over to what the Economist calls “a rickety apparatus of new bureaucracies” should be instituted only in response to a major breakdown in the private sector. The proponents of a radical overhaul claim that such a breakdown has occurred. But they are mistaken.

As we have seen, costs are tolerable, all things considered, and results are not unsatisfactory: as Senator Christopher Bond of Missouri observes, kings and sheikhs come here for treatment. And if we compare our private system with the Veterans Health Administration, which is already run by the government, the case against a lurch toward greater state control becomes even stronger. VA patients in need of such care as cardiac or orthopedic diagnosis often wait 60 to 90 days to see a specialist, and months more for surgery. And 55 percent of patients with routine problems wait three hours or longer to be examined for a few minutes by what former Congressman and VA attorney Robert Bauman describes as “an overworked doctor struggling with increasing numbers of patients and piles of government forms, regulations, controls, and policy directives.” Is this the direction in which we want to go?

There are, to be sure, reforms that could and should be made within the context of our present system. In addition to subsidizing those who are involuntarily uninsured, the most important is to make coverage “portable,” so that the temporary loss of a job does not deprive a worker of his insurance. Such tweaks to the system would certainly help. But even more certainly, they would avoid the disastrous consequences in store for us if we follow the Clintons down the path to a health-care system presided over by a series of government boards inevitably staffed by the same people who are already doing such a wonderful job delivering our mail.

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