America’s ‘NHI’ halted

An enthralling tussle recently unfolded on the other side of the Atlantic Ocean. A Republican, Scott Brown, won the Massachusetts’ Senate election, giving his party enough seats in the Senate to block President Obama’s and the Democrats healthcare bill, commonly referred to as ObamaCare. One of Brown’s specific campaign promises was to block the healthcare bill; and he won a substantial majority in a traditionally strongly left-leaning Democratic state.

For most South Africans this may not mean much but it nevertheless sends a clear message: Americans do not want socialised medicine. They know that a socialised healthcare system will be a crushing burden on the fiscus even though they are the wealthiest nation on earth, and that increased government involvement is likely to do more harm than good despite any well-meaning intentions. Is sense going to prevail on this side of the Atlantic? Will the SA authorities recognise in time that entrenching socialised health care in SA is not a wise idea?

What makes the Republican win of the senate vote in Massachusetts significant is that ObamaCare is modelled after that state’s socialised healthcare programme. Voters in that state are better informed than even Obama himself about how “well” the proposed healthcare system functions and resoundingly rejected the president's plan.

Fortunately for South Africans, government has not tried this nasty experiment here, but we can learn from the people of Massachusetts. The Massachusetts Senate vote should be viewed as a referendum on healthcare reform; changes to the SA system (and everyone agrees we need change) have to be very well thought out. Far-reaching, wide-scale changes that rely on heavy-handed, top-down dictates seldom work in practice. Incremental, evolutionary type changes are far more practical because they allow one to see what is working and where. They also make it easier to adjust things that are revealed to be not working as well. In contrast, top-down, heavy-handed changes are extremely difficult to correct once implemented.

ObamaCare is not dead yet, but the Democrats have to go back to the drawing board and come up with a revised, less ambitious, less costly and less statist version of health care. What lessons can SA learn from this as well as from other statist healthcare systems such as those found in the UK, Canada, Australia, and elsewhere?

The consequences of government run health care are entirely predictable – and we have evidence to boot. Governments, with the best will in the world, cannot raise enough funds to provide unlimited care to all of their citizens. A government run, single payer system that provides “free health care for all”, will cost individuals dearly, and affect both their wallets and their health. Inevitably, under single payer models, price controls get imposed that limit and thus ration the supply of medicines, access to treatment, the procedures that can be carried out, the number of hospitals that can operate, and even the number of beds in those hospitals. Patients are placed on waiting lists and once the waiting lists are filled, waiting lists for waiting lists are formed.

No matter what anyone may promise, nothing offered by government is for free – someone always pays. A cursory look at the financial resources required to fund the “free health care for all” proposal in SA, as well as the stock of healthcare professionals, reveals the infeasibility of the proposal.

To compare resources available, take for example, Canada where it is well known that the single payer model results in long delays in the provision of health services and is absorbing an alarmingly high and increasing percentage of taxes. The country is struggling to meet its “free health care” promises despite the fact that it has a per capita GDP of $38,400 (PPP adjusted). Compare this to SA’s per capita GDP of $10,000, a mere 26% of Canada’s. If wealthy Canada is unable to provide timely healthcare services on a single-payer “free health care” basis, how will SA possibly manage to do so? It is not necessary to have insight into SA’s proposals to know for certain that we cannot follow in Canada’s footsteps.

SA’s high unemployment rate is a potent factor in planning for provision of health care. In Canada, in 2008, unemployment was estimated at 8.5 per cent of the workforce compared to SA’s latest figures which show that approximately 24 per cent of the available work force is unemployed. Canada also has far more skilled healthcare personnel compared to SA. For example, Canada has a physician density of 19 and a nursing and midwifery personnel of 101 per 10,000 people, where SA has only 8 physicians and 41 nursing and midwifery personnel per 10,000 population. SA’s medical personnel complement has to be boosted and this can be achieved most rapidly by allowing the private sector to carry out the necessary training and certification.

Unemployment imposes a much larger burden on SA than it does on Canada, in that SA has to deal not only with health care for the destitute but also with hunger, shelter and clothing. Establishing priorities in allocating budgetary resources to deal with these issues is exceedingly difficult. SA’s welfare burden on taxpayers is already heavy; having to impose additional taxes to pay for health care will imperil investment, production and future employment opportunities.

Increasing government’s role in health care will make the health system less flexible and innovative – the opposite of what is needed to adapt to future changes in demographics and disease burdens in SA. It will not be today’s typical voter that will have to endure such a system, but rather their children and grandchildren. The goal of healthcare reform should be to create conditions for the private sector to expand and give more and more people access to better health care from vigorously competing medical schemes and healthcare providers.

The government’s motivations to provide health care to all South Africans are laudable. Empowering individuals to choose their healthcare options for themselves and encouraging private sector competition is arguably the best way to achieve this outcome. The state can play a role and pick up some of the bill – but they need to allow healthcare providers to compete, to drive down prices and provide the poor with quality medical care, in the same way as has been done with transport, food, clothing and myriad other products and services.

Author: Jasson Urbach is a director of the Health Policy Unit (a division of the Free Market Foundation) and of Africa Fighting Malaria. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.

HPU Feature Article / 26 February 2010

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