Prices in the private health sector need to be strictly regulated is the opinion expressed by the Minister of Health in his budget speech when he welcomed the announcement that the Competition Commission will be investigating private health-care costs. According to the Minister, the World Health Organisation, United Nations, World Bank and Harvard University support national health insurance and provide well-researched guidance to countries on how to go about implementing such a system. They do not provide evidence for the debate as to whether or not it is needed.
Notwithstanding the enduring belief that taxpayer-funded and government-provided health-care systems offer cheaper and more cost-effective care than private health providers, and treat all citizens equally, not a single national health system that meets these ideals has ever existed. Every single one of them, including those of wealthy countries such as Great Britain and Canada, battle endlessly with escalating costs, limited funding and waiting lists.
Governments are severely limited by the amount of funding they can extract from taxpayers. National health systems cannot deliver on their promises as they are limited in the care they can provide by the funds made available through the national health insurance system. Governments, therefore, are impelled to impose price controls, limit access to prescription drugs and medical technologies, limit the number of procedures that may be carried out, control the number of hospitals and beds, and decide who should receive care and to whom it should be denied. The comparative efficiency with which government agencies utilise funds is generally poor and the result is millions of patients on waiting lists going untreated, or being treated with out-dated medical technologies. There is, in fact, no universal access to care under national health insurance systems, and no guarantee that care will be provided when needed.
Private providers do not face externally imposed budget limitations: as long as there are buyers for a health service, and it is economically viable, the service will be provided. If the price is too high, few, or nobody, will buy the service. Thus consumers control prices and dictate the supply without any ministerial intervention.
While it is notoriously difficult to directly compare country health systems, the evidence is that the greater the extent of competition and patient choice, the better a health system performs. The Euro Health Consumer Index 2012, published by the Swedish based Health Consumer Powerhouse, ranks 34 national European health care systems by measuring their “consumer friendliness”. The ranking is based on 42 indicators, covering five areas critical to health consumers: patients’ rights and information, accessibility of treatment (waiting times), medical outcomes, range and reach of services provided, and pharmaceuticals.
The study found that the countries that rate highest, with the Netherlands taking top position, are those with a multitude of insurance organisations, which are organisationally independent of health-care providers. In these countries, citizens choose between different insurance providers, which, in turn, do not discriminate between health-care providers who may be private for-profit, non-profit or public. Lower ranked countries, such as the United Kingdom, and those at the bottom of the scale (e.g. Latvia, Romania, Bulgaria and Serbia) have highly socialised systems under which the government, or a government created agency, both finances and provides health care.
These findings are consistent with economic history. Economic development and human welfare achieved under government control and direction of economic activity falls short of the level achieved under the private ownership and direction of the means of production. Thus, the greater the role of government in the funding and provision of health care, the more likely there will be waiting lists for medical procedures, denial of care to the elderly and limitations on the availability of medical technology, as experienced in Canada and the United Kingdom.
Just as doctors, hospitals, pharmaceutical companies, and developers of high technology medical equipment are not exempt from the laws of economics, so, too, are governments. There is no compelling reason why governments should provide and fund health care. Other than applying general laws against fraud and other misdemeanours to protect patients, governments should refrain from interfering with and controlling private health-care provision.
Countries that allow competition and the private funding and delivery of health care experience fewer problems than those that do not. Not surprisingly then, to reduce pressure on the public health system, some countries apply tax incentives to encourage people to take up private health insurance. Australia, where nearly 47 per cent of the population is currently covered by private hospital insurance, serves as an example.
The question arises: what happens to the poor and indigent under a private health-care dispensation? While the historical evidence shows that private philanthropy, charitable foundations and religious groups will take care of the poor, this cannot happen overnight. The solution is for government to purchase care for the truly needy from competing private providers. At the same time, restructuring government tax policy to encourage provision of care to the poor and indigent by charities, including charitable provision by private health-care providers, would contribute towards ensuring care for them in the long-term.
Contrary to what its supporters believe, a national health insurance system does not mean caring, sharing and compassion in the delivery of health care. It means government ownership and/or control over health-care provision. A private health system does not mean uncaring, selfish and greedy health-care providers intent on exploiting the sick. It means private ownership, control and provision of health care goods and services providing patients with whatever is needed.
The evidence that privately provided goods and services are superior to those provided by government is there for all to see. Health care is no exception.
Author: Johan Biermann is the author of South Africa’s Health Care Under Threat and Undermining Mineral Rights, published by the Free Market Foundation. 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.