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Tuesday, October 25, 2016

ColoradoCare Isn’t What it Seems

Universal healthcare may look promising from afar, but looks can be deceiving.

Every few election cycles a proposition to have universal healthcare pops out. This year, Colorado voters will have to vote on Amendment 69, which would replace the present Affordable Care Act (aka Obamacare) provisions with a single public option; a kind of Medicare for all for the state.

At first, the proposition looks enticing. The present healthcare system is riddled with inefficiencies and high costs. Indeed, the U.S. spends 17.4 percent of its total GDP on healthcare; Canada is only at 10.2 percent despite universal healthcare. According to supporters of the proposition, Coloradans would save $4.5 billion just during the first year thanks to lower bureaucratic costs, higher purchasing power thanks to bulk negotiations and less fraud. These claims are defended by the Canadian Union of Public Employees, even adding that fewer people die in a public healthcare system.

More Spending on Health, Less on Everything Else

However, by looking closely at the data one can doubt that Amendment 69 will save money in the long run. Healthcare expenditures are approaching 50 percent of the Quebec federal budget.Present trends in Medicaid – the universal healthcare program for low-income people – show that the program is taking a larger share of the states’ budgets. It therefore crowds out spending from other domains like transportation or even corrections.

Such a crowding out is happening with universal healthcare. In the Canadian province of Quebec, nominal spending on the public healthcare system (through the Ministère de la Santé et des Service Sociaux) has increased 13.2 percent during the past 5 budgets, 46.6 percent during the past 10 years and 263 percent since the 1997-1998 budget. Excluding debt service, health care expenditures have gone from 37 percent of the budget 20 years ago to 49.6 percent of the budget. In other words, the Quebec government is becoming a huge ministry of health.

And since these healthcare expenditures are financed through general taxation – there is no dedicated tax unlike Medicare in the U.S. – the “free” care people received costs them about $12,000 a year for a family of three in Canada according to the Fraser Institute. The institute estimates that the real cost has increased nearly 48.5 percent for all households in 2015 in the past 10 years.

In Colorado, Amendment 69 proposes a $25-billion tax hike to pay for this program, which will be financed by a 10-percent payroll tax. Such a perspective discouraged Vermont to enact a similar measure just two years ago. Then-governor Peter Shumlin thought that “the potential economic disruption and risks would be too great to small businesses, working families, and the state’s economy.”

“Patients” Deserve their Names

The disruption of universal healthcare is just not economic; it’s also social.

In Quebec, despite spending all that money on health care – $33 billion for a province about as populous as New York City – waiting lists are growing. If one’s health is in immediate danger one will see a doctor as soon as one is available, but otherwise more populous regions will tend to have overcrowded emergency rooms – the only ones with physicians available on weekends. At the time of this writing, (October 21, 2016), Hôpital de l’Enfant-Jésus ER in Quebec City had an occupancy rate on the gurneys of 108 percent, with 4 patients waiting for at least 48 hours to get their own room. In Montreal, Hôpital général Juif is 200 percent full with 12 patients waiting for at least 48 hours. In order to cut on costs governments limit the number of patients doctors can see during a week.

Even for “medically necessary” procedures waiting lists test the patience of the people. The aforementioned Fraser Institute study found that, in 2014, the average waiting time for such procedures was 18.1 weeks compared to 9.3 weeks 20 years before. Those who can’t wait and can afford it will therefore travel abroad to seek the care they need. Or they will move and invite people to do the same, as Julie Lesage famously did to get the care her daughter might have never received – a doctor told her she would have a better shot in Houston, where she moved.

Why so much waiting despite a sharp increase in spending? It’s simple: in order to cut on costs, governments limit the number of patients doctors can see during a week. And they have to make a choice: either they work for the public system or they work in a private practice. They cannot do both; therefore many doctors (especially younger ones) are going into private practices. While this “migration” represents only about 2 percent of family doctors, 45,000 patients were still left without a “free” doctor.

This migration away from government-paid health care is also happening in the U.S. Since Medicaid only pays 60 percent of what private insurers will pay, more and more new patients will likely have a hard time finding a doctor if Medicaid is their only means to pay. And with an aging doctor population (52 years old in 2014, compared to 50 in 2010) that will eventually retire, finding a doctor will become increasingly harder.

It would likely be even harder in Colorado. Since ColoradoCare would be financed through taxes there would have to be some limitations on healthcare spending so income tax brackets don’t look like Quebec’s – the highest marginal bracket is at 25.75 percent, and that’s not including the federal one at 29 percent. Therefore doctors’ reimbursement would be lower, likely creating dissatisfaction and a shortage.If competition works in markets for things like TVs and computers – both are cheaper and more efficient – why can’t it work for healthcare? 

So if Coloradans want their fellow citizens to have access to better and cheaper healthcare, there is one simple solution: laissez-faire. By abolishing the monopoly of employment supported by the American Medical Association, by abolishing the thousands of pages of regulations on how and when to provide care, in short by letting market forces act as they should cost will very likely decrease.

If it works in (relatively) free markets like TVs and computers – both are cheaper and more efficient – why can’t it work for healthcare? Such a market is already expanding with concierge doctors – they deal directly with patients rather than through a third party like an insurance company. Costs are affordable for middle-class households – $4-5 per day – and, according to a peer-review study, their approach decreases hospitalizations.