Single-Payer National Health Insurance around the World Part VI

by admin on 04/10/2015 10:47 AM

Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick

(Continued from the  January 2015 HPUSA Newsletter)

The Politics of Medicine

Part 2 / Chapter 21 / P 187

“Public choice” is the discipline that attempts to integrate economics and political science.1 Its chief goal is to explain political phenomena, just as economists explain purely economic phenomena. The name, however, is potentially misleading. The new discipline could more accurately be called “modern political science.”

A fascinating discovery of this discipline is that economic principles, if carefully applied, explain much of what happens in politics. Take the concept of competition. Just as producers of goods and services compete for consumer dollars, so politicians in a democracy compete for votes. Moreover, the process of competition leads to certain well-defined results.

In the economic marketplace, competition inevitably forces producers to choose the most efficient method of production. Those who fail to do so either go out of business or mend their ways. The outcome—efficient production—is independent of any particular producer’s wishes or desires.

In a similar way, political competition inexorably leads candidates to adopt specific positions, called the winning platform.2 The idea of a winning platform is a fairly simple one. It is a set of political policies that can defeat any other set of policies in an election. Politicians who want to be elected or reelected have every incentive to endorse the winning platform. If they do not, they become vulnerable; for if their opponents adopt the winning platform and they do not, the opponents will win.

Of course in the real world, things are rarely so simple. Many factors influence voters other than substantive political issues—a candidate’s religion, ethnicity, gender, general appearance, speaking ability, party affiliation, and so forth. Even when voters are influenced by real political issues, politicians do not always know what the winning platform is. Often they must guess at it. Nonetheless, public choice theory holds that, other things being equal, a candidate always improves his chances of winning by endorsing the winning platform. Hence, all candidates have an incentive to identify and endorse this platform.

This line of reasoning leads to the conclusion that in democratic systems with two major political parties, both tend to adopt the same policies. They do so not because the party leaders think alike or share the same ideological preferences, but because their top priority is to win elections and hold office.

Two corollaries follow from this conclusion. The first is that it is absurd to complain about the fact that “major candidates all sound alike” or that “it doesn’t seem to make any difference who wins.” The complaints are merely evidence that political competition is working precisely as the theory predicts.

Indeed, the more accurate information political candidates receive through better polling techniques and computerization, the more similar they will become. The theory predicts that, in a world of perfect information, the policies of the two major parties would be identical.

The second corollary is more relevant to our purposes. In its extreme form, the corollary asserts that “politicians don’t matter.” Over the long haul, if we want to explain why we have the political policies we have, it is futile to investigate the motives, personalities and characters of those who hold office.

Instead, we must focus on those factors that determine the nature of the winning platform.

This corollary is crucial to understanding single-payer health insurance. A great many British health economists who support socialized medicine are quick to concede that the British NHS has defects. But these defects, in their view, are not those of socialism; they merely represent a failure of political will or of the politicians in office. The ultimate goal, they hold, is to retain the system of socialized medicine and make it work better.

By contrast, we argue that the defects of single-payer health insurance systems are inevitable consequences of placing the market for health under the control of politicians. It is not true that British health care policy just happens to be as it is. Enoch Powell, a former minister of health who ran the British NHS, seems to have appreciated this insight. Powell wrote that “whatever is entrusted to politicians becomes political even if it is not political anyhow,”3 and he went on to say that The phenomena of Medicine and Politics . . . result automatically and necessarily from the nationalization of medical care and its provision gratis at the point of consumption . . . These phenomena are implicit in such an organization and are not the accidental or incidental results of blemishes which can be “reformed” away while leaving the system as such intact.4

An extensive analysis of the British health care system shows that all of the major features of national health insurance can be explained in terms of public choice theory.5 That is, far from being the consequence of preferences of politicians (who could be replaced by different politicians with different preferences in the next election), the major features of single-payer systems of national health insurance follow inevitably from the fact that politicians have the authority to allocate health care resources, and from that fact alone. The following is a brief summary.


One argument used to justify national health insurance is that, left to their own devices, individuals will not spend as much as they ought to spend on health care. This was a major reason why many middle- and upper-middleclass  British citizens supported national health insurance for the working class. It was also a major reason why they supported formation of the NHS in 1948.6 Many expected that, under socialized medical care, more total dollars would be spent on health care than would otherwise have been the case.

Yet, it is not clear that socialized medicine in Britain has increased overall spending on health care. It may even have had the opposite result. This was the contention of Dennis Lees, professor of economics at the University of Nottingham, who wrote that “the British people, left free to do so, would almost certainly have chosen to spend more on health services themselves than governments have chosen to spend on their behalf.”7 The same may be true of the single-payer systems in other countries.

To see why this is true, let us first imagine a situation in which a politician is trying to win over a single voter. To keep the example simple, suppose the politician has access to ten dollars to spend on the voter’s behalf. To maximize his chance of winning, the politician should spend the ten dollars precisely as the voter wants it spent. If the voter’s choice is five dollars on medical care, three dollars on a retirement pension and two dollars on a rent subsidy, that should also be the choice of the vote-maximizing politician. If the politician does not choose to spend the ten dollars in this way, he risks losing this voter to a clever opponent.

Now it might seem that if the voter wants five dollars spent on medical care, we can conclude that he would have spent the five dollars on medicalcare himself if he were spending ten dollars of his own money. But this is not quite true. State-provided medical care has one feature that is generally missing from private medical markets and other government spending programs—nonprice rationing. Nonprice rationing, as we have seen, imposes heavy costs on patients (the cost of waiting and other inconveniences), leads to deterioration in the quality of services rendered and creates various forms of waste and inefficiency.

Thus, other things being equal, five dollars of spending on government health care will be less valuable to the average voter than five dollars of spending in a private medical marketplace. It also means that, under socialized medicine, spending for health care will be less attractive to voters relative to spending programs that do not involve nonprice rationing.

Public choice theory, then, predicts that the average voter will desire less spending on health care, relative to other goods and services, when healthcare is rationed by nonmarket devices. Moreover, the greater the rationing problems, the less attractive health care spending will be. So we would expect even less spending on health care in a completely “free” service like the NHS than in a health service that charged user fees.

In the real world, politicians can rarely tailor their spending to the desires of a specific voter. Generally, they must allocate spending among programs that affect thousands of voters. New spending for a hospital, for example, provides benefits for everyone in the surrounding community. And no matter what level of spending is chosen, some voters will prefer more and others less. Often, the vote-maximizing level of spending will be the level of spending preferred by the average voter.

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