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U.S. Republicans and Blue Dog Democrats barking up the wrong tree on health care

Critics of U.S. President Barack Obama’s desired health care reforms – including so-called “Blue Dog Democrats” – claim that his plan is just too expensive to implement, and according to the non-partisan Congressional Budget Office, they may be right. Still, the Blue Dogs, like their Republican colleagues, are barking up the wrong tree. The principle flaw with the Administration’s plan isn’t its cost, but its emphasis on a government insurance program as a means of keeping those costs down.

It’s widely believed that principle reason why millions of Americans currently do not have insurance is because they can’t afford its high cost. A government-run insurance plan, it’s argued, would not only provide these people with an affordable insurance option, it would also result in reduced premiums for everyone since private insurers would have to lower their rates or risk losing customers to the cheaper government plan.

On the surface, the strategy seems sound enough – private insurers would indeed trim waste, and then profit, in an effort to lower their premiums and retain their customers. Eventually, however, there would be no more waste or profit left to cut. What do private insurers do then? How would they compete with a government program that relies on taxpayer subsidies rather than efficiency to keep its own rates low?

What’s more, many American businesses and individuals would switch their current private insurance to government insurance because the latter would be less expensive. This would exert upward pressure on private insurers’ premiums as they struggle to maintain a pool of funds large enough to pay claims from.

Under such conditions it would be virtually impossible for private insurers to stay in business. Some would adjust to the new market by changing the products they sell, but most would abandon the market altogether, leaving the government with a de facto monopoly on health care insurance.

By paying claims, at least in part, out of general revenues or through taxpayer-backed borrowing, a government insurance plan would shield health care consumers from the cost of their consumption – that’s the whole idea behind it. But it’s precisely this link between health care consumers and the cost of their consumption that regulates the growth in demand for health care services. By eliminating that restraining force, government-run insurance would precipitate an explosion in demand and related costs at the very moment taxpayers are assuming liability to pay those costs.

Supporters of government insurance believe they have the answer to this dilemma. They propose the creation of a special regulatory council made up of health care experts to monitor the system and impose some sort of discipline. As of yet, the exact powers this council would have, have not been defined, but it doesn’t take an advanced degree in public administration to know that the only way it would be able to achieve its goal would be to establish strict limits on what services a government insurance plan would pay for, and how much it would pay for them.

There’s a word for this – Rationing.

Of course, consumers would still be able to opt out of the government plan, or they would be able to obtain private supplemental insurance to cover those things the government plan would not, but few would since there wouldn’t be many private insurers left selling such coverage, and the premiums would be exorbitant. The de facto government monopoly in health insurance would quickly become a de facto nationalization of the health care industry as a whole, even if the government doesn’t actually own the hospitals or directly employ the doctors and nurses.

That is essentially the system in place in Canada today, where most doctors and nurses in aren’t government employees – they’re private contractors who bill the government for the services they provide to patients.

In Ontario, like other provinces, fees are set by the government – in consultation with doctors – in order to keep overall costs to the system down. The total amount that individual doctors can bill the government plan each year is also capped to keep them from “cheating” the system by setting up a volume practice; that is, encouraging, and then charging for, “unnecessary” appointments by patients. It seems not to have occurred to the “experts” that the number of “unnecessary” appointments may have more to do with patients not having to pay for their visits than it does with doctors’ greed. In any event, an unintended (and bizarre) by-product of this cap is that new patients are regularly turned away by doctors who have “too many” already.

To make matters worse, because doctors’ and nurses’ education in Canada is heavily subsidized by taxpayers, government gets to decide – in consultation with experts – how many will be trained each year. The number of students that medical schools can accept each year depends on the amount of money available in the budget for training, not the actual demand.

Is it any wonder that there’s a shortage of doctors and nurses in Canada?

Most Canadian cities have fewer MRI machines than many individual American hospitals, and according to a report released last year by the Cancer Advocacy Coalition of Canada, Ontario – the country’s wealthiest and most populous province – boasted a grand total of just nine PET scanners for the whole province, and some of these were sitting idle because hospitals couldn’t hire the technicians to run them without exceeding the limits placed on their spending. This is the real legacy of government-run health insurance in Canada, and it’s what awaits Americans too if they travel down the same path.

Are there good things about the Canadian system? Of course there are. For starters, everyone is insured with no limit on coverage, an important factor that should not be ignored. But there’s a trade-off: chronic shortages of personnel and equipment mean that timely treatment for anything other than a sudden and catastrophic illness or injury is generally unavailable in Canada. The result is that Canadians with serious chronic illnesses either languish on waiting lists for treatment, or they obtain treatment in… you guessed it – America, and pay for the treatment themselves.

None of this is to say that there aren’t significant problems with health care in the U.S. that ought to be addressed, particularly when it comes to insurance issues. The notion that a government-run insurance plan can be relied upon to resolve any of these issues is dangerously misguided though. At best, government insurance would sink American health care into a pool of mediocrity; at worse, it would deny or delay life-saving treatment to those who need it.

This isn’t fear-mongering – it’s a daily reality for many of us in Canada that Americans must be made aware of before it’s too late.

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