A Tale of Health Care

Somewhere in the US a large city emergency room is crowded with patients who are forced to wait for hours to receive medical care.  These patients have come to the emergency room because they do not have health insurance and cannot afford to pay for the medical services they need.  This tragic situation is caused by our corrupt and inefficient private health care system.  The greedy, unscrupulous corporate fat cats who run the big medical providers and health insurance companies care only about maximizing their own profits and padding their bank accounts while poor people suffer and die.  The only sensible solution is for the federal government to control the delivery of all health care.  Only the federal government is able to fairly and efficiently deliver high quality health care to everyone at a reasonable cost.

This is a simplified version of the liberal fairy tale currently being told by President Obama, Senate majority leader Harry Reid, House Speaker Nancy Pelosi, and their allies.  This story is exemplified by the President’s famous “amputation” illustration given last summer while promoting his health care plan.  The president claimed that doctors have little incentive to encourage a patient with diabetes to control his diet and weight and get proper exercise because they don’t make much money from this kind of treatment.  He said that the doctor would rather allow the patient’s diabetes to progress until a leg amputation was required when the doctor would make anywhere from $30,000-$50,000 for the surgery.  This, of course, produced a firestorm of criticism from many quarters especially from doctors whom the president so blithely slandered.  The fact is that the president and his supporters want us to accept a fantasy regarding the current state of health care to whip us into a frenzy of zeal to accept the idea of government health care.

Regarding the president’s claims, his numbers are a gross exaggeration.  If a surgeon did perform an amputation on a Medicare patient he would be reimbursed less than $1,000.  However, the biggest fantasy in the narrative the president is telling is that we currently have a private health care system.  We actually have a hybrid public-private system.  At the present time more than half of all health care in the US is paid for by the federal government.  The federal government pays for health care through Medicare, Medicaid, Veterans Administration, military services and federal employees.

Government intervention in the health care system is actually one of the main causes of runaway health care inflation.  Even though most of the health care services delivered to people enrolled in these programs is provided by private sources they are forced to accept the payments dictated by the federal government.  If we go to the doctor, we are expected to pay whatever the doctor says the service costs.  The federal government is so big and powerful that it can pay what it decides is fair regardless of the actual cost of the service.  It is difficult to determine the exact impact of federal intervention in the health care system but it is reasonable to estimate that Medicaid pays only about 60% and Medicare only 80% of the actual cost of medical services.  Of course, medical providers can refuse to see Medicare and Medicaid patients and some of them do so or limit how many they will take but most medical providers are responsible and conscientious enough that they do so only if necessary contrary to the picture of callous greed painted by the president.

If Medicare and Medicaid are stiffing medical providers to the tune of 20-40% how can they stay in business?  The answer is that private health care plans have to make up the difference.  Part of the reason why your health insurance premiums are so high is that all non-government health care consumers must pay extra to subsidize government provided health care.  This is a classic case of the federal government causing a problem (health care inflation) and then dashing in and offering to rescue us from the problem they themselves caused.