Tuesday, August 3, 2010

Health Care Socialization: Coming Soon to a Hospital Near You

By now you may have seen this flow chart created by the Joint Economic Committee illustrating the complex red tape erected by Health Care Reform. It should be noted that even before Obamacare was made law, there was a mountain of bureaucratic red tape in the health care industry, but things have become even worse.

How will this play out on the hospital floor? It's one thing to see a knotty looking multi-colored chart. But how do we know that such bureaucracy will make our health care situation even worse? Isn't it possible, one might ask, that in spite of all of the organizational complexity, we might all get adequate service anyway? Are there any insights we can glean from economic theory and history to help us answer these questions?

Well for one thing, economic theory implies that our most recent health care reform is set to generate shortages for health care services. Earlier this summer, I asked a doctor friend how the new law would affect him and the health care field. He said that much was unknown, but that in general the reform will increase the demand for services by increasing the number of people on health insurance rolls. At the same time it will decrease the supply of health care services as many presently in the industry will leave because of increased government meddling, higher costs, and additional paperwork. Increased demand and decreased supply can only cause health care costs to rise even further, which is exactly what the new reform was supposed to rectify. The new health care law does not give everyone access to actual health care. It gives everyone access to stand in line.

If we want to see how centralized provision of health care services actually works, we need look no further than to an actual single-payer provider operated by the U.S. Government--the system of Veterans Administration Hospitals. Their record of care has not been, shall we say, all that healthy. It is a story that includes waste, contamination, and even death.

You know you're in trouble when members of Congress tell you that your accounting system should receive a grade of 'F." Nothing like the pot calling the kettle black. Yet, in 2008 the Government Accountability Office found $6.9 billion in "miscellaneous obligations," many without any documentation explaining the who got paid for what. A new study placed the amount for last year at $12 billion.

Unaccounted for funds is relatively minor, however, compared to potential contamination and exposure to serious disease. As many as 1,812 patients of a VA hospital in St. Louis were at risk of contracting HIV due to improperly washed instruments.  More than 2,400 patients in a VA hospital in Miami might have been exposed to HIV, hepatitis, and other diseases during colonoscopies, because a tube that should have been disinfected after each procedure was instead disinfected only at the end of each day. This continued for almost five years. 79 of the patients were never informed of their potential exposure. So far three Miami patients have tested positive for HIV, with seven testing positive for hepatitis C, and one with hepatitis B.  Similar malpractices took place last year at VA hospitals in Murfreesboro, Tennessee and Augusta, Georgia.  A plethora of other incidents have been documented. Last November a VA hospital in Illinois had to suspend major surgeries due to a spike in patient deaths. At the same hospital back in 2007 a physician resigned three days after a patient bled to death following a gall bladder surgery. Over the past six years 98 patients were given incorrect radiation amounts at the VA Medical Center in Philadelphia.

While it is certainly true that not everyone treated at a VA hospital has a horror story to tell, we have every reason to fear that these sorts of stories will become more commonplace after the full implementation of Obamacare. The more bureaucratic health care becomes, the less efficient it will be, because managers of service providers will find it more difficult to wisely allocate their resources toward most cost-effectively treating patients, and in some instances will be forced by the new law to incur much higher costs due to mandatory treatment.

At the same time, because of the incentive problem inherent in bureaucratic management, we can expect a lowering of quality.Some of the most qualified physicians and nurses will likely leave the system. For those who do remain, the personal benefit of diligence and cost of negligence will both decline, making for an environment ripe for danger.

What can be done to thwart such an outcome? Well, as they say on TV, recognizing you have a problem is your first step toward recovery. We need to recognize that the recently passed health care "reform" was no reform at all. It makes things worse. Our best first step would be to repeal Obamacare, but not merely so we can go back to the old status quo. We should press on from there to establish a truly free market in health care.

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