U.S. Healthcare: The Free Choice to Suck

We have a health care system in shambles: 40 million uninsured, too many drugs and procedures not covered by most health plans, medical staff overworked thanks to pressure from bean-counting bureaucrats, and rising cost all around. Are free market economics the solution or are they the problem?

The boosters of market mechanisms -- from the House ranks of the GOP, to their allies at think-tanks like Cato, Heritage and Olin -- claim that the discipline of the market create "efficiency," "innovation" and "choice."

On closer inspection, however, America's for-profit healthcare does not match up with market myths about efficiency and service. Instead it is marked by cruelty, lack of choice and massive corporate welfare.

Take healthcare corporations and insurance companies. Far from being "supple," "quality-oriented" and "intellect" organizations delivering better service at ever lower prices, these behemoths are more accurately described as massive for-profit bureaucracies offering shoddy care at inflated prices. When compared to "socialized" healthcare systems, like those in Canada or Germany, Americans pay twice as much per-capita in medical costs, roughly $4,000 per person.

The extra cash paid out by Americans goes for "overhead." Private U.S. insurance companies on average take 14 percent in administrative costs while public healthcare systems like Medicare or the Canadian health systems spend only around 2 percent of their income in this manner.

But it's not even accurate to describe the extra surcharge paid by Americans as "overhead" -- that implies some productive use. In reality, much of the America surcharge pays for bloated CEO salaries and boosting the value of medical stocks.

As for salaries, consider the following: in 1999, C.A. Heimbold of Bristol Myers-Squibb made $168 million; J.A. Stafford of Wyeth made $116.3 million; while W.C. Steere of Pfeizer made a mere $28.8 million.

Stock prices and dividends are even more important. One industry analyst recently described healthcare corporations as "islands of strength in otherwise turbulent market waters." For example, the common stock of Healthcare Corporation of America has grown 25 percent in the last five years, massive Aetna US Healthcare Incorporated has grown 69 percent since it started trading three years ago, and HealthNet has grown by almost 65 percent in the same period. Sierra Health Services, which "delivers innovative managed care benefit plans" through a "family of companies" has surged by over 70 percent since '99.

"Who cares?" say the market radicals. You get what you pay for and thanks to the rewards of free enterprise we get better care. Not so. Socialized or largely socialized healthcare systems deliver better care for less money. Take Japan, which has an infant mortality rate that is half that of the United States and a life expectancy average 5.2 percent better, while paying only 44 percent of what Americans pay. Similar conditions obtain in the Netherlands, New Zealand, Germany and even Spain.

"Unfair comparison!" cry the pro-market ideologues. Our private system spends mightily on research and development, creating miracle drugs which these other systems take advantage of without paying full cost for. Nonsense.

In America, most pharmaceutical and medical research is paid for with government money. During the 1990s the federal government spent over $10 billion annually on pharmaceutical R&D. According to a major internal federal study (that only saw the light of day when Ralph Nader's group Public Citizen forced its release under the Freedom of Information Act), taxpayer-funded scientists conducted 85 percent of the research, tests and trials that created the top five drugs of 1995. Ulcer-treating Zantac and the anti-herpes drug Zovirax were among the drugs created and tested almost entirely with grants from the National Institutes of Health.

Given such lavish federal aid it is no surprise that Fortune routinely ranks the pharmaceutical industry "more profitable than any other." To the extent that pharmaceutical firms do spend, they devote almost as much to advertising and lobbying as to research. On average drug companies shell out $2 billion annually on marketing.

The federal government also pays for the bulk of all scientific training that creates the expertise that creates the famous drugs and medical procedures. In short, the high-tech wonders of American medicine are the product of steady government spending, not shrewd private investment.

In all honestly, we should view the high costs of American healthcare as a massive private tax levied on workers and employers alike by the for-profit medical bureaucracies. Creating a less expensive, government-funded, single-payer healthcare system would liberate billions of dollars a year that could stimulate consumption and investment throughout the economy.

Christian Parenti is currently a fellow at the University of Minnesota Humanities Institute's Summer Think Tank.

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