Health Care and Capitalism: Imperfect Together? 5

My friend Raymond Krauss has been researching health care and suggests that health care is inherently unsuited to capitalism.

Here is his article:

First and foremost, let me emphasize that, not unlike most Americans, I heartedly agree with Winston Churchill when he said in 1954 that “the inherent ice of Capitalism is the unequal sharing of blessings.” A socialist I am not! Capitalism has historically both raised incomes and reduced the cost of goods, allowing for a better standard of living for the masses.

Nevertheless, when it comes to heath care, this has lately not been the case.

Capitalism and competition have not served to reduce the cost of health care, but, in fact, have caused health care costs to rise at an astonishing rate, approximately five times the rate of regular inflation for the past seven years. Even more worrisome is that this trend may worsen in both the future.

To understand why this is happening in our otherwise great economic system of capitalism, I need to draw an analogy between a cup of coffee and health care.

In any American city or town, if you want a hot cup of java on a cold winter morning, capitalism gives you options. Stop at Starbucks for a $5.00 cup of “gourmet” coffee; go a little farther and enjoy a $2.00 cup at Dunkin Donuts (this about health care–we’ll skip the doughnut); of, if the budget is a little tight, stop at MacDonald’s for a pretty good $.69 cup of joe.

All three venues represent major corporations; together they give the consumer choices.

When it comes to health care, the $.69 and the $2.00 cups are not options; Starbucks is the first and last stop. There is no compelling market place pressure to reduce prices in the health care industry. Every health care service strives to be Starbucks.

Furthermore, the nature of health care does not provide economies of scale. The more automobiles that Toyota makes, the lower the manufacturing cost of each unit.

In health care, the more patients a hospital or nursing home, for example, has, the higher the overall cost, with no corresponding decrease in per patient costs: more doctors, more nurses, more technicians, more rooms, more construction, more diagnostic and life-support equipment.

The aging of the baby boomers will only exacerbate this situation. Costs will continue to rise; an increasing percentage of income will be spent on health care.

As consumers divert funds from purchasing goods and services–automobiles, Iphones, houses–to paying for doctors, nurses, tests, hospital rooms, consumers will have less to spend on goods and services to fuel the rest of the economy.

After paying for health care, all we will be able to afford to wake up with is that $.69 cup of coffee, while the other, more expensive coffee-seller face diminishing returns and, ultimately, bankruptcy.

Avoiding this scenario lies in following the steps of other industrialized countries: a comprehensive national health care plan with costs shared by everyone, business and consumers.

Other countries with comparable or, in many cases, better health care pay nowhere near the amount we do, protecting the disposable income of their consumers and helping keep the rest of their economies strong.

The American health care crisis is also becoming more acute as other prices increase. After 70 years, most economists agree that the root cause of the Great Depression was consumers’ insufficient purchasing power. As shown above, high health care costs are eroding consumers’ purchasing power already. Consumer spending accounts for 70% of our economy; it needs to remain there or the illness of Depression will infect out economy.

We are blessed in one way: So many other countries have national health care that we can study them and pick the best options to suit our needs.

A national plan–almost any national plan–will slow the hyper-inflation of health care costs by averaging the costs across the entire populace.

National health care is a tough sell in the United States. We have been so successful in using the free market for almost everything that is is difficult to turn to something that looks more like socialism than capitalism.

But it is time to make the change so as to preserve the rest of our free market economy.

In preparing the article, Raymond read about 10 books. Below are listed his primary sources:

Money Driven Medicine by Maggie Mahar
Heath Care Reform Now by Ge0rge Halvorson
Sick: The Untold Story of American’s Health Care Crisis–and the People Who Pay the Price by Jonathan Cohn
Health Care Melt Down: Confronting the Myths and Fixing Our Failing System by Dr. Robert Lebow and C. Rocky White

Also posted at Kos.