The Moral Myths of Medicare

Sometimes when I talk to people about my views of medicare, I feel a bit as if I’m from the planet Pluto and my audience is from Jupiter, so I’m going to try to get a little feedback as I go along today, just to see how much work I’ve got cut out for me to persuade you.

First audience survey

I’m going to start by asking what people think about our current health care system, and I’m going to give you two options.  The first option will be: put up your hand if you think that our current health care system is preferable to option two.  For this purpose, I will define our current health care system as a system of socialized medicine, consisting of a single-payer system in which government owns all the hospitals, pays all the doctors and other hospital personnel, defines what illnesses will be covered and what services will be provided, does not allow people to purchase private health insurance, and actively discourages the provision of private health care services if they overlap with what is available in the government-owned system. 

The second option is a system similar to what they have in the United Kingdom, in which there is both a government-owned sector that everyone is entitled to use, but also a parallel private health care sector, which can be used by individuals who choose to pay privately, out of their own pockets.  

(Vote taken on November 5, 2005:  Option 1, estimated at 20 percent.  Option 2, estimated at 50 percent.  Abstentions, estimated at 30 percent.) 

Third Option

 Now it may have occurred to some of you that there is a third option which I didn’t give you.  It’s the preference I actually hold myself, but generally when I ask who agrees with me, I find that we can continue our meeting in a telephone booth.  That option, of course, is a health care system in which there is no public component at all, but only the private provision of services.   Is there anyone here who wants to stick his neck out and agree with me that option three would be the best of the bunch? 

 (Vote taken on November 5, 2005:  about 10 people out of 250 registered for conference)

 Limited Range Of Opinion on Health Care

 I find it interesting that when it comes to the provision of health care services in Canada, the range of opinion is so limited.  On other commodities and services, it’s much broader.  For instance, if you were to canvass people on the issue of whether shoes should be provided by the public sector or the private sector, you would probably get a fairly good representation of people all across the spectrum.  On the far left, there would be some Marxists who would want to nationalize all the shoe stores and all the shoe factories because Marxists believe in nationalizing everything.  In the middle, there would be some people who would have no objection to the government owning a shoe factory, but would also be willing to allow private competitors to make shoes, too.  Then on the right, there would be some people who say there is no need whatsoever for the government to be involved in the shoe industry because the private sector is doing a perfectly adequate job of keeping Canadians shod.  But in the health care industry, that third segment of public opinion is almost absent. 

 On the one hand you have NDP leader Jack Layton, who has been trying to convince the prime minister to bring in legislation to outlaw any further participation in health care by the private sector.

 But even a market-oriented organization like the Fraser Institute seems to take a middle-of-the-road position.  I received a copy of the latest Fraser Forum magazine about 2 weeks ago, and the cover read:  “Letting the Market Save Medicare” which implies that medicare is worth saving. 

 There are very few people in the country who actually advocate scrapping socialized medicine entirely.  I happen to be one of them.  I think taking a middle-of-the-road position is a major error.  I think it’s wrong strategically, but I also think it’s wrong philosophically.  There are major problems with government health care, and those problems have philosophical roots.  If you’re going to attack the problems, you have to go right to the roots.  Otherwise, just like a weed, the problems will grow back, perhaps even stronger than before. 

 There are two specific “moral myths” that I’m referring to when I talk about philosophical problems.   

 
1.                  Profits Are Evil

 The first is the idea that there is something inherently evil about a profit-making organization, and something morally acceptable or morally superior about non-profit or government organizations. 

I suspect that there are a number of people here today who hold that premise.  Can I have a show of hands, please?  If you have a gut reaction that says it’s evil, or wrong, for someone to be making a profit off of another person’s need for health care, just raise your hand.

 (Results on November 5, 2005:  estimated 20 percent of audience.) 

The people who hold this idea seem to have some kind of idea that the price of everything is like an old-fashioned bottle of milk.  Most of you here today have probably never seen milk being sold in glass bottles the way it used to be sold fifty years ago, before homogenization became the norm.  But the image is still common enough, I think, even among your generation.  You probably know that the cream floated to the top, so at the bottom there was skim milk, and at the top there was a layer of thick, floating cream.  

Advocates of state-run medicine or non-profit medicine seem to think that this is what a private-sector price is like—the skim milk represents the costs of labour and materials, and the cream at the top is the profit.  If you eliminate the layer of profit, everything will be cheaper, because the price will just have to cover the enterprise’s costs.  That’s why if government does it, everything will cost less.  There’s no need to cover the profit.  

This is a wholly unrealistic way of looking at both private ventures and government ventures.  The truth is, every price, whether it’s something provided by private enterprise or by government, resembles a bottle of homogenized milk, where the cream (or the profit, if you prefer) is so thoroughly mixed in with the rest of the milk that you can’t separate it out. 

Shmoos

 How many of you hear today have ever heard of a shmoo?   Another show of hands, please.  (Results:  NONE!)  Back in 1948, cartoonist Al Capp who wrote the L’il Abner comic strip, invented this fictitious creature called the shmoo.  Shmoon (the plural of shmoo) existed to fulfill every wish of humankind.  They would gladly sacrifice themselves to be eaten by humans, and they tasted like whatever you wanted at the time—chicken, steak, and so on.  

Well the news flash is—there are no shmoon in real life, not even in non-profit organizations or in the civil service. 

 In every enterprise, private or public, the ultimate unit of production is the individual human being.  Every single person working in the hospital is there for his or her own profit.  There’s no sector of the population that’s particularly saintly or shmoo-like and willing to work for free, or for mere subsistence.  We all try to earn enough from our work to cover our own expenses—for food, shelter, clothing, etc.—and to have more left over for the little extras that make life worth living—such as vacations, or luxury cars, or whatever happens to turn on that individual. 

 But every doctor and every nurse and every orderly in a hospital has the same motivation whether the hospital is private or public.  Those employees would all like to see their wages rise as high as possible.  And a portion of their wages is clearly “profit”, in that they are earning more than the subsistence level of food needed to drag themselves in to work every day.  So even in public or non-profit hospitals, the milk bottle has a whole lot of cream mixed in throughout the product.

 But some would still argue that in public hospitals, there’s no entrepreneur skimming that final layer off the top.  This notion implies that the entrepreneur does nothing to earn his profit—he just sits back and collects it.  In fact, the entrepreneur is the guy who orchestrates the whole enterprise.  Someone has to do the same thing in every enterprise, even the government ones or the non-profits.  So there’s always someone who fills the same role no matter what form the enterprise takes.  And those people get paid a salary—a salary that is more than sufficient for their subsistence—a salary that is the equivalent of the profit earned by an entrepreneur.

 But there’s even more to it than this.  

In a private business, the entrepreneur’s desire for profits actually serves an extremely useful function: it provides the incentive to look for the most efficient way to do things.  If the owner can keep expenses down by finding cheaper sources of inputs, or by inventing an entirely new and more economical method of producing the same finished product, he gets to pocket the difference. This is a benefit not only to him, but to society at large. The fewer resources that are consumed in making one product, the more resources are available for use elsewhere.  

Critics contend that the profit motive leads to corner-cutting and shoddy output. They say the entrepreneur tries to increase his profit by taking the quality out of the product.  They forget that where competition is permitted, entrepreneurs can’t get rich by cutting costs alone. They also have to fight for market share, which means they  have to make the best possible product at the lowest possible cost.  

And I think if you take an objective look at the world around you, you’ll see that this is borne out in almost every field you can think of.  Computers are getting better and better, not shoddier.  Cars are getting better in terms of fuel efficiency, reliability and safety.  They’re not getting shoddier.  The same goes for clothing, electronic equipment, etc.  All of these things are provided by for-profit firms operating in a competitive environment where they increase their profits by providing better and cheaper products, not worse ones.  On the other hand, if you look at things that are provided primarily by government, that is where you will see things continually getting worse and worse.  I’m thinking here not only of health care but of education, which is almost entirely publicly provided.  

I’ve brought some empirical evidence in support of my argument.  The Fraser Institute did a study comparing compared the wages being paid to non-profit sector hospital workers  and for-profit sector hotel workers in British Columbia. The jobs compared were mundane sorts of jobs that required no specific medical knowledge. The employees in both groups were unionized, so no-one can say the comparison was biased that way. 

Source:  The Fraser Institute, Fraser Forum, January 2002, page 32

 Here’s what happens when you eliminate the profit that would otherwise go to an entrepreneur: it gets divvied up among employees at other levels in the enterprise instead.  There’s still plenty of profit being sucked out of the health care industry, but it’s sucked out at lower levels, by the cooks and painters rather than by the entrepreneur. 

So from the moral point of view, if you still think that making a profit out of other person’s ill health is evil, then logically you will have to reject not only privately provided health care but also publicly provided health care, because there is just as much profit, or possibly more, being made in non-profit or government-owned institutions as there is in the private sector.

Existence of Profits Does Not Predict Price

There are a couple of other points I want to make about the existence of profits in privately-provided health care.  The fact that a profit is being made says absolutely NOTHING about what the cost of the product is going to be to the consumer.  You can see this quite easily by looking at two extremes in the retail clothing industry.  I can go to Wal-Mart and buy a T-shirt on sale for about $5.  I can also go to Holt Renfrew and buy a designer T-shirt with someone’s name embroidered across it that will cost me $100.  Now, here’s the point:  both Wal-Mart and Holt Renfrew are in business to make a profit, and both of them DO make a profit, but there’s a huge difference in the cost of their T-shirts.  And there may also be a difference in the quality of the T-shirts.  But it’s extremely unlikely that the $95 difference in price is due entirely to the quality of the T-shirt.  Holt Renfrew may pay not very much more to its T-shirt manufacturer for its top-of-the-line T-shirt than what Wal-Mart pays to its supplier.  But Holt Renfrew’s stores have a different cost structure.  They have a lot more open space than Wal-Mart stores.  Their merchandise is arranged in more attractive displays, instead of in long aisles.  They have a prestigious address on Bloor Street, while Wal-Mart is out in the suburbs, so their rental costs are higher.  Their sales clerks look a bit classier than Wal-Mart’s clerks and probably get paid more.  All these things contribute to their higher prices.  It’s not just that their shareholders are greedier than Wal-Mart’s shareholders and demand bigger profits.  

The point is that in a private market for health care, there could be and (I predict) would be both the Wal-Mart version and the Holt Renfrew version of hospitals.  Both of them could be profit-making enterprises, but they would serve different market niches.  You could get a heart bypass operation at the low-end hospital that wouldn’t be much different from the bypass operation you’d get at the high-end hospital, but the rooms might not be decorated as nicely, or they wouldn’t be located in such expensive neighbourhoods, or the hospital personnel might not be as attractive.  

Pencil

 Here’s one final point I want to make about profit-making enterprises.  Can everyone see what I’ve got here in my hand?  It’s an ordinary wooden lead pencil, the old-fashioned kind, painted yellow with an eraser at the end.  When I was a child, a pencil like this sold for 10 cents.  Guess what it sells for today?  If you buy a package of 10 at someplace like Staples, each pencil is slightly less than 10 cents.  Now think about what a complex item this pencil really is.  Somebody had to cut down trees to get the wood.  They made a profit on that.  Somebody had to manufacture the graphite sticks (the part we think of as the “lead”) and they made a profit on that.  Somebody had to make this metal part at the end that holds the eraser on.  They made a profit on that.  Somebody had to make the erasers.  They made a profit on that.  Somebody had to assemble all those parts to make a pencil.  They made a profit on that.  And then Staples sold the pencil to me, and they made a profit on that. 

 All the way down the line, profits have been made on this pencil, but the pencil still sells for only 10 cents.  And it has sold for 10 cents despite 4 decades of inflation.  I ask you, if the government made pencils, instead of letting private enterprise do it, is there anyone here who would like to hazard a guess as to what a pencil would cost?  If there’s anyone here who would say it would be less than 10 cents, then please see me afterwards—I’ve some land in Florida I’d like to sell you.

2.                  Everyone’s Equally Entitled to Health Care

 The second moral myth I want to address is the notion that everyone is equally entitled to health care.  As I said earlier, this takes many different forms.  One commonly heard expression is that nobody should be denied health care regardless of whether or not they can afford to pay for it.  Another version is that nobody should be allowed to jump ahead of anyone else in the queue simply because he or she has more money.

 Survey

 Let me stop at this point and take another survey.  How many of you here today think that there is something immoral about some people being able to afford more health care than others? 

(Results on November 5, 2005): estimated 20 percent)
 

Bad Luck

 I think what underlies this moral myth is the notion that ill health is something that strikes at random, that it’s sheer bad luck rather than bad management, that there’s nothing a person can do about his or her health.  So there’s this feeling that because it could happen to any of us, just like we could be struck by lightning, we should not be allowed to draw distinctions between who gets treated and who doesn’t. 

There are three different ways that I want to tackle this moral myth. 

First, I want to deal with the notion that needing health care is just bad luck, and it’s something that could happen to any of us.  There are a few instances in which this is true.  Almost any of us could be struck by lightning or hit by a car, through no fault of our own.  And there are some illnesses such as Multiple Sclerosis or ALS that appear to come out of the blue and strike some people who have done nothing risky or inappropriate. 

But this, I would argue, represents only a small percentage of the health care costs we are actually incurring these days.  You can think of myriad examples of ways in which people voluntarily cause themselves to need more health care than other people.  There are people who engage in risky sports, for instance.  Why should someone who goes mountain climbing, or race car driving be entitled to the same “free” health care as someone who doesn’t assume these risks?  Where’s the moral imperative in that? 

 Then there are the people who increase their medical needs because of their lifestyles.  The more knowledge we get about how the body works, the more possible it is to control or at least affect your health through your conduct.  Consider two people at the extreme ends of the spectrum.  One person smokes three packs a day, drinks to excess, overeats, never exercises, parties all night and doesn’t get enough sleep, doesn’t wash his hands after going to the bathroom or before meals and so on.  The other person doesn’t smoke, eats moderately, doesn’t drink, takes vitamins, gets enough sleep, washes his hands before eating, and exercises regularly.  Statistically speaking, it’s pretty easy to predict that the second person is likely to need less health care than the first.  I cannot imagine why anyone would think it’s immoral for them to get different amounts of free health care.
 

Genuine Insurance versus Government Insurance

 But if you really are concerned about the “innocent” sick person, the one who needs huge gobs of emergency medical care through no fault of his own, then I would say there is a perfect answer out there that does not involve socialized medicine.  It’s called “insurance.”  This is what private health insurance used to cover before government made it illegal back in the 1960s.  It covered rare, catastrophic emergencies. 

 There are 3 characteristics of events that are normally considered “insurable”: 

• First, they are events that are unlikely to happen—like car accidents, or being hit by lightning.

• Second, they come without warning.
• Third, they are things that are undesireable—the insured person does not want them to happen. 

This is not true of most of what is covered by our health care system.  Our so-called government health insurance covers routine check-ups and tests.  It covers trips to the doctor for a cold or the flu, which if left untreated would usually disappear in any event after a few days.  

Can you imagine what car insurance would be like if it operated like health insurance?  Suppose it covered not just accidents, but routine maintenance, and the cost of filling up with gas, i.e. things that were both likely to happen, and fully predictable, and desired by the insured person?  The cost of car insurance would be astronomical.  The number of insurance claims would be astronomical.  And that’s exactly what we see in our health care system.
 

Having More Money Shouldn’t Be an Advantage 

The second way I want to tackle this is to look at the question of how having more money should affect the availability of health care.   On this subject, the medicare supporter’s view seems to be that having money is also merely a matter of luck.  You’re born with money, or you just happen to get lucky and get a good job, or something.  While there’s no denying that luck is a factor in the different ranges of wealth that people acquire, it’s certainly not the only factor.  Again, the choices that people make have a great deal to do with whether or not they have money.  And it’s not just the choices they make as the money comes in, it’s also the choices they make about how their money goes out. 

Generally speaking, the marketplace rewards with higher incomes those who do more for other people.  In a free market, you make money because you satisfy someone else’s needs, as expressed by their voluntary willingness to pay.  

These days, unfortunately, there are a  lot of exceptions to this rule, since the government plays such a huge role in the economy and it rewards players in a completely different manner.  The government coercively takes money from some and gives it to others, which means that the recipients of government incomes, whether they be civil servants or teachers or hospital employees, don’t have to satisfy the needs of the community.  And many of the people in upper income brackets these days are civil servants or people whose livelihood depends upon the money coercively taken by the state.  This is becoming increasingly so.  Nevertheless, to the extent that the economy is still a market economy, the general rule still does apply, that by and large, the people who have money to spend are those who have been the greatest benefactors of their fellow men.  

Now, personally, I don’t see anything morally wrong with the notion that these people should get better health care than others.  In fact, I think it’s morally wrong if they don’t.  What on earth are they working for, if not to be able to spend their earnings on something better than what everyone else can get for free? 

But that’s not the end of the story either, because there is also the question of how you manage your money in addition to the question of how much you earn.  People are radically different from one another in this respect.  I see this all the time in my law practice.  There are some people who, no matter how  much money they make, spend every last nickel and never have any savings.  There are others who, no matter how little they make, are very conservative with their spending and always have money saved.  They save precisely because they don’t trust others, and especially government, to provide for them, and they want to be able to help themselves in the event of an emergency.  Why should people like this not be able to use their own resources to buy something better for themselves if that is how they choose to conduct their lives? 

What Is Moral for Lady Luck Is Not Necessarily Moral for Humans

 Finally, the third argument is this.  Even if you reject my two previous arguments, even if you believe that ill health is a matter of luck and that having money is a matter of luck, there’s still something wrong about taking money from some people to pay for other people’s ill health.  Here’s the distinction. 

Luck is not a person.  Luck is not an entity of any sort.  Luck just happens.  There’s nothing fair or unfair about it.  There’s nothing just or unjust about it.  It just happens.  Luck is not a moral actor.  

Human beings are entirely different from luck.  Human beings are moral actors.  We have to start with the situation that’s handed to us, then decide from that point on what is the moral thing to do—how to treat people, given their conduct.

It is immoral, I contend, to forcibly take money away from people who have not harmed anyone else.  If person A assaults person B and causes him to need medical care, then I would say it is moral and just for us to force person A to pay for person B’s care—because he caused the problem.  But if A did nothing to B, and B’s misfortune was caused by C or by B himself or by sheer bad luck, there is no justification in punishing A for something of which he is completely innocent.  

It is not the moral thing to do, to go around saying we are going to correct all the “mistakes” that “luck” made.  Because that would involve taking things away from those that are “lucky” and giving them to those that are “unlucky”.  But how can you justify inflicting harm on someone who is completely innocent of any wrongdoing—someone who merely happens to be lucky?  It is wrong for us to punish the innocent.  The lucky have never harmed anyone else in becoming lucky.  We can’t make it our goal to go around trying to correct all the errors that luck made.

Those who don’t like to live with the luck of the draw can pool their risk of requiring expensive medical treatment by purchasing voluntary medical insurance.  It’s extraordinary that in this country where we make the rectification of bad luck into official policy, we do so only by coercive measures (that is, by the forced participation in socialized medicine through taxation) and we actually forbid the pooling of risk by voluntary measures (the selling of private health insurance).  

That might be about to change following the Supreme Court of Canada’s decision a few months ago in the case of Dr. Jacques Chaoulli, but the fallout from that case is still uncertain at this time. 

Okay, I’ve used up my half hour.  It’s time for questions.