Publicly funded medicine

Publicly funded medicine is a healthcare system that is financed entirely or in majority part by government funds (taxes or quasi-taxes). Publicly funded medicine is often referred to as "socialized medicine" or "nationalized medicine" by its opponents, whereas supporters of this approach tend to use the terms "universal healthcare", "single payer healthcare", or National Health Services. It is seen as a key part of a welfare state (see Welfare State for an interpretation in UK terms).

Role of the free market

Whether the free market can adequately deliver health care more cost effectively than publicly funded healthcare is one key question. Of all developed nations, the healthcare system of the United States is the one with the highest amount of privatization, and is perhaps the most commonly cited example by those favoring and opposing universal healthcare. It is below the average for developed countries in the majority of health measures such as infant mortality, maternal death, life expectancy, or cancer survival rates, while also being the most costly system in the world both in relative and absolute terms. In 2001 the United States spent $4,887 per person on health care, more than double the rate of any other G7 country except Japan, which spends $2,627 per capita annually. The United States also spends a greater fraction of its national budget on health care than such nations as Canada, Germany, France, or Japan. However, these statistics may not be the proper way to evaluate the United States system, because they include people not covered by any insurance. Those covered by the system get what is arguably the best health care in the world -- access to advanced medical treatments and technologies is in general significantly greater than in most other developed nations, and many wealthy foreign citizens visit the U.S. to obtain treatments unavailable (or available only with long waiting lists) in their home countries. Risk factors specific to the U.S. population, such as a relatively high prevalance of obesity, may partially explain increased health care spending; however, many other industrialized nations share these problems to some extent. Most experts believe that the U.S. system is best described as exhibiting greater inequality than others, with covered people receiving a very high quality of care and the uninsured and underinsured receiving a lower standard of care.

Related Topics:
Free market - Infant mortality - Maternal death - Life expectancy - Cancer - 2001 - $ - Inequality

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Most patented prescription drugs are significantly more costly in the United States than in most other countries, due to a lack of government price controls on the industry, enforcement of intellectual property rights limiting the availability of generic drugs until after patent expiration, and an absence of the monopoly purchasing power seen in national single-payer systems. Many U.S. citizens obtain their medications directly or indirectly from foreign sources to take advantage of the lower prices. U.S. Medicare coverage of prescription drugs is scheduled to begin in 2006.

Related Topics:
Patent - Prescription drug - Price control - Intellectual property rights - Generic drug - 2006

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While the United States is the most private of any system among industrialized nations, it has substantial public components. Of every dollar spent on health care in the United States, 44 cents comes from some level of government. The elderly are covered by Medicare, the poor (those with assets of less than $2,000) are covered by Medicaid, merchant seamen are covered by the Public Health System, and retired railway workers and military veterans are also covered by the government. In addition, government also affects private sector medicine by creating licensing and regulatory barriers to entry into health professions. Neoliberal economists argue that the American system is an only somewhat less public one, and that no nation currently operates a truly free market in the delivery of health care.

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Some neoliberal economists also argue that the free market is better able to allocate discretionary spending where consumers value it the most. There is variation amongst individuals about how much they value peace of mind and a slightly lower risk of death. For example, while a public-funded system, based on cost efficiency, might decide to pay for a pap smear only once every five years if the patient was not positive for the human papilloma virus. In a private system, a consumer can choose to be screened more often, and enjoy the luxury of greater peace of mind and slightly reduced risk. When evaluating the pool of current medical spending available to fund cost-effective care for the uninsured, this discretionary spending might be moved to non-medical luxury goods. Some health economists believe that since traditional private plans are not very good at limiting spending to cost-effective procedures and schedules, those consumers exploiting this will view the transition to a public system as a reduction in their compensation or benefits, and will question whether a society that will allow them to buy a better car or a European vacation, but not better health care, is truly free. Other health economists believe that with the growth of Health Maintenance Organizations and other cost-cutting entities, private plans are becoming so good at limiting spending that they sometimes deny needed medical benefits. Medical providers who are reimbursed by such entities are finding that they must spend increasing amounts of time filling out paperwork and fighting for reimbursement, and less time providing health services.

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It should also be noted that some medical providers, upset over low reimbursement rates, are submitting bills for services which were not rendered, in order to receive what they think is a fair value of the services that they did provide. Worse, because of lax enforcement, outright medical fraud is increasing, where invoices are submitted for ghost patients. A number of high-profile instances of Medicaid fraud have been uncovered among health care providers and medical device suppliers particularly in California and New York.

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Most experts believe, however, that significant market failure occurs in health markets, thereby making a free market operate inefficiently. The consumers of health care often lack basic information compared to the medical professionals they buy it from. Also, an individual is unlikely to make fully rational choices about his/her own health care in a case of emergency, and demand is likely to be inelastic. The extreme importance of health matters to the consumer adds to the problem of the information gap. This gives the medical profession the ability to set rates that are well above ideal market value. The need to ensure competence and qualifications among medical professionals also means that they are inevitably closely controlled by licensing requirements imposed by governments and professional associations, which limit the pool of specialized labor and can result in some degree of monopoly or oligopoly control over prices. Monopolies are made even more likely by the sheer variety of specialists and the importance of geographic proximity. Patients in most markets have no more than one or two heart specialists or brain surgeons to choose from, making competition for patients between such experts very limited.

Related Topics:
Market failure - Inelastic - Monopoly - Oligopoly

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In theory, when a government sets billing rates it can negotiate with professional societies with equal heft and knowledge, reaching a total cost that is closer to the ideal than in an unregulated market. Doctors' salaries do tend to be much lower in public systems. For instance, doctors' salaries in the United States are twice those in Canada.

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Markets also fail to provide efficient delivery for health care because most people misjudge the need for prevention, which is an essential component of a cost-effective system. Screening for diseases such as cancer saves both lives and money, but there is a tendency within the general population to not correctly assess their risk of disease and thus to not have regular check ups. They are only willing to pay a doctor when they are sick, even though this care may be far more expensive than regular preventative care would have been. An exception is when extensive publicity, such as that for mammograms, is undertaken. Making regular appointments cheaper, or even free, has been shown to reduce both rates of illness and costs of health care. Conversely, placing the cost of a visit to a GP too low will lead some to make excessive visits, wasting both a patient's and a doctor's time. Thus, while some experts believe free doctor visits produce ideal results, most others believe that requiring people to pay some fraction of the cost of an appointment would be better.

Related Topics:
Check up - Mammogram - GP

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An argument against public health care is that cost-benefit government decisions are often influenced by factors unrelated to providing the highest quality healthcare. Advocates of this view point to decisions by various boards based on value judgments rather than efficiency. For instance, breast cancer, which has a powerful lobby and a high visibility, gets significantly more money than lung cancer, which is often seen as self-inflicted due to smoking. In a free market system, assuming that one group of patients is no wealthier than the other, both would be treated equally. However, in such a system, inequalities may arise with the treatment of illnesses that are more likely to affect the poor than the wealthy (or vice versa).

Related Topics:
Cost-benefit - Breast cancer - Lung cancer - Smoking

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