Tuesday, August 28, 2007

Why I'm Not Buying Free Health Care, Part 3

Perhaps I already have--just not on purpose.

I found an interesting set of statistics in the book Non-Profit Organizations: Cases and Materials (3d ed. 2006) by James J. Fishman and Stephen Schwartz (I'm using this book for a school project; an online version doesn't seem to be available, sorry). Health care is the single largest sub-sector in the service providing non-profit sector (service providing excludes religious organizations), absorbing 60 percent of non-profit revenues and 25 percent of charitable contributions. Fishman & Schwartz at 22. Further, hospital care represents the single largest component of health care in the United States. Id. at 24.

Now here comes the interesting part: the break down of Hospital Care. Non-profit hospitals comprise about half of all hospitals. Id. Non-profit does not mean not profitable, but rather tax exempt and prohibited from distributing profits. Id. at 3. So for those non-profit hospitals that do earn a profit (not all do!) those revenues must be reinvested into the provision of services rather than distributed to owners. There is no investment incentive in a non-profit; revenues must come from fees for services, government grants or charitable contributions. Id. at 18.

The second largest group of Hospitals in the U.S. are government hospitals at 31 percent. Id. at 25. Government hospitals mean run by a governmental authority, mostly at the state and local level. Id.

Then for-profit hospitals are only 19 percent of all hospitals. Id. And they seem to be smaller as the account for only 14 percent of hospital beds. Id.

What does this all mean for this debate? On the one hand you might look at the numbers and say, "See, Pink, the market doesn't need to regulate health care; as you said quality is great. Such great quality is delivered without a significant market incentive for investment! Let's socialize that pesky 19 percent!"

On the other hand, you can just as easily say (as I will, predictably), "Perhaps many of the ills in our health care system, such as lack of access, are created by the lack of market incentives for the majority of hospitals."

Discuss!

6 comments:

Tim in Italy said...

I think you're concentrating on only a small segment of a much larger problem. Okay, let's split this market wide open with profit incentives and make health care, essentially, a business... like Pep Boys. My problem with this is 2 fold: 1) a for-profit model is hardly conducive to proper health care. Successful business relays on repeat customers and entering new markets which is exactly the opposite of what we should be looking for in an effective health care system. My second issue, 2), is how do people pay for these services? Your voucher idea? Possibly. I think it's a good idea, but there are still many details to be worked out.

If you look at cancer research in this country, where is the incentive to find a cure? I would say the same for HIV research. It seems that the emphisis is on treatment rather than finding a cure.

In the meantime, 50 million American are without health care, our life expectancy is now in 42nd place world wide behind economic power houses... like Cuba, and we have the highest infant mortality rate of indstrialized nations. Ain't that just great?

By the time these policy wonks make up their minds, we'll all be dead.

Lyndon Evans said...

This has nothing to do with your posting except the Norman Rockwell Print. When I was a little kid and up until I graduated High School when our Family Doctor retired, he had prints of the Doctor Series Rockwell painted, in his examing room. The one you have on the postng was one of them. The one I remember most was a little boy looking at something on the wall with his britches half way down his behind, and the doctor had a needle in his hand. Funny how somethings you haven't seen in years will bring back memories.

Anonymous said...

"Where is the incentive to find a cure?"

I may sound like a heartless bastard (aka conservative) and I am, but I think you're focusing too much on the humanitarian costs of disease. In this debate, you have to look at economic costs: of long-term treatment, lost productivity, disability, etc.

The incentive to cure comes from consumers, those paying the higher costs listed above. Cure may cost more than treatment, but that doesn't necessarily mean that Big PharmaMedi Industry will profit less.

Also, when comparing treatment and cure, separate economic incentive from scientific problems. Chemo, radiation, and surgery all kill or remove cancer cells from the body. It isn't always entirely effective, but these are (or at least can be under the right circumstances) curative therapies. For HIV, most drugs inhibit a specific step in entry, reproduction, or assembly. When effective, these could be curative. However, the virus has always found a way around these, and it's hard to target the virus when it's not active. Economic incentive has very little effect on solving these problems.

I really do think that an actual free market can alleviate many problems of the health care system.

Michael in Norfolk said...

I agree with Tim - the medical establishment does not have a financial incentive to find a cure for either cnaer or HIV/AIDS. Vacines and other preventative measures would generate nowhere near the revenues now produced from treatment.

Also, having previously done legal work for a non-profit hospital and it's parent entity, more time and effort was spnt on "monopoly games" with a rival local health care system than on providing top medical care. Therefore, while "non-profit," these organizations have anything but a charitable focus. Moreover, senior administrators made VERY good money.

As for market forces correcting the issue of the uninsured, if anything, the market is pushing employers to reduce medical coverage offered to employees. From my own firm, I know that health care costs a a big ticket item and there is always a temptation to cut back on coverage to keep up the profit margin. One firm I was with actually cut health care coverage and figured the year end distribution to principals resulting from the cost savings more than made up for out of pocket increases for principals.

The system is not working and needs a complete overhaul.

Tim in Italy said...

Hey Pink, on an entirely different matter, I was just going over your news service directory and I noticed that you don't list NPR. WOW! I'm so embarrased for you! I'm sure it's just an oversight. You've been so busy getting settled at school and all.

But hey, to help you out, here's their URL:
http:\\www.NPR.com. Now all you have to do is paste that in there and problem solved... will I be seeing you at Burning Man this week-end?

Icon said...

Pink @ Burning Man.....that would be a hoot! A light tan linen suit wouldn't show the sand, tho.