Fixing America’s Health Care System

Published March 1, 2005

Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer by Sally C. Pipes, with a foreword by Milton Friedman $14.95, paperback, 219 pages; Pacific Research Institute, September 2004; ISBN 0936488921

The purpose of Sally Pipes’ new book, the author says, is “to provide the reader with an easy-to-understand guide” to the problems of affordability, accessibility, and quality of health care in the United States and Canada. Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer seeks out the best approach to solving the complex problem of health care reform while simultaneously preserving the positive attributes of each country’s health care system.

Pipes, a Canadian-born economist who lives in the United States, has comprehensive academic and personal knowledge of both the Canadian and American health care systems. Currently the president and chief executive officer of the Pacific Research Institute, a San Francisco-based think tank, Pipes was assistant director of the Fraser Institute in Vancouver until 1991 and served as a member of California Governor Arnold Schwarzenegger’s transition team in 2003.

Suffering from Central Control

In Miracle Cure, Pipes convincingly demonstrates that although the American and Canadian systems appear to differ dramatically, “they both suffer from symptoms of the same disease–the disease of central control.”

In the foreword, economist Milton Friedman, a senior research fellow at the Hoover Institution, states, “What should be mutually satisfactory cooperation between patient and physician turns all too often into a bureaucratic nightmare.”

The reader, whether interested layman or professional, is not inundated with charts and tables, yet the views stated by the author are very well supported and referenced by statistical studies and, in some cases, by real-life anecdotes.

In Part One, “The U.S. Solution: Expand Consumer Choice,” Pipes analyzes the American health care system–its strengths, its weaknesses, its evolution into an employer-based system, and its current domination by all levels of government through direct financing and government subsidies.

Pipes devotes chapters to big government, third-party payment, managed care, Medicare and Medicaid, prescription drug coverage, physicians, insurance companies, pharmaceutical companies, and malpractice litigation.

Misleading the Public

Each chapter presents information the general public rarely receives from media sources. “One of the best-kept secrets,” writes Pipes, “at least from the media and policymakers who continually talk of a drug cost ‘crisis’ for low-income seniors, is that there are already programs, both sponsored by governments and private companies, that significantly subsidize this group’s purchases of prescription drugs.”

According to Pipes, “Nearly 20% of seniors, the poorest one in five, were receiving highly subsidized prescription drugs [through state-sponsored or private-sponsored plans for seniors]. An administrative fee of $12 purchases a month’s supply of any Eli Lilly and Co. product for lower income seniors or disabled. … The same is true for Novartis Products [and] Pfizer.”

The chapters on consumer-driven health care clearly describe the potential tangible and intangible benefits of health savings accounts (HSAs) and health reimbursement arrangements (HRAs). “HSA plans combine a high-deductible insurance policy with a tax-free savings account dedicated to paying for expenses below the insurance deductible,” explains Pipes.

Authorized in late 2003 by the Medicare Modernization Act, these plans will soon be widely available to taxpaying citizens under age 65 and may be extended to everyone in the relatively near future, offering cost constraints motivated by preservation of personal savings and implemented by enhancement of the patient-physician relationship. In addition, they avoid the austerity seemingly implied by the term “high-deductible” health insurance.

Solving Canada’s Problems

Part Two of the book, “The Canadian Solution: Legalize Competition,” notes that in Canada, the sole third-party payer is the government. “Canada is the only Western country in which private insurance for publicly insured procedures is actually outlawed,” notes Pipes. The federal and provincial governments jointly administer the Canadian health care system, called “Medicare.” Over time, power in the system has shifted gradually to the federal government, because it controls the funds.

In America, Pipes states, managed care, Medicare, and Medicaid inadequately control the increased costs of health care, while interfering with patient choices and irresponsibly reducing payments to health care providers. Technological innovation continues, but central authorities arbitrarily control availability of sophisticated diagnostic and therapeutic procedures.

The Canadian system, on the other hand, says Pipes, severely limits innovation and availability because of insufficient funding. Canadians have good emergency and primary care, but for elective surgery and highly technical procedures they suffer unacceptable waiting times. The Canadian government pays for only 70 percent of all national health spending. Supplementary insurance, employer-sponsored insurance, and out-of-pocket payments cover procedures that are not publicly funded.

Regaining Humane Concerns

Pipes recommends that America improve its health care system by increasing consumer choice, and that Canada allow private insurance to compete with its government-run, single-payer system.

Pipes offers compelling reasons for both recommendations, including returning control of health care decisions to patients, lessening government intervention in patient care, introducing constraints against overutilization, and combining decreased costs with increased quality of care through competition.

In the conclusion of the book, she writes, “The greatest risk to both systems is not that they will go bankrupt. It is that they will come to see human beings as nothing but cost centers. … We will lose more than access, affordability, and quality in health care. We will lose our humanity.”

Robert Hamilton, M.D. ([email protected]) is a retired vascular and general surgeon in Alton, Illinois.