Obamacare’s Muse: The UK’s NHS

Published June 3, 2015

As I previously discussed in Townhall Finance, real and sustainable private investment is being held back in large part due to the regime uncertainty caused by such regulations as Dodd-FrankObamacare and climate change. In fact, I first pointed this out publicly as one of the guest speakers at a large Tea Party rally on Tax Day 2010 in Appleton WI.

Given the large and rising costs of healthcare in the US (eg 17.9% of GDP in 2014, up 5% from 1999), it is understandable that many Americans voted for reform. But Obamacare will only make the already government-centric American system even worse in terms of costs, prices, quality, innovation and care (including more bureaucratic rationing).

If Obamacare is not repealed and replaced by a more free market style system, then it will over time become more and more like its inspiration or muse of the UK’s National Health Service (NHS) … where each regulatory failure calls forthmore regulation ad infinitum. As a late great economist once pointed out in the context of Hillarycare:

“On the free market, the consumer is ‘king or queen’ and the providers are always trying to make profits and gain customers by serving them well. But when government operates a service, the consumer is transmuted into a ‘pain-in-the-neck’, a ‘wasteful’ user-up of scarce social resources.” – Murray N. Rothbard

It thus seems appropriate to revisit the NHS. In doing this, I not only can offer my perspective as an economist but also as a patient of the NHS in the late 2000s. I have also been a patient of the US health care system in the 2010s, and of the Australian system for many years from the late 1980s. Although all three systems are far from perfect, the UK’s is a distant third place in my experience, including (no doubt surprisingly to most American liberals) the pervasiveness of ‘cold and uncaring’ NHS staff that I encountered from almost day one in the UK.

The NHS has for many years been referred to glowingly by the US liberal elite. One of these admirers of the NHS is former Obama ‘technocrat‘ at the Centers for Medicare and Medicaid Services (CMS), Dr Donald Berwick.

Dr Berwick has described the NHS as: “universal, accessible, excellent, and free at the point of care – a health system that is, at its core, like the world we wish we had: generous, hopeful, confident, joyous, and just.” And he added: “I am romantic about the NHS; I love it.” Perhaps this ‘love affair’ with the NHS is driven by his belief that: “Any health care funding plan that is just, equitable, civilized and humane must redistribute wealth from the richer among us to the poorer and the less fortunate. Excellent health care is by definition, redistributional.”

The NHS has its origins in the rise of western Progressivism (such as UK Fabian Socialism) and Imperial Germany’s mandated health insurance from the 1880s onwards. Again we can see the ‘Bootleggers and Baptists” phenomenon in action, with the ‘Progressives’ and ‘Fabians’ playing the role of the ‘Baptists’ and with the ‘Iron Chancellor of Germany‘ and his cronies as the ‘Bootleggers’.

The NHS came into being in the late 1940s, with the express goal of providing the best and most up-to-date health care services available to anyone who wanted it free-of-charge. It was to do this by essentially nationalizing the entire health care sector in the UK. The NHS has since then grown to be the largest employer in Europe, employing more than one million people.

As demand is not constrained by market prices, the NHS has mainly resorted to rationing of services in the face of excess demand, which has resulted in the NHS’ infamous queuing. As Michael Tanner of the Cato Institute has previously highlighted, as many as 750,000 Britons were awaiting admission to NHS hospitals in 2007. Cancer patients, for example, can wait as long as 8 months for treatment resulting in nearly 20% of colon cancer patients, considered treatable when first diagnosed, being incurable by the time treatment is finally offered. The waiting times for many other less urgent procedures have usually been measured in months, with one in eight patients still waiting more than a year.

Less obvious than the quantity of services provided, is the non-stop rising costs to the British taxpayer. Dr Helen Evans of the UK’s Nurses for Reform pointed out that, even in between the 1944 ‘White Paper’ and the 1948 start of the NHS, the budget was already being revised upwards by nearly 75%. In its first year of operation, the NHS actually costed over 230% more than originally estimated. The main driver behind these cost overruns was the assumption that demand would remain roughly constant despite services being delivered ‘free‘ at the point-of-use. Nominal charges have been introduced over the years, with negligible impact.

Capital investment in new, expanded and renovated hospitals was minimal until the great ‘Hospital Plan‘ of the early 1960s. In fact, a significant proportion of the inherited NHS hospitals predated the First World War and, despite this, not a single new hospital was built during the first decade of the NHS. The ‘Plan’ aimed, over the course of a decade or more, to build 90 new hospitals, drastically remodel 134 more and provide 356 further improvement schemes. Even by the 1990s the ‘Plan’ remained unfulfilled, with only a third of the projects completed and a third not yet started.

Of course, the news headlines are more so dominated by quality of service issues. As of 2008 in many NHS hospitals, more than 10% of patients were picking up infections and illnesses they did not have prior to being admitted. And up to 60% of NHS hospital patients could be undernourished during inpatient stays.

All of these worrying themes have continued unabated through to the present. Despite all of this, the NHS is still a ‘sacred cow‘ in the UK, and the prospects for even minor free market friendly reforms in the foreseeable future are still very slim indeed.

Given the benchmark of the NHS, the future of Obamacare is perhaps best encapsulated by two former HHS ‘apparatchiks‘ who purportedly said:

“National Health Insurance means combining the efficiency of the Postal Service with the compassion of the IRS … and the cost accounting of the Pentagon.” – Dr Louis Sullivan & Constance Horner

[Originally published at TownHall]