Health, government, and Irving Fisher

American Journal of Economics and Sociology, The,  Jan, 2005  by Victor R. Fuchs

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The consequences of NHI for health care expenditures appear to have been the opposite of expectations. Because insured patients face no financial barrier to the utilization of care, economic theory predicts that the quantity demanded should increase. Perhaps it does, but this does not translate into greater expenditures. Countries with universal health insurance uniformly spend much less on medical care than does the United States. It is clear that countries with universal coverage find other methods to contain health care spending, methods that apparently are more effective than financial constraints on patients. No one knows what the optimal level of expenditures is; thus no claim can be made that NHI is, in the economist's sense, more efficient. Countries with national health insurance contain expenditures in part by using their monopsony power to squeeze down the prices of resources, especially drugs and physicians' services. They also rely heavily on "upstream resource allocation"; in other words, control over capital investment and facilities and equipment, specialty mix of physicians, and the development and diffusion of high-cost new technology. The price paid for such controls is delay or inconvenience in receiving high-tech services, or sometimes not receiving such services at all. Whether such delays or denials have a significant effect on the health of the population is not known with certainty; the available evidence suggests that they do not.

For many countries, NHI is viewed as more than just a device for holding down the growth of health care expenditures. It is valued for its contribution to political stability and social solidarity. This objective is stated most explicitly in the Scandinavian countries, but I believe it is implicit in the support for NHI in other countries as well. Symbols and institutions have always played an important role in providing cohesion for nation-states. In earlier times religion was a major force, but today many people find a white coat more reassuring than a black one, a medical center more impressive than a cathedral.

VI

New Trends in Health Policy

HEALTH POLICY IS IN A STATE OF FERMENT in nearly all industrialized nations. Rising expenditures for health care, driven primarily by technological and demographic changes, are forcing governments to reexamine and modify long-standing arrangements for financing and delivering care.

One new trend features attempts to place the practice of medicine on a more scientific footing. These attempts appear under different names: "evidence-based medicine," "outcomes research," "clinical guidelines," "the new technology assessment" (Fuchs and Garber 1990). Whatever the name, the idea is the same. Although the practice of medicine will always be partly an art, new information technology, new analytical techniques such as "meta-analysis," and the presence of health professionals who combine clinical and quantitative skills make it possible to improve substantially the scientific basis for medical practice.