The Case for Socialized Medicine

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The Case for Socialized Medicine

By: John Browne | Thu, Mar 30, 2017


Last week the American political establishment was shaken to its foundation
when the Republican Party leadership withdrew the American Health Care Act
(AHCA) just before the vote was to be taken on the floor of the House of Representatives.
Besides being a most unusual procedure, it exposed a fundamental split in the
country,reflected not merely in Congress but within the Republican Party. GOP
purists, represented by the House Freedom Caucus, demanded more significant
roll backs in socialized medicine that were contained in the Ryan plan. Their
refusal to back the plan, after years of promising complete repeal, doomed
the bill.

Given the political and popular landscape, the legislative fiasco should cast
serious doubt that Washington will ever be able to take any meaningful steps
to roll back government involvement in health care. Although widely considered
a failure of design and execution, Obamacare seems to have succeeded in one
important mission: It has created an even greater dependency on government
in the health care marketplace. Getting government out is now much more difficult
than it was just eight years ago. This may have been the democrats’ plan from
the start. As a result, the choice conservatives now face is to embrace an
increasingly complex, cumbersome, and inefficient public/private hybrid system,
or to acknowledge the political reality and make the most palatable lemonade
they can from the lemons that are available. Believe it or not, that may argue
for a deeper embrace of socialized medicine.

Contrary to the current rhetoric, Obamacare was not in fact America’s first
foray into socialized medicine and it did not represent the kind of crossed
Rubicon that Republicans like to accuse it of being. The door had first been
opened in the Second World War when government imposed wage controls that gave
incentives to employers to bundle health insurance into compensation packages.[1] When
the government then made employer-provided insurance tax deductible, such plans
became the norm. But the government really charged into the market in 1965
with the creation of Medicare and Medicaid. For many years, Republicans have
had to twist themselves into logical pretzels in order to argue that Obamacare
is socialism while Medicare is not.

In granting a brand new entitlement, Obamacare did nothing to address the
problems that have plagued the U.S. health care system for decades. It did
not encourage competition among insurers, it demanded a “one size fits all” approach
to coverage, and most egregiously did nothing to contain the rising medical
costs that threaten to bankrupt the nation. To add insult to injury, it required
that people buy insurance that they really didn’t want.

Although the Ryan plan removed the obligation of individuals to buy coverage,
it made many of Obamacare’s shortcomings worse. It left pre-existing condition
requirements in place, which would guarantee that premiums and deductibles
would continue to rise. It did not relax the state restrictions on insurance
competition, nor did it seek to contain medical costs. In other words, the
Ryan plan would have put Republicans on the same hook from which the Democrats
are now hanging. The alternative of a repeal without a replacement, so much
wished for by the hard right, would have created the kind of political chaos
that would virtually guarantee a Republican massacre in 2018 and 2020.

However, Republicans may still, for now, be able to lay claim as the party
of fiscal responsibility. And as a result, I would suggest a basic cost-benefit
analysis. It is clear from almost any standpoint that the socialized health
care available in other developed nations like the UK, Canada and the 34 developed
free market economies of the Organization for Economic Co-operation and Development
(OECD) delivers health care more efficiently than in the U.S.

In October 2012, PBS Newshour reported the U.S. as the world leader in cancer
treatment and health care research. Given our private wealth and the strength
of our university hospitals, this should come as no surprise. But what we have
gained in high end coverage, we have lost in everyday care. The same report
mentioned that there are only 2.4 practicing doctors and 2.6 hospital beds
per thousand people, which is far below the OECD averages of 3.1 and 3.4 respectively.
In addition, the American life expectancy is 78.7 years, in 2010, versus the
OECD average of 79.8 years. (Jason Kane, 10/22/12)

The World Bank reports that, in 2014, the U.S. spent 17.1% of GDP or $9,403
per person on health care. The UK spent 9.1% of GDP or $3,935 per head; Canada
10.4% or $5,292; the EU 10.0% or $3,613′. In 2000, despite spending approximately
twice the amount per head of any other nation, or group average of nations,
the World Health Organization rated the U.S. health system at only 37th, Canada
30th, and the UK 18th out of 191 nations. (WHO Global Health Expenditure Database)
Clearly, we are not getting what we think we are paying for.

Many OECD countries like the UK and Canada have what is termed a ‘single payer’
system sponsored by the state. In the UK, this means that the National Health
Service provides basic ‘bangers and mash’ coverage which includes provisions
for prior conditions and catastrophic illness. Yes, wait times to see a physician
for non-acute conditions are generally longer than in the U.S., but the bureaucratic
process of paying through insurance, with its never-ending forms, co-pays,
deductibles, and network providers, is largely absent.

In the UK, a thriving private health system that provides higher end ‘roast
grouse and soufflé’ services runs alongside the “bangers and mash” state system.
This means that wealthy people with access to greater resources can still seek
care above and beyond what is available through the state. But since the level
of base care is widely regarded as adequate, the two-tiered system does not
generate significant class resentment.

Furthermore, this system allows top specialists to continue serving in the
public system while supplementing their low state income with the higher fees
paid in their private practices. And while doctors in the UK generally make
less than their U.S. counterparts, they are also free of the crushing malpractice
insurance which tends to be a great equalizer.

I have lived for long periods of my life in the UK and the US, I have had
a good deal of exposure to the two health care systems. And while both offer
mixtures of public and private care, the UK’s is much closer to the type of
socialized medicine that has long been the goal of the American left. I have
always considered myself a conservative but the UK system seems preferable
to the monstrosity that has been created by Washington sausage making.

Of course any state system would involve rationing on some level. But if such
guidelines are developed democratically, public acceptance of such limits can
be achieved. By acquiescing to a move towards a single payer system, Republicans
would be in a strong position to ensure that cost containment would be a priority.
In that sense, conservatives could potentially strike at the root of the health
care problem: The inexorable rise in costs and the crushing burden that health
care currently places on the economy. Currently, the push for socialized medicine
has been the province of the Democrats, with the primary energy coming from
the extreme left figures such as Bernie Sanders and Elizabeth Warren. The worst
scenario for health care would be to allow such big spenders and class warriors
to set the agenda.

Given that many countries have succeeded in providing better overall health
care outcomes with universal coverage and at far less cost, it should not be
too much of a stretch for Congress to take the final step and accept an extension
of Medicare to all. Of course, taxes would have to increase to pay for it,
but citizens and businesses would no longer have to pay for insurance themselves.
If the cost of health care can be brought down, the net result is less money
for health care and more for everything else.

I have never been a fan of socialized anything. But in the modern world of
instantly diffused outrage and the increasing frustration with a health care
system that is clearly dysfunctional, Republicans should recognize the political
reality and seize the initiative. A soberly devised plan could vastly streamline
health care delivery, minimize waste, control costs, provide basic care for
all, and perhaps even deal a harsh blow to tort lawyers. Moderate Democrats
would jump on board in droves and President Trump and the Republican Congress
could emerge as winners.

Observers should not count President Trump as down. He has a reputation for
coming back. He may recognize a political winner when he sees it and look to
ditch the ideological baggage of his own party. Trump was not put into office
by card carrying conservatives but by middle class populists who would support
anything that makes their lives less anxious.

I believe that private enterprise always delivers higher quality and lower
prices than government. This is true for goods and services and it also would
be true for health care if the markets were allowed to function freely (which
they have not). But voters today do not perceive health care as a good or a
service, but as a right. Conservatives can argue this point, but they will
lose the emotional battle, which is where this fight will occur.


[1] – BERDINE, Gilbert.
Supply and Demand: Government Interference with the Unhampered Market in U.S.
Health Care. The Southwest Respiratory and Critical Care Chronicles, [S.l.],
v. 2, n. 7, p. 21-24, july 2014. ISSN 2325-9205. Available at: <http://pulmonarychronicles.com/index.php/pulmonarychronicles/article/view/143/353>.
Date accessed: 29 mar. 2017.

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Euro Pacific Capital


John Browne

John Browne, Senior Market Strategist
Euro Pacific Capital, Inc.

John Browne

John Browne is the Senior Economic Consultant for Euro Pacific
Capital, Inc. Mr. Brown is a distinguished former member of Britain’s Parliament
who served on the Treasury Select Committee, as Chairman of the Conservative
Small Business Committee, and as a close associate of then-Prime Minister Margaret
Thatcher. Among his many notable assignments, John served as a principal advisor
to Mrs. Thatcher’s government on issues related to the Soviet Union, and was
the first to convince Thatcher of the growing stature of then Agriculture Minister
Mikhail Gorbachev. As a partial result of Brown’s advocacy, Thatcher famously
pronounced that Gorbachev was a man the West “could do business with.” A graduate
of the Royal Military Academy Sandhurst, Britain’s version of West Point and
retired British army major, John served as a pilot, parachutist, and communications
specialist in the elite Grenadiers of the Royal Guard.

In addition to careers in British politics and the military,
John has a significant background, spanning some 37 years, in finance and business.
After graduating from the Harvard Business School, John joined the New York
firm of Morgan Stanley & Co as an investment banker. He has also worked
with such firms as Barclays Bank and Citigroup. During his career he has served
on the boards of numerous banks and international corporations, with a special
interest in venture capital. He is a frequent guest on CNBC’s Kudlow & Co.
and the former editor of NewsMax Media’s Financial Intelligence Report and
Moneynews.com. He holds FINRA series 7 & 63 licenses.

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Published at Thu, 30 Mar 2017 09:16:16 +0000

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