TCS Daily


Client or (In)patient? Curing Is Painful

By Guoda Steponaviciene - January 6, 2005 12:00 AM

In the times when EU's best practices are widely copied, health care policy seems to be much at a disadvantage. Complaints about health care are being voiced in every European country. Though different in words, in general they revolve either around long waiting lists, a poor quality of services or inappropriately big spending or a mixture of these defects. No wonder, why.

Health care systems, as they are designed in most of the countries in the world, cannot perform well for one principal reason - the state's too active meddling with the public money and abundant regulations. This factor blocks a natural market mechanism in health care systems so that they cannot function properly. State interference itself stems from political interest to please voters and is more or less characteristic to all dominant parties.

We don't question the laws of physics when we study rotation of the wheel just because the wheel belongs to a Ferrari, not to a tractor. However, economic laws of scarce recourses, demand and supply, and the function of the market price seem to be invalid when public health care systems are debated.

European politicians claim they will create quality health care services for all citizens and will maintain low budget deficits at the same time. But the European traditional medicine is increasingly dependant on material resources. So the quality can be enhanced without impairing health care accessibility only through more efficient treatment.

However, in reality things go the other way round as new technologies are more expensive. This fact doesn't run counter to a general economic rule that technologies make things cheaper. Simply, new health care technologies target new diseases, untreated cases and side-effects of the existing treatment.

We can't escape a rise in prices of health care, if we say that all people have the right at least to try treating their uneasiness. Even if we admit a certain budget deficit (with a rosy hope that one fine day everyone will quit smoking and take exercise to die healthy and quickly), this deficit will still have a tendency to grow as fast as it will threaten countries' financial stability.

To avoid this, countries employ restrictions on spending. They can be passive, e.g. waiting lists for services, and active, e.g. quotas set on drug prescription, regulation of the number of general practitioners in the market, discrimination of private providers of health care services and alike.

In all cases the patient is faced with the same sad result -- administratively restricted accessibility to needed services. There is no way to evade restrictions of demand because recourses available for health care are always scarce. But it is possible to escape from them being artificial and distorting market relations.

Many wonder why the patient is not a central figure of the system. The answer is simple -because the patient does not cover a full price (if any). Public financing of health care eliminates the significance of the price which is a natural regulator of demand.

Once health care expenses are compensated, why not use them lavishly, especially if doctors and nurses are well-paid and are kind. Why not take a taxi to hospital, if the service is covered from patient accounts? Even in those countries where there is no fun to go to the doctor, abundant use of government-paid services is widely observed. People become daily visitors often because they can't get the right service from the very beginning, receive prescribed medicines for very few days (because of quotas) or simply want some socializing.

Administrative means used to control demand can be very efficient in terms of cutting expenses, but they are too harsh in regulating such a complex and vulnerable activity as medical treatment. Waiting lists, quotas for medicines, restrictions on market entry both limit access to health care services and undermine their quality.

In addition, such measures distort patients', doctors' and health care administrators' motivation and build preconditions for corruption. They force doctors to perform tasks that are at odds with their primary duties - to offer the patient the best possible treatment. It is small wonder the prestige of this profession is suffering even in those countries where salaries in the medical sector are high.

It is strongly believed, especially in less wealthy states, that more generous public financing can work miracles in solving these problems. But the theory and the practice of EU's old member states show quite the contrary. The only recipe for curing health care systems is to trim public subsidies and recognize that health care goods and services have an essential characteristic feature - the price.

It should be noted that the existing compensations from patient accounts do not indicate the real prices of health care. They do not show the value of services to the patient. Compensations only reflect the capacity of a country's budget and a prevailing political will. The absence of market prices also make competition among health care providers only formal and limit the scope of private health care insurance.

If the patient is willing to be treated as a client and get a quality service, firstly, he has to cover himself at least a share of the price. The bigger this share, the more the patient will be regarded as a client.

Secondly, the share of the price to be paid by the patient has to be explicitly defined and known to all participants of health care in order to provide a working field for private health care insurance companies.

And thirdly, private health care providers have to be treated as equal to public ones in terms of receiving funds for compensations, market entry, meeting the required standards and so on. These are essential preconditions for competition in the health care sector which would bring a better quality, balanced finances and the system's orientation towards the patient.

Of course, it would be unrealistic to demand that market forces should be introduced into the health care system at one fell swoop, particularly if they don't exist there at all. This wouldn't work even if such an unimaginable political will would occur. However, if decision makers agreed upon an overall direction, changes could be introduced gradually and according circumstances of individual countries.

It is no puzzle why patients and even health care workers do not like changes. However, change is a curing process of the health care system. Who else, if not patients and doctors, can understand that curing is painful?

The author is Vice-president, Lithuanian Free Market Institute. This article received honorable mention in the recent TCS essay contest on reforming European health care.


 

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