Last fall, the possibility of an acute energy shortage was the major issue concerning the people of the UK. Well, I have good news and bad news: The good news is that the combination of a warmer-than-expected winter and rapid adjustments in energy markets averted that nightmare scenario. The bad news is that another kind of shortage has hit the UK hard and is of major concern there: a shortage of health care.
The UK has had a government-run health care system since 1946. Called the National Health Service (NHS), it provides health care services for free. Well, not exactly for free—the NHS is financed via taxation. But it’s “free” in the sense that there are no out-of-pocket expenses. That makes what we economists call “the marginal cost” essentially zero.
As anyone who has taken Econ 101 knows (or should know), the purpose of prices is to bring demand and supply into an approximate balance. Essentially, prices act as a rationing device to limit consumption enough to prevent the supply from being exhausted. If government holds a price artificially below the market price (and only governments—not free markets—have the power to do this), there will be an excess of demand over supply—in other words, a shortage.
Guess what? Zero is an artificially low price. The only way the UK’s NHS can keep the system going (that is, to make sure the system doesn’t crash from overconsumption) is for the bureaucrats of the NHS to replace the natural, economic rationing function of prices with political rationing by bureaucratic decisions.
I recall about a decade ago reading about a cost-control decision that the NHS made. They used to pay for custom-designed and made shoes to fit warped, contorted feet caused by diabetes. To contain costs, in some cases, they switched from providing free custom-made shoes to free amputation of feet. Ouch.
Today, the health care system in the UK seems to be falling apart. The average wait time for an ambulance is 90 minutes. Over-crowded hospitals are turning patients away. Currently, 1 out of every 10 people in England—more than 7 million human beings—are on waiting lists ranging from months to years for nonemergency procedures such as hip replacements. The Royal College of Emergency Medicine estimates that between 300 and 500 citizens are dying prematurely every week because of delays in receiving treatment. Double ouch.
This grim situation isn’t happening because the bureaucrats running the NHS are incompetent or mean or stupid. It’s the inevitable consequence of the inescapable facts that the supply of medical care isn’t unlimited, that its costs have to be covered somehow, and that some excruciatingly difficult decisions must be made about what to prioritize. Thus, in recent years, the NHS has cut the number of hospital beds. It has also capped the salaries of health care professionals. The average pay for the employees of the government-run system has fallen by as much as one-third (adjusted for inflation) since 2008. This precipitated a recent strike by frustrated paramedics and nurses, which further pinched the supply of health care. It isn’t surprising under these conditions that 70 percent of Brits now describe the state of health care as “bad.” Triple ouch. Clearly, “free” isn’t all it’s cracked up to be.
The problem of shortages under government-run health care systems isn’t confined to the UK. A few weeks ago, a lifelong friend, whose working career led him to western Canada in the 1970s, flew to the States to schedule knee replacement surgery. He was quoted a price of $25,000. (An American friend who had the same operation by the same doctor about eight years ago told me that his insurance company paid $90,000 for that operation—an indication of how insurance inflates medical expenses in the United States.)
So why would my friend leave Canada, where health care is “free,” like it is in the UK, to go to the expense and trouble of flying more than a thousand miles to pay $25,000 out of his own pocket? The answer is obvious: availability. Just as there are long waiting lists in the UK, so it is in Canada. My friend had been trying unsuccessfully for more than a year just to schedule knee replacement surgery in Canada. Even if he were to finally succeed in getting that appointment, he still would have to wait at least another three years for the actual operation. Due to the pain and restricted mobility caused by his worn-out knee, my friend is only too happy to pay $25,000 to get relief in a few weeks rather than have to wait a few years to get it done for free.
This prompts a question: What will happen if the United States adopts some form of socialized/nationalized/monopolistic health care system as favored by politicians such as Bernie Sanders? Where would people such as my friend in Canada go in a pinch? More to the point, where would Americans go? Could we avoid shortages in the actual delivery of health care services?
Only if the laws of economics apply only in Canada, the UK, and other countries with national health care systems. Personally, I wouldn’t count on the United States being miraculously exempt from those laws. To Americans who find the prospect of government-run health care appealing, I would cite the old cautionary adage, “Be careful what your wish for; you might get it.” Quadruple ouch?
