No Clean Bill for Europe's Health Care

By Tanner, Michael | Insight on the News, September 16, 1996 | Go to article overview

No Clean Bill for Europe's Health Care


Tanner, Michael, Insight on the News


Europeans are learning a hard fact of life about socialized medicine: There's no such thing as a free lunch. The question now is whether Congress will learn from Europe's mistakes as it takes the next steps in reforming the American health-care system.

For years, advocates of government-run health care pointed to Europe as an ideal, noting that the United States was the "only industrialized country without a national health-care system." Now, however, the European welfare states are slashing benefits in the face of rising health-care costs.

A recent front-page story in the New York Times detailed the European cutbacks. According to the article, Britain, France and Germany all are being forced to limit access to care. Rationing, already extensive, is increasing.

The Europeans have run into a very simple economic rule. If something is perceived as free, people will consume more of it than they would if they had to pay for it. Think of it this way: If food were free, would you eat hamburger or steak? At the same time, health care is a finite good. There are only so many doctors, so many hospital beds and so much technology. If people overconsume those resources, it drives up the cost of health care.

The same problem is besetting the American health-care system. The vast majority of American health care is not directly funded by the person consuming those goods and services. Instead, a third party, either the government or an insurance company, pays the bill.

Medicare is Exhibit 1. Medicare beneficiaries pay almost nothing out of their own pockets for health care. Under Medicare Part B, for example, the deductible is an absurdly low $100. (There is, however, a 20 percent copayment.) The deductible under Part A is higher - $716 on the first 60 days of hospital care for each spell of illness. There also is a copayment required for hospitalization of longer than 60 days. However, nearly 70 percent of the elderly have some form of "medigap" insurance that covers all or part of the deductibles and copayments.

Thus, recipients have little incentive to be good consumers and avoid unnecessary expenses or seek the best deal for their dollar. …

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