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July 11, 2007

We're Already Paying for Universal Health Care

According to the World Health Organization, France is ranked number one in health care. At the same time the United States is all the way down at 37. So should we change our system to mirror the French system since it seems to outshine us so well? Well, that would drown us in horrible new taxes wouldn't it? Nope. In fact, you may be already paying for universal health care, but not receiving it.

To figure this all out, we're going to have to know how much the French actually pay for their health care system. According to BBC, France spends about 9% of their GDP on their system. The French GDP is estimated to be $1.9 trillion in 2006. 9% of 1.9 trillion is about 170 billion. France's population is about 64 million. That means that the per capita cost of health care in France is about $2,700. Multiply that by America's estimated population of 301 million, and you get a cost of about $813 billion. That is definitely a lot of money, but we may be already spending it on socialized health care in America. It is estimated that Americans spent about $2 trillion on health care in 2005.

Medicare and Medicaid are government run health care programs. The House Ways and Means Committee stated that in 2002, Medicare expenditures for the government were about $257 billion. At the same time, premiums paid by Medicare subscribers were about $231 billion. Medicaid on the other hand had a budget of $295 billion in 2004. So, the total costs of Medicare and Medicaid in America is about $783 billion, just $30 billion short of equaling the relative cost of the French system.

Government spending on health care does not even stop at Medicare and Medicaid. According the the Journal of the American Medical Association, the government subsidizes about 45% of US medical care costs, covering Medicare, Medicaid, workers' compensation, the Department of Veterans Affairs, public hospitals, and government public health activities. It is estimated that in 2005, Americans spent about $2 trillion on health care. If the government is paying 45% of this, they are actually spending about $900 billion on our health care system, more than enough to pay for a French health care system in America.

So, now we have to ask ourselves if we're up to the task of matching the French health care system in America. I say we can do even better. No system is perfect, including in France, but for $2 trillion we should be blowing the competition out of the water.

UPDATE: The two Wikipedia links were fixed.


Anonymous said...

Hi there, your blog was linked to at, and I felt compelled to answer your points regarding healthcare in the US. Before I begin my proper response to your post's topic, i.e. healthcare, I want to start out by writing in a general sense and then work towards the particulars at hand.

Let me just say right away that your argument is not entirely new, many healthcare watchers use similar points in an effort to "change the system", and for this reason I think your post fails as well.

You used GDP as the standard of measure for the size of a country's economic output. Now I may not convince you of what I am about to say, but using GDP as it is reported in the media is not only not a realistic indicator of the size or health of a country's economic output, but focussing on it also leads almost all laymen into thinking that the larger this number is, the better off a country is, and vice versa. In short, nothing could be further from the truth. Are you ready to be amazed?

This is a trap that almost all people in the economics profession falls into. You may think how in the world can someone like me actually suggest that so many people in the world could be so wrong about something so very important? Well, the answer to this is simply that economics is perhaps the most misunderstood, misinterpreted and false-doctrine filled social science of them all. The reason this is so is anyone's guess, but I think it is due to the fact that the truths and falsities contained in economics are in existence precisely because there is an economic incentive for some people in doing so! Observe. I am a government official, and it is my job to ensure that rampant poverty (which by the way can only exist in a hampered market economy, not a free one) is as low as possible. Since I want to be re-elected and maintain my standard of living, I impose minimum wage laws to make the relatively poor people happy and thus vote friendly. Everyone wins right? Wrong. I won't go into how minimum wage laws (in conjunction with other allegedly citizen-friendly economic laws) cause unemployment and do exactly the opposite of what it is intended to do, but I could recommend some excellent literature.

Back to GDP, however. I promised you that I will show the errors in using it in this way. To put it quite simply, GDP is not a measure of economic health (real physical wealth), but rather it is merely an indicator of the quantity of money in circulation. Now since the health of an economy is not measured by how much money is floating around (see 1980's Argentina, 1920's Germany for examples), it follows that GDP should also not be used in making sound economic judgments. You may ask, OK, what IS a valid indicator of economic health, and, in turn, of the health of the average citizen of that economic system? The answer of course is the degree to which people save and invest their incomes or revenues. The higher this rate, the higher tends to be both the productivity of labour, and its concomitant effect, real wages, or, if you prefer, just how much bang we are getting with our bucks.

It is no secret that the Federal Reserve is always intent on increasing the quantity of money in circulation. Of course (one of) the effects of this is to degrade the dollar's purchasing power over time. It's the sole reason why $5.00/hour just can't allow people to get by.

By the same token, it is also the reason why healthcare costs seem to rise every year. Costs are, of course, nothing but the PRICES businesses muct pay to keep their operations going. Under this heading are capital goods, general expenses, and labour. This is also the reason why GDP goes up every year in virtually all countries around the world (every country has a centrally controlled banking authority that continuously increases its country's money supply).

To fully explain just what makes up GDP, I won't bog you down with the nitty gritty, but essentailly it is this:

GDP is the sum of investments and consumption income. Of course there is more to it, but I assure you we will not lose anything of relevence by ignoring these other aspects.

You mention that the French GDP was $1.9 trillion, and that healthcare accounted for 9%, or $170 billion. Per capita this amounts to around $2,700. Now, if you stop here, and say that hey, the French are "spending" less than we are, and they have socialized medicine, you are committing a very elementary economic fallacy, namely confusing "value" with "riches". What I mean by this is you are using a strictly monetary component, a dollar value that belongs in the aggregate sense only and not individually, and using it as a basis for comparison between the average French and American citizens. It is a fallacy of composition. GDP is simply NOT a measure of the economic prosperity of the individual citizen.

Perhaps the easiest way of seeing this truth is for me to propose a thinking game with you, whereby I ask you some questions, and then I will fill in the blanks in those places you would have answered.

PF: Would you agree that the more money is in existence, the more money will be spent by the average citizen? Of course some will spend less and some will spend more, but can we at least agree that if the money supply were to double, that, on average, everyone will double their rates of expenditures for various things like food, clothes, rents, etc?

You: OK, sure. But some will save lots of it, perhaps even the majority will save more, so you can't say for certain what they will do. What you said may not always occur.

PF: Yes, but if we look this from one person's perspective only, would you agree that in order for one person to save say, $1000 more in their bank balances, that somebody else in the economic system MUST NOT have saved that money, because you now have it?

You: OK, fine, but what does this have to do with healthcare?

PF: Everything, here's why. Remember GDP? $1.9 trillion? Imagine now (finally) that every single citizen of the country, every man, woman and child, from CEOs to janitors, SPENT every single dollar they come into contact with on consumers' goods like TVs, cars, food, clothes, etc...what do you think would happen to GDP?

You: Not sure, I think it will increase, because nobody is saving anything anymore, and the economy will have a huge boost.

PF: Look at it from this perspective. If everyone were to spend their money on consumption, what would happen to the country? Remember, there is no longer any investments, wages paid out to workers, upkeep of factories, equipment, trucks, forklifts, everything that has anything to do with purchasing capital goods, or maintaining capital goods, labour, etc simply disappears. No money is spent on these things anymore.

ALL MONEY is now spent on consumers goods. Even the revenues that businesses receive in exchange for their consumers goods products, go into buying MORE consumers goods. NOTHING whatever is saved and productively spent on such things as capital goods like assembly lines, packaging, transportation, and wages to people working in factories, offices, fields, and plantations. All the money that businessmen used to pay out in these things now are used to buy goods for the businessmen themselves to enjoy. Instead of buying labour or capital goods, they now use all their revenues to buy yachts, rolls royces, and rolex watches. By the same token, the makers of yachts, rolls royces and rolex watches then use their higher revenues to buy other consumption goods as well.

Now, the question is, what is the ultimate result of this imaginary exercise? Of course it is easily seen that GDP would fly through the roof! It would be equal to how much money was originally floating around PLUS all the money that was originally in cash balances. In other words, GDP would be LARGER!!! It would equal the amount of money in the economic system at that time, times the velocity of circulation that would ensue if all that money were spent on consumers goods, because ALL the money that is received by business and individuals would be spent. BUT, and here's the BIG BUT, there would be DEATH ON A MASSIVE SCALE!!!

Think about it, no more workers making wages, no more factories to make goods (as factories require saving and investment to not only expand but to upkeep their operations), no more assembly lines, no more advanced food production, no more anything. What would exist would be a very primitive society that could only produce the most basic things with the people's bare hands. It would be what Adam Smith described as a "rude and primitive state of society".

Make sense? Good. Now that GDP should not be used as a measure for economic anything, other than an indicator of how much money is circulating, let me now conclude with how this applies to the healthcare industry.

The problem with the healthcare industry is its high costs. That's it really. Quite simply, it is expensive to buy drugs, get doctor treatment, and have insurance. Why is this? The reason I ask you this is because I don't think enough people have asked the right questions yet.

The question I would ask is why does the US FDA, as opposed to say the French or Canadian regulators, make it almost impossible or next to impossible, to import cheap and effective drugs from abroad? Wouldn't THIS be the first order of business? We import cars, food, clothes, but why not healthcare? The answer of course is that it is BECAUSE the US healthcare industry is regulated so much. Why does the FDA thumb its nose at the Canadian or French regulator decisions? Why are the drugs good enough for the French and Canadians but not good enough for Americans? Now I don't know for sure what exactly the relationship between the FDA and the drug companies are but I can imagine it is a "cozy" one to say the least. Don't you see the hypocrisy here? Everyone in the Bush admin and drug companies are screaming to have more free markets, but behind the scenes they are making it illegal to be as such. Every other country knows this is true, except, it seems, Americans themselves. So first of all, the borders should be completely open to drug imports.

Second, the percentage of GDP spent on healthcare in other countries in no way reflects the average standard of health of those citizens. These other citizens are healthy NOT because they have universal healthcare, but because their LIFESTLYE is to be healthy. Most Americans (60% by the last count I am aware of)are fat fucks who eat cheese burritos for breakfast; it is no surprise that they require 24 hour doctor supervision. That costs lots of money. I have never needed a doctor to regulate my diet, nor do I require expensive drugs in order to maintain my destructive lifestlye. Most Americans do. So, secondly, I would convince these people that living like a fat-ass is not healthy. Simple, yes. But simple logic is required for many of these people. It costs NOTHING to go out for a run, or take a walk, or for that matter, use the stairs instead of the escalator. Living healthy is not something that requires extra money at all. All you have to be is aware. If you stay ignorant even if people are telling you otherwise, you don't deserve any special treatment, least of all other people's tax dollars that would go into maintaining your unhealthy habits.

Now, having said all this, I now want to turn to what you said correctly, and also what you properly emphasized, however I say this with reservations, because you didn't mention something important.

The correct thing you mentioned was that the US government IS spending loads of money on healthcare. What you didn't mention however was the fact that not all government expenditures some out of tax dollars, which is another way of saying that "the average American is already paying for universal healthcare".

The simple truth here is that the US government finances a hell of a lot of their expenditures via the money printing press, and borrowing. This fact eludes many people, modern liberals especially, because it appears the government can spend without anyone having to pay for it. No money? Print it! Of course this IS a tax indirectly on the people, by sapping any purchasing power the poor have left in their lives. But then the government sees this, then instead of stopping the printing press, they go ahead and do the only thing they know how to do, i.e. make newer laws like raising the minumum wage again in order to combat the seemingly evil businessmen intent on paying the low wages that are only low because the government destroyed the value of the previous minumum wage! It goes and on like a cancer spreading throughout a person's body. More cancer? Give more of what caused it! Hogwash.

So now we have to turn to how can we make healthcare affordable again? First up, abolish the Federal Reserve. Then, allow free markets to flourish in the healthcare industry, thereby lowering prices over time, just like the prices of electronics lower over time.

Increasing government expenditures that will go into universal healthcare will only decrease the amount of investments made in the economy if it comes from taxes, or it will further bankrupt the poor if it comes from the printing press, or it will make the US even more politically dependent on foreign nations that could violate human rights if it is borrowed(like China, whom the US ignores because they are the prime source for borrowing).

The result is then MORE hypocrisy in the eyes of the world towards the US, and MORE isolation.

Get rid of medicaid, and medicare, but ONLY if the US government spends less at the same time. If these programs were abolished, yet the rate of government expenditures continued at the same rate and thus sap from the poor again, then that will be devastatin to them, because now not only are they without public care, they would have even LESS of a chance at making ends meet, with the result of this is that they are less able to pay for the odd life saving operation desperately needed.

Thanks for listening, and if you read this whole post, I thank you again,

Private Freedom

Steve said...

Thank you very much Mr. Freedom for posting such a great reply to my puny post. It's been quite a while since I took economics, so forgive me for any of my fallacies. My original purpose with this post was to show people how much we do socialize health care as it is (i.e. how much we waste).

I do believe we need to change the system. How exactly, I'm not sure, but I like the points you raised. I hate the Federal Reserve, mainly because I don't understand why we need it. I remember asking a economics professor why we use the Federal Reserve and just print money and he tried to explain it to me in a lot of words. I asked him what exactly he meant by all of it, and he said basically he really didn't know why our system still works the way it does.

Furthermore, I think I understand my fallacy in using the GDP in such a way. I'd be interested to know the material you said that could be recommended reading on this topic.

Anyways, I would respond more, but I'm pretty tried from just getting off work. But thank you for your response as I am always glad to learn how I am wrong so I don't continue being so ignorant.