01 Jan 2003 Talking Points on Health Care #17: Why National Health Insurance Means Waiting for Care

Some advocates argue that a universal government run “single payer” heath system is the solution to America’s health care problems of rising costs and a substantial uninsured population. However, the experience of countries with such nationalized health systems shows that following their advice would simply trade one set of problems for another.

For example, nationalized health systems typically control costs by setting fixed annual budgets for medical services, which has the effect of rationing medical care and creating waiting lists for treatment.

When any hospital treats more patients, it costs more. In the U.S. the hospital is paid for treating each patient, either by the patient’s private or public (Medicare or Medicaid) insurer, or by the patient directly. In the small number of cases where the patient is both uninsured and unable to pay, the costs are passed on to other, paying patients

Thus, US hospitals have incentives to: treat more patients because each patient brings in more revenue; hold down costs by treating patients quickly and efficiently, and; treat difficult and expensive cases, since they will be paid more for those treatments.

In contrast, in a national health system with fixed hospital budgets the incentives are reversed. The more patients a hospital treats, and the sicker they are, the quicker it will use up its budget and be forced to suspend services until new money is available. Thus, the hospital’s incentives are to spend its budget predictably by treating a steady, limited stream of patients throughout the year, and to avoid patients with expensive, but not immediately life threatening, conditions. Inevitably then, some patients are forced to wait until resources are available to treat them. Furthermore, increasing the hospital’s budget doesn’t make much difference, since the incentives remain the same. The new money is usually spent on predictable (budgetable) items like increased staff salaries.