The Good News on Health Care

There’s so much bad news about health care these days. Maybe it’s time for some good news.

One sector, technology, is advancing at a pace never seen before. Customers have a range of services to choose from, and price competition is very intense. The doctor sees you whether you have insurance or not. Customers mostly pay directly for services. Overall spending is increasing, but that’s because there are more services to purchase. Competition between providers is very intense.

Sadly, for humans, all this is taking place within veterinary medicine, and the beneficiaries are animals, mostly pets. According to The New York Times,  the demand for advanced treatment is booming, and supply is responding. The paper cites the case of Tina, the 10-year-old chow that recently underwent chemotherapy and a bone marrow transplant at a clinic associated with the Mayo Clinic. The $15,000 spent on this may sound like a lot, but it is far cheaper than the same services provided to people.

“A long list of cancers, urinary-tract disorders, kidney ailments, joint failures and even canine dementia can now be diagnosed and treated, with the prospect of a cure or greatly improved health, thanks to imaging technology, better drugs, new surgical techniques and holistic approaches like acupuncture.”

To be sure, not too many people are willing to shell out this much to help their pets achieve a better life. This is a niche market. But that makes the existence of technological progress all the more remarkable. “Improved veterinary care for all pets has increased consumer spending in this area to $13.4 billion last year from $9.2 billion in 2006, according to the American Pet Products Association.”

Some people theorize that progress in medicine is possible only with massive government involvement. You have to force business to provide insurance, for example. But only 3% of pet owners have insurance on their pets, and somehow the system works. You pay for what you need. Prices are posted and openly discussed. Everyone knows what’s what. You can even find out the costs of services by looking on the Internet. Imagine that!

Also, and strikingly, veterinary medicine is relatively unregulated compared with the human health care industry. There are no budget-busting government programs to provide for poor pets or pets in their older years. There are no prescription drug benefits. There are no subsidies, mandates or third-party payment systems, much less threats, bureaucracies or a giant central plan designed to achieve universal access.

Instead, medicine for animals works just like any other normal market. There are standards, rules and private boards to assure quality control. There are strict and highly regrettable regulations on how many universities can offer certification, a fact that undoubtedly raises prices and salaries, but harms availability. But once the certified doctor opens shop, the customer is in charge.

You know it immediately when you walk in. There is not an intimidating receptionist, a long wait that takes all afternoon, detailed checks on your coverage or anything else. Instead, it is a friendly environment in which everyone speaks to you like a normal human being. You are welcome to call the doctor by his or her first name. They tell you everything you need to know. Prices are posted openly, and you can select among a vast range of services.

The customer comes first. And there is a constant awareness at every step that the customer is the one paying the bills, and that changes everything. You get thorough explanations of every option and procedure, along with a realistic look at risks relative to spending. You are in a position to accept or refuse, which gives the entire clinic a strong reason to be open and forthcoming about every aspect of treatment.

There are sometimes malpractice lawsuits, but they are rare because there is such open discussion of risks and uncertainties. The typical veterinarian pays $500 per year in insurance to guard against such lawsuits. The annual fees for human doctors are $15,000 and up.

What I find most striking in this case is the way progress in animal health care is happening as if driven by an invisible hand. There are no congressional debates, executive decisions or plans from the White House, no nationwide solutions imposed from the top down.

Now, you might say that this is a superficial example, that humans are obviously more important than animals, so it makes no sense to compare the two systems. The truth is that the same laws of economics of apply to both. The laws of economics are universal and apply to every sector in all times and all places. So there are lessons to be learned.

If the customer were not paying and the doctor were paid by a third party through some sort of mandate with a centrally planned price list, you would see prices go through the roof. Moreover, if there were some sort of universal access provided by government funding and control, you would see further upward price pressure.

In fact, if you were to set out to wreck this industry, you would follow a path very much like what has occurred in human health care. You would have business be responsible for the insurance, and make that insurance pay not only for emergency situations but for routine care involving simple shots and fleas. Then you would create giant programs to provide funding for young pets, old pets and poor pets and contemplate the bliss of universal coverage. If anything ever went wrong, you would have courts side with the pets over the doctor every time. You would have the government fund massive pet hospitals and insist that there should be no range of services, but rather that absolutely every pet has a “animal right” to the best care available no matter what.

You would popularize arguments: “Animal care is too important to be left to the wiles of the free market.” Maybe you would even put this statement in a U.N. charter document on universal rights. In short, if you wanted to wreck this sector, you would socialize it, thereby dramatically reducing service, raising prices, increasing costs and stopping technological advance.

So far, the health care debate for humans has been driven by all the wrong impulses. The correct example of where we need to be going is right in front of our eyes. But it would mean getting the government to give up its control, and there is no more difficult task than that.


Jeffrey Tucker

The Daily Reckoning