Can you imagine a columnist writing "Food and Profits, a Poor Mix?" Eduardo Porter's "Economic Scene" column for Wednesday's New York Times Business Day was similarly titled: "Health Care And Profits, A Poor Mix [1]."
Porter, who previously covered economics as a reporter for the paper, showed his mistrust of the market to provide vital services like adequate health care and pensions, advancing his left-wing argument via a narrow 30-year-old study.
Thirty years ago, Bonnie Svarstad and Chester Bond of the School of Pharmacy at the University of Wisconsin-Madison discovered an interesting pattern in the use of sedatives at nursing homes in the south of the state.
Patients entering church-affiliated nonprofit homes were prescribed drugs roughly as often as those entering profit-making “proprietary” institutions. But patients in proprietary homes received, on average, more than four times the dose of patients at nonprofits.
Writing about his colleagues’ research in his 1988 book “The Nonprofit Economy,” the economist Burton Weisbrod provided a straightforward explanation: “differences in the pursuit of profit.” Sedatives are cheap, Mr. Weisbrod noted. “Less expensive than, say, giving special attention to more active patients who need to be kept busy.”
This behavior was hardly surprising. Hospitals run for profit are also less likely than nonprofit and government-run institutions to offer services like home health care and psychiatric emergency care, which are not as profitable as open-heart surgery.
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These profit-maximizing tactics point to a troubling conflict of interest that goes beyond the private delivery of health care. They raise a broader, more important question: How much should we rely on the private sector to satisfy broad social needs?
Well, food is a "broad social need" that's covered quite effectively via a private sector phenomenon known as "grocery stores."
From health to pensions to education, the United States relies on private enterprise more than pretty much every other advanced, industrial nation to provide essential social services. The government pays Medicare Advantage plans to deliver health care to aging Americans. It provides a tax break to encourage employers to cover workers under 65.
Porter thinks the free market, which has provided more goods more cheaply to a larger number of people than any other system, is an example of American narrow-mindedness. In Porter's world, the more "collective responsibility" (i.e. socialism) the better.
Our reliance on private enterprise to provide the most essential services stems, in part, from a more narrow understanding of our collective responsibility to provide social goods. Private American health care has stood out for decades among industrial nations, where public universal coverage has long been considered a right of citizenship. But our faith in private solutions also draws on an ingrained belief that big government serves too many disparate objectives and must cater to too many conflicting interests to deliver services fairly and effectively.
After ominously suggesting the socialization of pension plans: "....401(k) plans are riskier and costlier to administer than Social Security," Porter claimed America's health-care system a failure because some get more complete care than others. Never mind that America performs more life-saving high-end health-care procedures, like risky surgeries, than any country on Earth.
By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.
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We may want to broaden the debate. The relevant question is how best we can serve our social needs at the lowest possible cost. One answer is that we have a lot of room to do better. Improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation.