The Business of Health Care

Laura Mazer, a 2nd-year medical student at Emory, has written the following good article on the business of health care, including how bad government policy is destroying the ability of hospitals to provide good service. This essay is the featured article in Winter 2007 issue of the student newspaper The Undercurrent and is reposted here with their permission:

The Business of Healthcare
By Laura Mazer -- Winter 2007

The state of California has lost more than 90 emergency rooms since 1990 -- and with them, the ability to treat hundreds of thousands of patients. In New York City, eight hospitals have shut down since 2003 after facing a financial crisis. And in Atlanta, Grady Memorial Hospital is threatening to join their ranks. Grady is the only level 1 trauma center in the area, and if it closes, it will mean the loss of almost 1,000 beds, nine community health centers, and the training facilities for two medical schools.

The cause of these and other failures throughout the country is obvious. Hospitals are providing care without receiving payment. Like any other business, hospitals have a constant list of bills to pay every month, from diagnostic tests and drugs, to basic supplies and the salaries of sometimes thousands of people. And all too often, they receive no compensation in return.

What drives the nation's hospitals to operate at an obvious deficit, giving away for free a service that is neither cheap nor easy to produce? They do it in part because they are legally required to do so. In 1986, the Emergency Medical Treatment and Active Labor Act made it illegal for a hospital to refuse care in an emergency setting, regardless of ability to pay. The Act essentially transformed emergency rooms into primary care facilities for the uninsured.

In other industries, services provided for free are considered voluntary charity. They are provided only as far as they can be supported by the business's other income, and they are neither legally nor morally required. But in healthcare, any suggestion that a hospital accept only the patients it can afford to treat is greeted with moral outrage.

Hospitals respond to this combination of legal requirements and community expectations by accepting an unsustainable patient mix that inevitably ends in crushing debt. Healthcare has become a multi-billion dollar industry incapable of demonstrating the kind of economic common sense a child with a lemonade stand instinctively displays.

Bankrupt hospitals are serving as eloquent testimony that the basic principles of economics are just as viable for healthcare as for any other industry. So why is it that fiscally responsible hospitals are considered immoral, and prosecuted as illegal? What is it that makes medicine unique?

The answer can be found in the consumer advocacy groups and professional societies that advocate for socialized medicine. In 2001, a task force assembled by the American Academy of Family Physicians proposed a system of 'free' healthcare for all Americans -- to be paid for by Americans, with a payroll tax. They declared, "There are a set of basic services that most people are expected to utilize in their lifetime, and there should be no financial barrier to these."

This is the justification offered by all advocates of socialized medicine, in its various forms. Healthcare is required. It is a basic service. It is necessary for life. How can ability to pay determine access to a requirement for life? In a civilized, industrialized country, the argument goes, it is the government's duty to provide basic necessities to its citizens.

This argument relies on the assumption that healthcare is uniquely important for human survival, that while most industries provide optional goods -- items that improve life, perhaps, but are not required for it -- healthcare is not optional. To live, you must have access to life-saving or life-prolonging therapies.

It is true that healthcare is, in certain circumstances, required for life. A patient in renal failure will die without dialysis every week. A child with a bacterial infection needs antibiotics. But reformers forget that a lack of dialysis is not the only thing that can kill the kidney patient. A lack of food, clean water, shelter, or clothing in the winter will be as deadly to the child as a lack of antibiotics.

Medicine often focuses only on the physical act of living -- breathing in and out, keeping the heart beating. But human life is more than the functioning of the moving parts. Although healthcare may be the only requirement for a brain-dead accident victim on life support, it is not the only requirement for the rest of us. To live, we need food, we need shelter, we need companionship, and work, and hundreds of other material and spiritual requirements. Healthcare is a necessity -- and after a car accident, or during a flu infection, it may be the most important necessity. But it is not the only requirement for life.

When people talk about a 'right' to healthcare, they mean an entitlement to healthcare. They mean that unlike other goods and services that must be earned through individual work or trade, healthcare should be provided for free.

Medicine is not the only industry that fulfills a necessity for life, so what entitles us to the products of this particular industry, and not others? Why not food or clothes? And why not those products that provide a good life -- feather beds or paintings or tickets to the movies? Or are we entitled to those as well?

The issue goes far beyond healthcare. It is a question of what the government's role should be in providing for its citizens. Should the government collect taxes to provide citizens with whatever goods and services they deem 'necessary?' Or is it the responsibility of individual citizens to work for whichever products and services they can independently earn -- with the government existing to secure their freedom to pursue these ends?

In other industries, Americans balk at the idea of the government stepping in to provide values to its citizens. The dangers and inefficiencies of government-run industries are well understood. We would not tolerate, for example, the government nationalizing the supermarkets. If a grocer decides to provide food to the hungry, most Americans understand that he does so voluntarily, and with his own money.

What we must understand now is that there is no reason to treat healthcare any differently.

American healthcare is failing. It's only a matter of time before hospitals around the country can no longer support themselves, and we are forced to change the system. The only solution is a means of exchange that does not rely on sacrificing the rights of some individuals to obtain values for others. The only solution is a free market.

If we want to save American healthcare, we have a moral and practical obligation to seek less government intervention -- not more.

Laura Mazer is a second year medical student at Emory University. She has a BA in biology from the University of Chicago.