The New Road to Serfdom (10 page)

DON’T EUROPEANIZE HEALTH CARE

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Let me—perhaps recklessly, in the circumstances—return to the example of health care. In August 2009, I was asked on Fox News whether I’d recommend the British health-care model to Americans. I replied that, if you look at international comparisons, Britain fares badly. Our waiting times are longer than in other Western nations, and our survival rates are lower. Britain is pretty much the last place in the industrialized world where you’d want to be diagnosed with cancer, stroke, or heart disease.

This wasn’t because of any failing on the part of our medical professionals, I said. Many wonderful people became doctors and nurses because they wanted to help others. But the system didn’t maximize their potential. Unlike most European health-care systems, where there is a mix of state and private provision, the British
system is monolithic: Everything is run by the government and funded out of general taxation.

The British National Health Service, I added, was the third largest employer in the world behind the People’s Liberation Army in China and Indian Railways, employing 1.3 million people. Yet the doctors and nurses were a minority within that 1.3 million: They were outnumbered by administrative and other non-medical staff.

I joked that simply to say what I was saying would open me to attacks in Britain. I would be accused of “insulting our hardworking doctors and nurses”—when, in fact, the employees of the NHS stand to gain more than anyone else from the end of a system that allows the state ruthlessly to exploit its position as a monopoly employer.

It didn’t take long for my jocular prediction to be fulfilled. A few days after my return to the United Kingdom, Labour politicians went into overdrive. It was “unpatriotic,” said Health Minister Andy Burnham, to criticize the NHS in front of a foreign audience (this from a party that has systematically handed away Britain’s powers of self-government in defiance of popular opinion and in breach of its own manifesto promise of a referendum). The Prime Minister, Gordon Brown, dedicated a passage of his speech to the Labour conference to excoriating me. The main Labour newspaper,
The Daily Mirror,
trotted out the very cliché that
I had forecast: I had, it said, “insulted our hardworking doctors and nurses.”

I recount this episode for a reason. The point that I had been trying to make in the United States was that once politicians assume responsibility for health care, they find that they have made an almost irreversible decision, and one which, over time, will open taxpayers to unlimited liabilities. Whatever the economic situation, it will be politically impossible to stop increasing the health-care budget, because doing so will lead to accusations of leaving dangerously ill people untended. Every British political party fought the 2010 election on the basis that there would have to be spending reductions in order to contain the deficit, and every one had to tack on an exemption, promising to increase spending on the NHS.

More to the point, it becomes almost impossible to suggest any reform, because the slightest criticism of the system is howled down as an attack on the people who work in it.

Nigel Lawson, Margaret Thatcher’s Chancellor of the Exchequer, wrote after leaving office:

Britain thus finds itself in a paradoxical situation. Every day, the newspapers carry horror stories about what happens in hospitals. We read of people traveling abroad for treatment, of thousands of deaths from infections picked up in wards, of potentially life-saving drugs being withheld on grounds of cost rationing. Yet no one is allowed to suggest a connection between these outcomes and the system that produces them. Do that, and you’re “insulting our hardworking doctors and nurses.”

Privately, of course, many doctors and nurses believe that the NHS needs a fundamental overhaul. Following my Fox interview—which, partly because it fell during the August “silly season,” was the leading news story in the United Kingdom—I received two sorts of e-mails: those from people who agreed, and who often recounted horror stories of their own; and those that asserted that I was a heartless Tory who wanted poor people to be left to die “as happens in America.” While there were several NHS administrators in the latter camp, most of the doctors I heard from were in the former.

For what it’s worth, I think there are ways in which the United States could usefully improve its health-care system. The current setup, partly because of the costs of litigation, is more expensive than it needs to be, and gives too much power to the insurance companies. But the one thing certain to be bigger and more remote than a big and remote insurance company is the federal government.

My own preference is for a system of individual health-care savings accounts, along the lines of what happens in Singapore. Singaporeans are obliged to pay a percentage of their earnings into a dedicated account, a small component of which must go to insure against catastrophic illness, but the bulk of which is used to pay for everyday health-care needs. Because the insurance companies have a much reduced role, health-care providers are encouraged to offer their services as cheaply as possible. Consumers, for their part, also find that thrift is rewarded: Once their savings pot reaches a certain size, they are no longer required to pay anything into it.

A consequence is that, unlike insurance-based systems, the Singaporean model incentivizes healthy activity. Instead of relying on expensive statins, for example, Singaporeans have every reason to improve their diet and exercise. The result? Singapore has a healthier population than that of the United States or Britain, with higher longevity, for less than a quarter of the price:
Health care accounts for 3.5 percent of GDP in Singapore as opposed to 16 percent in the United States.

Incidentally, it is worth stressing that in Singapore, as in every developed nation, the government pays for the health care of those who would otherwise go untreated. Its calculation is that if it concentrates on the poor, rather than trying to run a system for everyone, the poor will be better looked after—partly because the state is devoting its attention to them alone, but mainly because those on low incomes will nonetheless benefit from the general rise in standards caused by consumer choice and competition. On the measurable evidence, this calculation is correct: Poor Singaporeans are much healthier than poor Britons.

You don’t have to be a Democrat to fret about the uninsured in America. You don’t have to be a think-tank specialist to come up with better alternatives. You don’t have to be an angry populist to feel that the system of litigation, which forces doctors to take out expensive insurance against lawsuits, and pass the costs on to their patients, needs reform. But reform should be approached within the spirit of the U.S. Constitution: that is, with the citizen, rather than the government, taking charge, and respecting the jurisdiction of the fifty states.

Instead, in March 2010, the United States opted for a federal role in directing health care. Not, that is, a federal role in paying for those who would otherwise be
unable to afford treatment, but a state-administered system. True, the government option initially will sit alongside private schemes. But this is how state health care began in Canada. After a while, ministers found that, having assumed responsibility for the system, they were more or less obliged to keep expanding it at the expense of the private sector. Within a few years, the Canadian health-care system was close to being a state monopoly, with private insurance almost squeezed out. The United States is not Canada, of course, and the system adopted by the Obama administration is not the same as either the British or Canadian model. But the principle has now been established that there will be government-run provision—not simply as a safety net for the poor, but as a direct competitor to private alternatives. The system will be funded out of general taxation, with practitioners answering to state officials. I really hope you’ve thought this through, my friends. Because, believe me, there is no going back.

DON’T EUROPEANIZE WELFARE

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The expansion of the state doesn’t just reduce economic growth. More damagingly, it tends to squeeze out personal morality. As taxes rise, charitable donations fall. As social workers become responsible for
vulnerable citizens, their neighbors no longer look out for them.

Euro-sophists believe that there is something intrinsically immoral about the American system because it fails the destitute. This failure is inferred from the relatively low benefit entitlements received by poor Americans, and from the conditionality of welfare payments. It is a stock phrase of virtually every European politician, regardless of party, that “a society is judged by how it treats the worst off.” Plainly, then, there must be something selfish—and possibly also racist—about a people who keep voting for a system that treats the most needy so pitilessly.

It rarely occurs to the critics that there might be better ways to measure the efficacy of a welfare state than by the size of its budget. Indeed, in a truly successful social security system, budgets ought to fall over time as former recipients are lifted into better and more productive lives.

This, of course, was the original rationale for welfare. But it has been almost entirely forgotten in Europe, where dependency has become structural. Benefits that were intended to have a one-time, transformative effect have instead become permanent, as recipients arrange their affairs around qualifying for subventions. Millions have become trapped in the squalor of disincentives and low expectations. In Britain, which is by no means as badly off as many EU members, the
annual welfare budget, including the lump sum payments that, as in the United States, are called “tax credits,” comes to more than $200 billion a year. Yet this huge contribution has little impact on either poverty or inequality.

It’s the same story elsewhere in Europe: Paying people to be poor has created more and more poor people.

The United States is different, and different for reasons that, again, can be traced back to the DNA encoded at Philadelphia.

In 1996, President Clinton signed into law a reform package that had been proposed by the Republicans in Congress. It stands as the only meaningful overhaul of social security anywhere in the world, succeeding on every measurable indicator. Poverty, unemployment, and welfare budgets fell sharply, while satisfaction among former benefits claimants soared.

It is true that the 1996 act was passed at a time of strong economic growth; but this alone does not explain the almost miraculous shift from dependency to gainful work. The number of families on welfare fell from 5 million to 2 million, and 1.6 million children were taken out of poverty. And, perhaps most impressive, the reforms lifted groups who had been untouched by every previous welfare initiative: Poverty among black children fell from 42 to 33 percent; among single mothers from 50 to 42 percent.

So what was the magical formula? What wand did President Clinton wave to conjure so extraordinary a transformation? Essentially, he devolved responsibility. The 1996 Personal Responsibility and Work Opportunity Act shifted social security from the federal government to the states, and gave local authorities incentives to reduce their caseloads. Offered the freedom to experiment, the states seized it with gusto. Some incentivized employers to take on the workless; others organized schemes themselves; most made the receipt of benefits conditional on taking up job offers. Best practice quickly spread, as states copied what worked elsewhere.

At the same time, no state could afford to carry on as before, signing checks with a minimum of questions asked. Doing so would, as legislators well understood, make such a state a magnet for every bum in America. There was, in short, a measure of healthy competition.

It cannot be stressed too strongly that, without U.S. federalism, the 1996 reforms couldn’t have happened. The Gingrich Republicans were able to draw on successful examples from around the country. The policy was made bottom-up rather than top-down.

Prior to the 1996 welfare reform act, a handful of states had developed pilot projects, to which congressional Republicans could point. When critics of the legislation, led by Senator Ted Kennedy, warned that if states were granted greater autonomy, they would cut
benefits and services in order to drive the impoverished across the state lines, Republicans were able to reply with one word: “Wisconsin.”

Wisconsin had seen its welfare caseloads drop by almost 70 percent between 1987 and 1997, while caseloads in the rest of the country rose steeply. By 2004 almost 67 percent of Wisconsin welfare recipients were working. Wisconsin did not deport the unemployed; it spent 45 percent more per family and found them jobs, self-respect, and a sense of personal empowerment. Wisconsin, in other words, was a living, thriving refutation of those who opposed the devolution program.

Under the Wisconsin regime, claimants were individually evaluated to measure their employability. In each category, they were held accountable for their performance; if they failed to complete their required activities, they were sanctioned. For example, if they failed to show up for work, they faced financial penalties. Appeal processes were put into place to prevent abuse of the system by either recipients or caseworkers. Rather than balking at this raised level of responsibility and accountability, a large number of recipients liked the system, reporting increased self-esteem and hopefulness for the future—to the undisguised incredulity of the European journalists who were periodically dispatched to the lake-ringed state to describe its supposedly Dickensian conditions.