Editor’s Note: Part 5 of a five-part series challenging the conventional wisdom and media/government response to the Wuhan virus. Click here for Part 1, click here for Part 2, click here for Part 3 and click here for Part 4.
In this final installment of our series on the Wuhan virus event, after discussing the societal and cultural fallout from Wuhan in Part 4, we need to talk about the public policy consequences which must fall from it. There are two in particular.
9. The Wuhan virus should cure us of any future Medicare-for-all discussions.
We talked in Part 1 for a brief moment about how the capacity of the health care system, which is expressed as static in every one of those “flatten the curve” graphs, has to be able to expand to meet the demand for health care, whether in a public health event like this one or just from societal trends.
What we know from experience is that public-sector health systems like the ones in European countries like Italy and Spain are inelastic, which is to say they are highly resistant to increases in demand, and quick to offer waiting lines and rationing. One of the chief issues in Italy is that the system quickly ran out of supply of respirators and ventilators, and thus people sick with the Wuhan virus were essentially denied medical care and left to die.
This is the great danger being thrown at the public with respect to the virus’ arrival in America, but there is a key difference between Italian health care and the American version.
America has the ability to innovate and expand access to health care, because American health care still contains a private-sector component.
The Mises institute had a very informative piece last week about the differences between Italian health care and South Korean health care, and what role those differences played in producing very different results when the Wuhan virus showed up in those two countries.
South Korean Healthcare
Although South Korea does have a state-monopolized system providing a universal health insurance, this state-provided insurance is not able to set prices in the market for healthcare. Hospitals and clinics routinely charge patients more than the state insurance will pay, which has caused many Koreans to take out private insurance to cover the difference. TheKorea Bizwire reports that eight out of ten Koreans take out such insurance, with the average Korean paying just over 120,000 won (about $120) a month for it.
Care is provided by a set of hospitals that are 94 percent privately owned, with a fee-for-service model and no direct government subsidies. Many of these hospitals are run by charitable foundations or private universities. Private hospitals in the country exploded in number from 1,185 in 2002 to 3,048 in 2012. The result is that South Korea has 10 hospital beds per 1,000 people, more than twice the Organisation for Economic Co-operation and Development (OECD) average (and nearly three times as many as Italy’s 3.4 beds per capita). These private hospitals also charge significantly less (between 30–85 percent of the price) than US hospitals (which are also often required to get a “certificate of need” from the government before construction, depending on what state they are built in).
In Italy, by contrast, surgeries and hospitalization provided by public hospitals or by conventional private ones are completely free of charge for everyone regardless of their income. This is entirely paid for by the the national health service, the Servizio Sanitario Nazionale (SSN) (as are family doctors’ services). Waiting times can be up to a few months for large public facilities, though they are somewhat shorter for small private facilities with contracts to provide services through the SSN. Public and private medical providers offer “free market” options in which the patient pays directly, but this is rarely taken up and thus contributes very little to hospital revenues. Emergency medical service is always free of charge.
Wait times and other quality markers are significantly worse in the south of the country, with patients often going to northern Italy for better care. Doctors graduating from Italian medical schools often go elsewhere for work, and Italian officials are seeking to respond by reducing openings in medical programs. Italy experienced an ongoing health worker shortage even before COVID-19 struck the country. The number of hospitals in the country has been on a steady decline over the last couple of decades, from 1,321 in 2000 to 1,063 in 2017. SSN prices for payments to hospitals were set below market rates for the purpose of saving money on healthcare, and the results were as expected for a de facto price control.
So how did those differences come into play? As you might imagine…
Currently, the Italian healthcare system is overwhelmed by the tens of thousands of COVID-19 cases it is already facing. They have turned to rationing care to prioritize the young, leaving those most at risk of the virus to essentially fend for themselves. Most just chalk this up to the severity and danger of the pandemic. However, the evidence tells a different story. It portrays a situation made far worse by a reliance on government-centralized healthcare that manages costs by de facto price rationing rather than a free market system. Although South Korea provides a basic safety net, it is also one of the closest healthcare systems in the world to a free market, outpacing to a significant degree even the US system (which includes a great number of supply-restricting regulations that only drive up costs and hurt availability). As a result, South Korean healthcare did what Italy’s already undersupplied system could not do—cope effectively with the pandemic and manage to get it under control without shutting down the entire country in the process.
What the South Koreans were able to do was to leverage the private sector to utilize a great deal of testing, and therefore isolate the people who needed to be isolated. The private sector is very good at that sort of thing. The public sector, by contrast, is sloppy.
President Trump’s response to the virus has been interesting, in that most of the media criticism directed at him has gone from bashing him for travel bans which turned out to be crucial in keeping this thing from getting worse faster than it has, to bashing him for an insufficient response by people who want the entire country put under martial law. But the one thing Trump has done which most gives reason for hope that this event can be successfully brought to a close is to work quickly to bring the private sector on board to boost capacity – starting with testing and moving on toward treatment of those who get sick.
With a Medicare-for-all, single-payer health system you’re going to lose that private sector. You won’t have Roche, LabCor, Qwest or even Humana or the other private hospitals. You’ll lose, to a large extent, the pharmaceutical companies hard at work on a vaccine for this thing. You lose all of the infrastructure which allows for your health care system to be elastic in the face of an event like this, and what you get instead is rationing.
A system that makes you wait 10 weeks for a hip replacement is not going to be able to handle a major viral outbreak. Period. The Medicare-for-all crowd can pretend otherwise all they want, but the fact is if you give them the health care system lock, stock and barrel they will perform no better than the Italians have when the next one of these events comes.
This should be the last we hear of that idea. We need a lot more free market in health care, not less.
10. Decouple from China as fast as we possibly can.
In the Steve Hilton video we opened Part 1 with, a cessation of our trade relationship with China, at least with respect to strategic goods, was one of the host’s main recommendations as a consequence of this event.
Hilton is right for a couple of key reasons.
First, we cannot continue to buy more than 80 percent of our pharmaceuticals from the Chinese. Those drugs were not invented in China; they were invented here. They are owned by Americans. The Chinese, as evidenced by their threats to stop exporting pharmaceuticals to America out of a sense of pique at being blamed for the initial spread of the virus, believe they own those drugs.
In an article in Xinhua, the state-run media agency that’s largely considered the mouthpiece of the party, Beijing bragged about its handling of COVID-19, a virus that originated in the city of Wuhan and has spread quickly around the world, killing nearly 5,000 people and infecting thousands more. The article also claimed that China could impose pharmaceutical export controls which would plunge America into “the mighty sea of coronavirus.”
Though the United States is a global leader in research, much of the manufacturing of life-saving drugs has moved overseas. The last American manufacturing plant to make a key component in penicillin shuttered in 2004. Since then, Chinese pharmaceuticals companies have moved in and taken over, supplying between 80 percent and 90 percent of U.S. antibiotics, 70 percent of acetaminophen and about 40 percent of heparin, according to Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations.
This is absolutely unacceptable, and it has to stop immediately. As much of our pharmaceutical manufacturing as possible needs to be brought back to American shores as soon as possible as a matter of national security. But what isn’t possible to bring back home at least needs to be moved out of China.
If we’re making acetaminophen in India, penicillin in Mexico and hydrocortisone in Brazil but not here, that’s still OK. It’s an improvement over having to take seriously the threat that because the Chinese don’t like criticism they get, they’ll withhold export of drugs we invented.
The Chinese have made themselves an unreliable and untrustworthy trading partner. This was true far before the current Wuhan virus episode made it so crystal clear. China has rapaciously violated intellectual property rights, they’ve been guilty of dumping products on the market in predatory fashion cutting across practically every manufacturing sector, they’ve engaged in a ruthless mercantilist regime, they’ve exploited their expanding role in global trade in order to conduct a mafia-style foreign policy with the developing world and they’re rapidly fueling an offensive military capability with the proceeds of that trade which ought to be going toward upgrading the economic and political status of their people.
And the experience of the Wuhan virus has shown us China’s true face. The Chinese lied about the spread of that disease for weeks, which put the rest of the world behind the eight-ball in responding to the virus; Trump’s travel ban, which was roundly panned by the mainstream media coming as it did at the very outset of the world’s public knowing about the infection, came later than it could have had China been honest about what was going on. But for his foresight in imposing it, we would have had far, far more infections than we do.
And when China finally did address the virus, they brutalized their people in the name of public health – welding shut the doors to apartment buildings, leaving people without food or medicine, arresting doctors and others for questioning government policies, and so forth. Now they want to take credit for having slowed the spread of the virus, according to them.
There is zero reason to take China’s official numbers seriously. Zero.
And after all of that, the Chinese are protesting over this thing being called the Wuhan virus. When that’s where it came from. Admittedly, the water for this campaign is being carried by the American Left in the mainstream media, though it isn’t hard to see who’s pulling their strings.
This event really ought to bring home something which has been obvious to a lot of people – which is that our 30-year experiment of offshoring much of our supply chain to a communist oligarchy in hopes the attendant prosperity would turn them into a nation of Jeffersonian democrats is a total, complete, disastrous, destructive failure. We have not profited from the experience.
Yes, there are those who have made out quite well from trading with China. Let’s see the evidence that trade with China, rather than with India, Brazil, Mexico, the Philippines, Pakistan, Malaysia or even Vietnam, was the key to that success. Each one of those countries, and certainly all of them put together sharing that supply chain, would have been happy to give American companies a lot better deal than the Chinese have – more protection of intellectual property rights, friendlier consumer markets for American export goods, better political, cultural and economic effects on their own populations. With China, what you’ve had is monopolization and a growing threat to our way of life which showed up with the rather frightening behavior toward the NBA last year, and now with this virus.
It’s a crucial priority which was already underway in the face of Trump’s tariffs with the Chinese, but the American supply chain has to be pulled out of China. Now. It can’t come soon enough. If it isn’t done it will signal we’ve learned nothing from this catastrophic experience and we’ll deserve everything we get.