Canadian Medicare; Doomed from the Start; T. Corcoran

The medicare debate, instead, is building around the salvage operation-how to fix the sys tem and halt its decline, how to control and man age the delivery of health care services to a popu lation that now regards free, socialized medical care as a national birthright. In the words of the British Columbia Royal Commissjon on Health Care and Costs, "It is a great system, but it needs to change." The salvage operation has taken a predictable course. In newspaper commentaries, political debates, royal commission reports, and at hospital association meetings, the common themes of reform are restated over and over again. We need a comprehensive national strategy, a major reset ting of priorities, a reallocation of funds, better management. The problem with this approach to reform of the health care systemis that it overlooks an important complication: It won't work. The best intentions, the most diligent effort, the greatest minds cannot and will not be able to overcome the problem at the heart of the decline of Canadian medical care.

Mr. Corcoran writes the Report on Business column for The Globe and Mail, Toronto, Canada. This article is from his November 23, 1991, column. The health care crisis is rooted in the same swamp that leads to the decline of all socialized systems all over the world. Numerous economists long ago pointed out that socializedstructures can not be managed, and are doomed to collapse and chaos, because they suffer from a lack of essential economic information and an inability to make economic calculations and decisions. The problem of economic calculation is not merely a technical matter that can be resolved with a few more computers or overcome by a more concentrated and dedicated brain trust. The inability to make rational economic calcula tionsto determine how much money to spend where, when, how, and why-occurs because the system has outlawed the basis for making eco nomic calculations.

Canadian medicare is expected to deliver health care to 25 million people without the three essen tial ingredients of a workable economic system: prices, markets, and profits. The arguments against prices and markets are legion. Looming largest in health care is the moral argument. We cannot, critics tell us, leave some thing as crucial as health care to a market-based system. There's no denying that the moral issues are important and worthy of every attention. But that is not the point here. The point is this:Youcan believe that socialized medicare is the most moral system in the world, ifyou want,but the fact is that socialized medicare will not work. Another popular argument against markets is to point to the United States. But the U.S. system is 183 not a market-based system. More than 40 percent of the U.S. health care system is paid for by gov ernment, the industry is heavily regulated by national and state laws, and evidence of bureau cratic and government-caused waste abounds.

Canadian medical care costs an average of $5,000a year (in Canadian dollars) for each house hold. This cost, however, is not paid by consumers of health care, which means that the essential price signals telling the system what services to provide are nonexistent. Since governments own virtually all of the health care system, there are no profit sig nals telling the owners where to invest and where not to invest. No Prices,No Markets Replacing the market are the bureaucrats and the politicians, who must make every decision and calculation-without having the essential information. There are no prices, no costs, no profits, no markets. The result is the current turmoil and the ulti mately insoluble political and pressure-group debates over numbers of hospital beds, doctors' salaries, service cutbacks, uncontrolled costs, mounting debts, nurses' responsibilities-all of which will have to be resolved by arbitrary polit ical fiat.

All we need to do, others say, is manage the system better, bring in some good, sound business practices. This is a fruitless exercise. Little pock ets of seeming efficiency might be created in some hospitals and in some areas, but the whole economic structure cannot be managed into eco nomic health. The recent report of the British Columbia Royal Commission is a tragic demonstration of the futility of the current debate. By rough count, there are 650 recommendations and sub-recom mendations, the majority of which require the gov ernment to expand bureaucratic control through thousands of additional recommendations and regulations. As the commission said: "There has never been an overall plan, and, quite naturally, the structure that has evolved lacked coherence and, some times, logic.It also lacks the ability to assess itself, to objectively judge how just, efficient and effec tive it is in providing health care."

Another 650recommendations will not change the reason the system cannot assessitself-and the recommendations, if implemented, willonly make matters worse. D 184 The Little Railroad That Could by Anthony Young W oven into the rich fabric of American history and folklore are some of the most famous railroads still operating today. You needn't be a railroad buff to recognize them: the Atchison, Topeka and Santa Fe (estab lished 1895),the Grand Trunk Western (1852),and the Union Pacific (1862) to name just three. Among these great railroads are those created recently by mergers of existing companies, with names like Conrail, Burlington Northern, and CSX. Of the thirteen Class 1 freight carriers oper ating in the United States, the smallest is the Florida East Coast Railway (FEC).! The FEC operates only 783 miles of track between its Jacksonville headquarters and Miami, but in a heavily regulated and unionized industry, it is a model of efficiency and profitability. How has this small railroad, established in 1895, man aged to survive and prosper in an industry that has seen countless railroads, both great and small,van ish from the scene?