Proponents of radical health care reform frequently point out the flaws in our current system. One primary critique is that American health care is expensive and, worse, all that spending doesn't necessarily result in better care.
To make this point, Atul Gawande, a physician and writer, profiles the small Texas town of McAllen, which is one of the most expensive health care markets in the country. Gawande claims that health care costs in McAllen are a result of doctors practicing bad medicine – over prescribing tests, procedures and treatments.
Gawande’s article apparently had a big impact on President Obama, and the White House frequently makes this argument about the system as a whole: “Today, we are spending over $2 trillion a year on health care – almost 50 percent more per person than the next most costly nation,” the president told the Annual Conference of the American Medical Association in June.
“And yet...for all of this spending, more of our citizens are uninsured, the quality of our care is often lower and we aren't any healthier. In fact, citizens in some countries that spend substantially less than we do are actually living longer than we do.”
It shouldn't be a surprise that there is little correlation between spending and quality in our health care system. That's what one should expect when government interferes in a marketplace, distorts competition and shields consumers from the price of a product or service.
Consider the case of public education. Some of the highest per-pupil spending occurs in the worst school districts. Washington D.C. blows through about $24,600 per pupil every year, yet it consistently remains on the bottom of the chart.
To put this number in perspective, President Obama sends his children to an exclusive private school where tuition begins at $28,442. The Obama's pay that money because they know that their daughters will receive a high quality education. But you can be sure no parent would pay $20,000 a year to send her child to the average public school in D.C. Yet that's how much taxpayers are paying for year after year of failure.
The difference is clear: in the private sector, there is a clear relationship between price and quality. Without this correlation, private schools would not have any students. But when government picks up the tab – and normal market forces and competition subside – rudimentary economic principles like the relationship between cost and quality go out the window. Government schools embroiled in waste and inefficiencies stay in business because parents have no choice.
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