Democrats seeking their party’s 2020 nomination seem convinced that health care systems in Canada and Europe are better and cheaper than America’s because the government plays a larger role in them. But our country is distinguished less by its level of public spending on health, which is near the average for developed countries, than by the protectionist nature of state intervention in hospital markets that is responsible for the leap in hospital costs The Post reported on this week.
Consider some numbers. There are 4,840 community general hospitals in America, compared to only 200 in England’s National Health Service — four times fewer per person. Whereas France performs roughly the same number of MRI scans per capita as we do, it has only a third as many MRI machines. It’s no accident that the cost of MRI scans in France is a third of what it is in America.
America’s hospitals are mostly nonprofit or publicly owned institutions, whose costs consist largely of staffing and equipment and don’t vary directly with the number of patients treated on any given day. Their revenue needs therefore depend to a large extent on the volume of patients over which capital and labor costs can be spread.
Politicians have for decades intervened in markets to protect hospitals from competition, in the hope that helping facilities overcharge privately insured patients would allow them to fund substantial charity care without risk of closure. In 2014, 43% of hospital revenues came from privately insured patients, but these accounted for only 28% of inpatient and emergency department costs.
This arrangement has also led hospitals to upgrade costly high-tech capabilities, yielding widespread overcapacity and ever-increasing prices.