Covid-19 and Medicaid for All: Part 2

This the second part of my article on the recent epidemic and government-run health care takes a look at the health care systems in Europe. In most countries over there, government is the main payer – in many cases the only meaningful funding source – for medical services. This has put the health care systems across Europe under stress in a way that we have not experienced here in America.

At the heart of the problem is, as I explained in Part 1:

-The advancement in medical skills and technology that come from research and innovation; and

-The decoupling of that cost increase from the free market that is necessary under a government-run system.

Under a free-market system the cost increases from advancements in technology and skills are mitigated by medical providers who learn to do more with less. He who excels at that will be more successful. By contrast, a government-run system has no limitations on cost hikes. Since government does not spend its own money it does not have any incentives to do more with less. Therefore, it maxes out what its taxpayers can afford – and then some – whereupon it has to turn to health-care rationing.

This is precisely what we have seen in Europe. Countries like Italy, Spain, Greece and Cyprus are frightful examples of what happens when government can no longer deliver on its health-care promises.

More on that in a moment. First, let us see what happened when European health systems were confronted with Covid-19.

Government only has one method for containing costs: rationing. Also known as “waiting lists”, health-care rationing is unavoidable under a Medicaid-for-All style system. To use Sweden as an example – a very popular country among the American left – their health care system costs every working adult 14 percent of their pre-tax income.[1] This is just the direct tax; there are services provided by local governments and there are subsidies from the central government that add up on top of this tax.

In total, the cost for hospitals, clinics, as well as ambulatory, elderly and rehabilitative care, amounts to about 12.5 percent of the Swedish GDP. To cover this entire bill, In other words, the 14-percent health care tax on personal income does not cover the full cost. Health districts – regions or landsting as they used to be called – also get substantial funding from the central government. All in all, Swedish taxpayers surrender about 20 percent of their personal income to government, solely for the funding of their health care system.

What do they get for the money? To begin with, patients have to dole out a substantial amount of money out of pocket. Based on OECD and Eurostat health expenditures data, out-of-pocket costs – we know them as deductibles and copays – account for 16 percent of the total funding of Swedish health care. This is money that patients have to pony up after government has imposed its heavy taxes on their incomes.

Swedish health care is also rationed. The Swedish government tries to conceal aspects of this problem; to take one example, Sweden does not report the staffing structure of its health care system to the EU statistics agency Eurostat. Other countries do this; in Greece, 24 percent of all hospital employees are medical doctors; about as many are nurses or midwives; just below 30 percent are other medical professionals or employees; and the rest are administrators.

We are going to review the staffing structure later. It is important to do so, as the staffing structure conveys important information on the quality of the health care a patient can expect. Put simply, the more medical doctors there are, and the more medical doctors there are per capita, the higher the presumed quality of care.

Likewise, one can measure access to health care by the staff-to-population ratio. All other things equal, the more health care staff there are per capita, the more accessible health care will be. Again, no such profile is reported by the Swedish government, [2] but Eurostat and the OECD publish valuable data for other European countries.

First, though, we turn our attention to another metric with useful information on health care quality: hospital beds. Figure 1 reports an interesting trend in the number of hospital beds per 1,000 residents. The trend is prevalent across Europe:

Figure 1: Hospital beds per 1,000 residents

Source: OECD

The density of hospital beds has declined across the board, with more health-care procedures shifting from in-patient to out-patient. However, there is a distinct outlier in Figure 1, and – again – that is Sweden. This hard-line single-payer system, which has a practically universal ban on private hospitals and – again – relies almost entirely on government for its funding, underwent a catastrophic rationing reform during the 1990s. Today, Sweden ranks at the bottom among its European peers in terms of hospital-bed supply.

It is important to note the Swedish hospital massacre. It happened during a very serious fiscal crisis, one that I covered in detail in my book Industrial Poverty. To mitigate heavy losses in tax revenue, government resorted to drastic tax hikes; at one point the tax-to-GDP ratio topped 60 percent. Yet despite bone-crushing increases in taxes in the midst of an economic crisis, government still could not balance its budget. Gasping for air in the chokehold of fiscal panic, the Swedish government coupled its confiscatory tax hikes with a long series of very hard spending cuts.

One of its many cost-slashing measures was to dramatically “reform” the health care system. The plunge in hospital bed supply was part of that “reform”. Another was to fire a lot of administrators at hospitals, forcing medical professionals to take over administrative duties and thus spend less time with patients. This, of course, only exacerbated the rationing of medical services.

It is here that the coronavirus epidemic brings together Medicaid for All, our current budget deficit and the challenges that come with a health-care epidemic. So long as the health care system can provide treatment on an out-patient basis, the decline in beds is of no consequence. The problems start piling up when a public-health epidemic breaks out and its treatment requires widespread in-patient treatment, i.e., hospitalizations.

The coronavirus outbreak provides an excellent test case for how responsive a health-care system is, or is not, to such an event. Behold Table 1 below, which compares hospital-bed supply to Covid-19 mortality rates as reported in May 2020 at the height of the epidemic by the Johns Hopkins University Covid-19 database.[3]

Interestingly, countries with a bed count above four per 1,000 residents have a visibly lower mortality rate than countries with a bed ratio below four:

  • In the left column in Table 1 are the countries with a bed count above four (average 5.85); their mortality rate is 6.27 percent;
  • In the right column in Table 1 are the countries with a bed count below four (average 2.94); their mortality rate is 8.52 percent.

Of the 15 countries in the higher-bed-count group, only three had a mortality rate above ten percent, while more than half had a mortality rate below five percent. By contrast, in the low-bed-count group five out of 12 countries experienced more than ten percent deaths, while only four saw mortality below five percent:

Table 1: Hospital beds and Covid-19 mortality

 BedsMort. BedsMort.
Belgium5.6616.4%U.K.2.5414.3%
France5.9815.3%Italy3.1814.1%
Hungary7.0212.9%Netherlands3.3212.9%
Slovenia4.507.0%Sweden2.2212.5%
Switzerland4.536.2%Spain2.9711.9%
Greece4.215.7%Canada2.527.5%
Poland6.625.0%Ireland2.966.3%
Germany8.004.5%USA2.776.1%
Austria7.373.9%Denmark2.504.9%
Estonia4.693.6%Finland3.284.7%
Lithuania6.563.6%Portugal3.394.2%
Czechia6.633.5%Norway3.602.8%
Luxembourg4.662.7%
Latvia5.572.0%
Slovakia5.821.8%
Sources of raw data: OECD (beds); Johns Hopkins University (mortality)

The numbers reported here are experimental, of course. They are based on two important premises:

  1. The hospital bed count, which is from 2017, is assumed to be representative of the bed-count number for 2020. This is an imperfect assumption, but with the exception of chainsaw-like reductions in hospital funding as in Sweden in the 1990s, the supply of beds only changes slowly over time.
  2. The bed count includes all hospitals, in other words psychiatric ones as well as those for general-admission purposes. This could be challenged as too blunt of a bed count, but there has also been anecdotal evidence in European media during the epidemic that beds in specialized facilities have been converted for the purposes of treating Covid-19 patients. Therefore, using the totality of hospital beds is a reasonable measure of the epidemic-response capacity limit of a nation’s hospital system.

Despite the experimental status of this comparison, it does suggest that health-care systems that are starved for hospital beds tend toward higher mortality rates.

Table 2 compares the same bed count, in the same two groups, with the coronavirus infection rate, or the number of confirmed cases per million residents. The average rate of coronavirus cases in the higher-bed-count group is 1,772 per million residents, with five of the 15 countries above 2,000 and eight below 1,000. Among the lower-bed-count countries, nine out of 12 exceeded 2,000 cases per million residents. Not one of these countries had an infection rate below 1,000, making for an average of 3,013:

Table 2: Hospital beds and ratio of Covid-19 cases

 BedsCases BedsCases
Luxembourg4.666,390Spain2.974,904
Belgium5.664,770Ireland2.964,885
Switzerland4.533,571United States2.774,344
France5.982,681Italy3.183,709
Germany8.002,111United Kingdom2.543,571
Austria7.371,818Sweden2.222,855
Estonia4.691,333Portugal3.392,781
Czechia6.63786Netherlands3.322,539
Slovenia4.50704Canada2.522,007
Lithuania6.56545Denmark2.501,893
Latvia5.57505Norway3.601,540
Poland6.62474Finland3.281,129
Hungary7.02350
Slovakia5.82272
Greece4.21262
Sources of raw data: OECD (beds); Johns Hopkins University (cases)

Again, countries with a more generous hospital system are better prepared to deal with a public-health threatening epidemic than those with a more stingy health care system.

The next question is how the staffing and funding structure itself affects a health care system. More on that in Part 3.


Footnotes:

[1] It is technically known as a municipal income tax, but a portion of the 30+ percent tax charged by municipalities is dedicated to the health care districts.

[2] They do report their numbers to the World Health Organization, but since their database suffers from other incompletion problems, it does not help in determining the structure of Swedish health-care staff.

[3] Please see: https://coronavirus.jhu.edu/map.html. Numbers were retrieved on May 16, 2020. The reason for choosing the month of May is to capture the readiness of a health-care system at the very onset of a crisis. More recent data would obfuscate the role of the institutional structure of the health care system itself.

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