The question of Health Care Reform has again been raised in Congress. Superficially the U.S. has an expensive health care system which does not produce health benefits equivalent to many other less expensive systems in the world. The justification for these perceptions are in some ways correct and in other ways misleading. We will attempt to address these questions in a comprehensive manner in the following discussion.

In the year 2000, the World Health Organization (WHO) issued a report which has been repeatedly used as a reference in our current health care debate. This report ranked 191 countries in terms of their performance relative to providing health care to their citizens. In this report, the U.S. had the most expensive per capita costs and had a relatively poor performance in terms of quality years of life expectancy. Using the WHO criteria, the U.S. ranked 37th in the world.

A short list of nations with their health care data are shown below:

A comparison of the above data and the resulting rankings reveal some apparent inconsistencies. This is because the methodology used to determine ranking did not take the data at face value. The do-gooders at the WHO assigned importance to the their collected data in the following way:

As can be seen, the assignments of relative importance has the strong smell of socialism. Note that 62.5% of the WHO rating criteria contain some aspect of promoting equality. If we were to do an "impartial" analysis of the data we would not use preconceived ideas of value. The most sensible approach would be to determine how the data in the WHO table contribute to the people's degree of satisfaction with their healthcare.

We did our own analysis of the data by performing a multiple regression of the data vs. degree of satisfaction. Prior to the regression, the data were normalized with respect to their average and standard deviation. This procedure puts them on the same scale so their coefficients show relative effects. The results of this regression is shown below:

The most significant factors turned out to be infant mortality and life expectancy. Contrary to expectations, life expectancy had a large negative effect on satisfaction. Some indication of this can be seen in the WHO table which shows Denmark with the lowest life expectancy and by far the highest degree of satisfaction. Another surprise was the relatively modest negative effect of higher costs on satisfaction.

The resulting model appeared to be able to predict 80% of the variation in satisfaction. One exception was France which had a significantly higher degree of satisfaction than the model. Some of the reasons for Denmark's and France's satisfaction may have been due to criteria other than those studied.

The problem with the data gathered by the WHO is that the data selected were correlated with each other in various ways. Furthermore, the data selected undoubtedly do not include factors that are important but not recognized. In order to get reasonably meaningful conclusions from a study such as this, intervention is required to truly isolate the effects of the various factors. In short, both the data gathering and the analysis criteria of the WHO report were flawed in serious ways. It was designed to make a dishonest case for socialism.

Over half of the WHO health care analysis was dedicated to the distribution of costs and services. The WHO apparently thinks that socialism is a given if we want the best health care system. We will now address the equal distribution fallacy with respect to incomes and health care.

GINI coefficients are used to describe how much variation in income there is within a country. It is a statistical calculation which assigns a number between 0 and 100 with the higher numbers representing more inequality of income. This tool may also be used to determine the variation in any factor of interest within a population.

Socialists like to point out that the U.S. has a high GINI number with respect to income and therefore does not approach their socialistic ideal. The problem with this analysis is that large countries tend to score higher because of higher regional differences within the country. If the U.S. were broken down into smaller sized regions, each region would produce a low GINI. This, coupled with the fact the the GINI does not consider cost of living differences makes this method of limited value.

For example, the average median family income in Des Moines, IA is $43,000 while in New York, NY it is $46,600. The cost of living in New York, however, is more than double that in Des Moines. The net result is that Des Moines residents get 95% more "bang for the buck." Interestingly, within New York itself there are greater differences in income than any other city in the United States.

The question we should address is whether equal distribution of health care costs would improve the health care in the U.S. It would seem that having the ability to pay more for health care would be an advantage for the wealthy - and this is undoubtably true. However, as with other things in life, the effect of gradually diminishing returns sets in. Socialists jump on this tendency and believe the extra money spent by the wealthy might be better utilized by those at the lower end of the diminishing rate curve.

To test this concept we tabulated the income distributions over the U.S. population. We then assumed a relatively sharp loss of return on health care as the money spent increased. If four times the money was spent on health care by an individual we assuned a 2 fold improvement in health benefit.

We integrated the health care across the U.S. income spectrum using the above rate of diminishing returns with money spent being proportional to income. Then everyone was assumed to have the same income as the national average. This would be equivalent to an equal distribution of wealth available for health care. The resulting quality of national health care increased by only 10% - even with the assumed high rate of diminishing returns.

What would be missing is the excess health care spending by the wealthy which contributes to testing advanced medical procedures. Technological development would be sharply curtailed.

The costs of our Health Care system are the highest in the world. As usual, the governmental policy makers feel they must take control in order to reduce costs and improve efficiency. A further goal is universal coverage in the form of insurance. Past experience has taught us that politicians are looking more towards the next election and less towards the future of our country.

There are four areas that need attention but they don't require a governmental take-over. They do require regulations that promote responsibility and reward progress in the private sector.

A health care plan that gives everyone equal coverage is being sold on the concept that this approach is "fair." Obviously, this plan would have to set limits on what health care is provided. Unfortunately, we all view our own lives as being infinitely valuable - especially when we are tapping pooled resources. The result is that politicians will, as they have in the past, keep adding endless benefits to buy votes.

But wouldn't it be better to have everyone choose their own limits. This can be accomplished by families purchasing an insurance policy that meets their specific needs. This is what we do with other "necessities" such as food.

What if we all pay for our own health care, whether through insurance or out of pocket payments? Then each of us will have direct control of our health care costs. This promotes competition and efficiency through the use of market forces. Without the use of market forces, the fallback position is politics. Politics, as we have seen, tends to ignore costs because false promises and votes become the top priority.

Transparency, in this context, means that individuals must be informed when they are in charge of their own health care. As the system is now, when a treatment is recommended by your physician he can not tell you what the total cost will be. It is only after the final bill is sent to you and/or your insurance company that the total cost becomes evident. It is like if you ask a contractor to build your house and he will be unable to quote you a price. Total cost will only be evident after the subcontractors have completed their work.

Furthermore, the expected probability of health improvement is not often conveyed to the patient. The expected degree of health improvement must also be conveyed. Without this information, a rational decision, which requires a cost/benefit tradeoff, cannot be made. Without rational decision making, the system is bound to eventually collapse.

The primary means of promoting efficiency is competition. This has been the engine which has long driven our economy and improved our standard of living.

Competition not only improves resource utilization but also promotes technological development. The U.S. is a leader in medical technology. The development costs associated with advancing technology are now passed on to U.S. patients. On the other hand, advancements in drugs, diagnostic tools, and procedures are picked up by other countries without having to pay the development costs.

The use of lawsuits has gotten out of hand. Lawsuits for malpractice are necessary but, in the U.S. the legal profession has milked the system in the form of class action law suits. These class action law suits provide huge profits for the lawyers, low compensation for the plaintiffs, and penalize the medical commmunity beyond what is reasonable.

The statement that 46 million Americans are uninsured is a fallacy. It is estimated that from 25 to 50% of the uninsured in this country are actually illegals. They are now getting care without paying for insurance. When people don't pay their own way in a society, the society ends up in a death spiral.

A primary concern associated with government control is the proper allocation of resources. Politicians are neither knowledgeable nor motivated enough to produce efficient allocation of the nation's resources. Strict dependence on polls is misleading since they are not conducted in a manner that permits logical decisions with respect to specific priorities. General statements are interpreted differently by every person.

The logical allocation of resources requires knowledge of the relationship between costs and benefits. As the costs go up in any program, the benefits do not increase proportionately. This is referred to as the "law of diminishing returns." This has a major influence on how we should prioritize various programs. Prioritzation is required when we have fixed resources. In other words, a budget.

In the table to the left, we have created a hypothetical set of five programs that may or may not be related. What they do require is their total cost must not exceed $1000. The original allocation represents what might occur when assets are allocated by "seat of the pants" logic. The associated benefits are determined by an objective study of results.

The adjusted allocation portion of the table was constructed using the diminishing rate of return we assumed earlier. The various programs were normalized by determining the costs at which each program would produce a cost/benefit ratio of 1. The resulting costs were totaled and compared to the budget amount. Each program cost was then multiplied by the same factor to obtain the desired total budget level of $1000.

The result was a set of programs which all have the same cost/benefit ratio. This is a basic requirement for priority setting because any program with a high cost/benefit ratio should be reduced and the extra money allocated to better performing programs.

In this hypothetical example, the total realized benefits increased by over 20%. It would not be surprising to find that our system of politically motivated spending would, with proper prioritizaton, have much more potential improvement in efficiency than shown in this example. Keep in mind that individual elements of a given program, such as health care, should also be treated in the same fashion.

It seems that as a society becomes more prosperous it becomes much less cautious in the use of wealth. A mind set takes over that is difficult to overcome. People begin to think that certain luxuries are "deserved" regardless of cost.

Let's consider the increasing size of government and the resulting taxation in the light of our previous allocation scenario. It should be obvious that government also creates diminishing returns as its size grows. The question you should ask yourself is - "would I get more benefit from my money than what I get by sending it to the government?" If the answer is yes, the size and intrusiveness of government has gotten out of hand. Inefficiency and decay will be the inevitable result.

But there is an even more overriding factor that should be foremost in our minds in the current political climate. That factor is the cummulative effect of the current disregard for our Constitution, the overturning of contracts, the passing of legislation without review, and the rejection of budget limits. Under these conditions, any legislation should be opposed - no matter what claims are made in its favor.