Miracle Cure How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer Miracle Cure How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer By Sally C. Pipes With a foreword by Milton Friedman Pacific Research Institute San Francisco California The Fraser Institute Vancouver, Calgary, Toronto Canada Copyright © 2004 by Pacific Research Institute and The Fraser Institute. All rights reserved. No part of this book may be repro- duced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. The author of this book has worked independently and opinions expressed by her, therefore, are her own, and do not necessarily reflect the opinions of the supporters or directors of the Pacific Research Institute or the members or trustees of The Fraser Insti- tute. Printed and bound in Canada. Library and Archives Canada Cataloguing in Publication Pipes, Sally, 1945- Miracle cure : how to solve America’s health care crisis and why Canada isn’t the answer / by Sally C. Pipes ; with a foreword by Milton Friedman. Includes bibliographical references. ISBN 0-936488-91-3 (Pacific Research Institute).— ISBN 0-88975-212-5 (Fraser Institute) 1. Health care reform—United States. 2. Health care reform—Canada. I. Fraser Institute (Vancouver, B.C.) II. Pacific Research Institute for Public Policy III. Title. RA395.N7P56 2004 362.1’0973 C2004-905096-6 Table of Contents ACKNOWLEDGEMENTS .......................vii ABOUT THE AUTHOR ....................... viii PREFACE ..............................xi FOREWORD by Milton Friedman ................. xv INTRODUCTION: Why is Health Care Such a Mess and What Can We Do About It? .............xvii Part One The US Solution: Expand Consumer Choice 1. What is the Real Nature of Health Care in the United States? . 1 2. How did Big Government become Big Medicine? ......... 5 3. How is Washington Responding to Health Care Now? ...... 9 4. What Is a Third-party Payer—and What’s So Bad About It? . 13 5. Is Managed Care Good or Bad? .................17 6. Why Can’t We Get the Best Health Care at the Best Prices? . 23 7. What’s Wrong with Tying Health Care to Jobs? .........27 8. Is There a Better Way Than Employer-sponsored Health Care? .......................33 9. So What is the Solution? .....................35 10. How did Medicare/Medicaid Get So Big? ...........37 11. What About the Condition of Our Seniors? ..........45 12. What’s Wrong with Prescription-drug Coverage for Seniors? ........................47 13. Is there a Solution for Seniors? ................53 14. What’s the Proper Role for Doctors? .............57 15. What’s the Best Role for Insurance Companies? .......61 16. Why Not Crack Down On Greedy Pharmaceutical Companies? ........................65 17. How Should We Treat Pharmaceuticals? ...........75 18. Why Not Just Import Cheap Drugs? ..............81 vi Miracle Cure 19. What Role Do Lawsuits Play in Increasing Health Care Costs? ........................87 20. What Does the Future Hold For Quality in US Health Care? ........................91 21. How Would Consumer-driven Health Care Affect Doctors? How Could it Benefit the Uninsured, Seniors, and All Consumers? ...............99 22. Innovation is Alive and Well .................107 23. Consumer Power is the Answer ...............119 Notes to Part I ..........................120 Part Two The Canadian Solution: Legalize Competition Introduction: Canada’s Health Care Conundrum .........137 1. What is the Single-payer System? ...............139 2. How does Canada’s Single-payer System Differ from Universal Coverage? ...................141 3. How did the Canadian System Come To Be? ..........145 4. What does Canada Spend Every Year on Health Care? How does the Canadian Health Care Debate Affect the United States? .................151 5. Can You Give Me Concrete Evidence of the Failure of Single-payer? .......................155 6. How does Canadian Federalism Work in Practice? ......169 7. How does the Canadian System Treat Pharmaceuticals? . 171 8. Still, Americans Are the Ones Taking Buses to Canada, Right? . 181 9. Is There a Role for the Private Sector in Canada? ........183 10. Are There Benefits to the Canadian System? .........185 11. Are There Signs that Canada is Correcting its System? ....189 12. What is the Prognosis for Canada if it Doesn’t Reform? ....195 13. What is the Romanow Commission Report? How Will it Affect Access and Quality of Care? ......199 14. What are the Solutions for Canada? .............203 CONCLUSION: An Appeal to Reason and Compassion ......207 Notes to Part II ..........................208 About the Pacific Research Institute ...............217 About the Fraser Institute ....................219 vi ACKNOWLEDGEMENTS I would like to thank the following individuals for their contribu- tions to this book: Naomi Lopez Bauman, Mark Davis, and Chris- topher Middleton. I thank Dr. David Gratzer, senior fellow at the Manhattan Institute, for his invaluable suggestions. I also thank those scholars and health care experts who served as peer review- ers and the many other free-market think tanks that have encour- aged and contributed to PRI’s work in this area. I am especially grateful to my friend and mentor Milton Friedman for writing the foreword to this book and for his invaluable sug- gestions on how to improve it. And I thank Michael Walker, exec- utive director of The Fraser Institute, and his staff for co-publishing the book and for providing guidance and support along the way. Very special thanks also go to the contributors to the Pacific Research Institute, who made my work on this project possible. I am tremendously appreciative of your intellectual, as well as mon- etary, support. Any errors or omissions are my sole responsibility. —Sally C. Pipes vii ABOUT THE AUTHOR Sally C. Pipes is president and chief executive officer of the Pacific Research Institute, a San Francisco-based think tank founded in 1979. Prior to becoming president in 1991, she was assistant director of The Fraser Institute, based in Vancouver, Canada. Ms. Pipes addresses national and international audiences on health care, women’s issues, education, privatization, civil rights, and the economy. She has been interviewed on CNNfn, “20/20,” “The Today Show,” “Dateline,” “The Dennis Miller Show,” and other prominent programs. She has written regular columns for Chief Executive, Investor’s Busi- ness Daily, and the San Francisco Examiner. Her opinion pieces have appeared in the Washington Post, Financial Times of London, New York Times, Los Angeles Times, San Francisco Examiner, San Francisco Chron- icle, Sacramento Bee, and Orange County Register. She also co-authored with Spencer Star Income and Taxation in Canada and co-authored with Michael Walker seven editions of Tax Facts. A Canadian residing in the United States, Ms. Pipes writes, speaks, and gives invited testimony at the national and state levels on key health care issues facing America. Topics have included the false promise of a single-payer system as exists in Canada, phar- maceutical pricing, solving the problem of the uninsured, and strategies for consumer-driven health care. Over the past year she has participated in prominent debates and public forums, testified before five committees in the California legislature, appeared on popular television programs, participated in talk radio shows nationwide, and written several dozen opinion pieces on the issue of drug importation. viii About the author ix Ms. Pipes has held a variety of positions in both the private and public sectors. In British Columbia, the Ministry of Consumer and Corporate Affairs appointed her director and vice-chairman of the Financial Institutions Commission. She also served on the Van- couver City Planning Commission. Ms. Pipes serves on the board of the Independent Women’s Forum, the national advisory board of Capital Research Center, the board of advisors of the San Francisco Lawyers Chapter of the Federalist Society, and the State Policy Network president’s advi- sory council. She has served as a trustee of St. Luke’s Hospital Foundation in San Francisco, as a commissioner on California’s Commission on Transportation Investment (CTI), and as a gover- nor of the Donner Canadian Foundation. She was a member of California Governor Arnold Schwarzenegger’s transition team in 2003. Ms. Pipes is a member of the Mont Pelerin Society, National Asso- ciation of Business Economists, and the Philadelphia Society. While in Canada she was a member of the Canadian Association for Business Economics (president for two terms) and the Associ- ation of Professional Economists of BC. PREFACE From leisure to labor unrest—to say nothing of politics—health care has been topic A in the United States and Canada for some time. In 1997, US movie audiences erupted into applause when actress Helen Hunt went on a verbal rampage against the restric- tions in her son’s fictitious managed-care plan in the hit movie, As Good As it Gets. Half a decade later, Hollywood sent actor Denzel Washington on a literal rampage against the dominant form of health coverage in the United States. In John Q, Washington takes over an emergency room in an attempt to secure his critically ill son treatment that has been denied by his health insurance company. The Canadian health care system found itself on the silver screen in 2003 as the backdrop in the award winning film, The Barbarian Invasions. “I voted for medicare, I’ll accept the consequences,” intoned the film’s main character Remy, a left-wing Canadian pro- fessor dying from cancer. Remy was responding to his son’s effort to secure him better, and more comfortable care in the United States. “I’m lucky I’m not in the hall,” Remy quips at another point. Frustrations with health care have spilled off the screen and onto the streets in both countries as well. From October 2003 to March 2004, 59,000 Californians left their grocery store jobs to go on strike, causing themselves and their employers economic hard- ship and California shoppers inconvenience, in hopes of keeping the company-paid health insurance to which they had become accustomed.