Last month, I had a medical emergency and ended up in an ER. There, they solved the emergency by implanting a temporary device. The use of such a device implies an increased risk of 3 percent to 10 percent per day of having a severe infection, on top of limiting my mobility to the point of making it extremely difficult for me to leave home.

　　Therefore, I hurried to consult a specialist to arrange for surgery to solve the problem definitively. He graciously received me the next day. After discussing the best procedure for my case, to my disbelief, he told me he was only able to schedule an appointment with a surgeon no earlier than three weeks later. The surgeon would then tell me how many weeks or months it would take him to schedule the surgery. Only after I insisted did the specialist give me an antibiotic to prevent an infection.

　　By then, I realized that according to the “protocols” followed in the United States for similar cases, once the emergency has passed, the procedure to address the problem is considered an “elective” one. So, no priority is given to people in my situation—at least in the United States. When I called my old doctor in Brazil, he was able to perform the same procedure the American recommended the following Sunday.

　　I do not question the technical skills or common decency of the professionals I interacted with in the United States—the service I got at the ER was fast and skillful, solving an issue that could have quickly escalated to a life-threatening condition. Nonetheless, there is no question that I got better and timely treatment in Brazil at a fraction of the cost of performing the same procedure here in the US. The question then is, why is that so?

　　I am an economist and a lawyer by training. Most of my research is on the relation between institutional arrangements and economic performance in money and banking. Although I am not naïve about malice and stupidity, I am convinced, as I just said above, that the American health professionals with whom I interacted were competent and decent people. The problem lies elsewhere—the plethora of misaligned and perverse incentives created by the institutional setting under which healthcare is provided in the United States.

　　It is common for people to say that the American healthcare system is “the best in the world,” usually in association with news about medical innovations. Sadly, that could not be farther from the truth. Although healthcare in America is the most expensive in the world, the results are dismal.

　　Exhibit A is the life expectancy of Americans compared with life expectancy in countries with similar income per capita—about 10 percent lower. Notwithstanding controversies about the impact of car ownership and accidents in those statistics, it seems undeniable that inefficiencies in the US healthcare system are a big part of that problem. Just think about the statistical certainty that I would have an internal infection for using that device for more than a few days. How many persons in the same situation contract those infections? How many of those die or are left with severe sequelae?

　　What went right in my medical treatment in the United States was the timely and effective ER treatment that ended the emergency. Before going to the hospital, however, I called a more specialized clinic in my naiveté only to hear from the answering machine that the clinic does not perform urgent treatments, and if you have one, “call 911 or go to an ER.”

　　Why is that? The most expensive service provided by a hospital is treating emergencies. Therefore, it is reasonable to expect that hospitals generally would want most to enter their premises through their emergency rooms.

　　What is in that for the medical clinics? First, many, if not most, are now part of the same medical groups that own the hospitals. Unsurprisingly, they have decided not to compete with other branches of their employers by providing services for which they would charge less than what is charged for a visit to an emergency room, even if they have the specialization needed to offer them better and in a more cost-effective way. Second, that seems an excellent way to avoid legal liabilities and to make the entire operation easier. Why bother with complex cases if you can direct them to the ERs?

　　How about the insurance companies? It seems evident that given the structure of payments of most health insurance policies, where beneficiaries are forced to pay a significantly higher co-pay for emergency services than for a medical appointment to perform a simple procedure, inducing people to get emergency treatment creates an implicit disincentive for them to procure any medical treatment. In other words, that works as a service-rationing scheme. Suppose you cannot wait three months to see a doctor, and what you need goes beyond what a nurse at an urgent care may provide; the only alternative is to go to an ER, where you will need to pay thousands of dollars out of pocket. In that case, many families will decline to go to any physician at all until the situation becomes dire (when, unfortunately for many, that may be too late).

　　It is common sense that if you have the level of political meddling to which healthcare is subject in the United States, the players in such a market will concentrate instead of competing to increase their bargaining power in the political game they are forced into. The vertical integration of hospitals and medical clinics is just an example. The partition of the market among a few insurance companies to guarantee monopoly power for them in the states they operate is another.

　　The bottom line is that healthcare is just one more instance in which bad political decisions have life-and-death consequences.

　　The costs incurred by physicians to cope with the risks of malpractice litigation and the bureaucratic procedures imposed by third-person payees such as insurance companies imply that medical doctors need to earn hundreds of thousands of dollars before a single penny enters their pockets. No wonder you are lucky when you go to the doctor if he spends more than five minutes with you.

　　Another anomaly that is difficult to understand is why there are so few medical schools in a wealthy society like the United States. The Brazilian population is about 60 percent the size of the American population, but Brazilian income per capita is just one-eightieth of the Americans. Being fifty percent more populous and eight times more prosperous, you would be surprised to know that as late as last year, there were just twice as many medical students in the United States as in Brazil. Considering the size and income of the population, there are proportionally many more medical students in Brazil than in the United States despite the growth in the number of medical students in recent years in America.

　　To explain why that is the case, an obvious culprit is the corporatist spirit of the medical guilds and other vested interests. That may be seen in the red tape involved in making it so hard, compared to many other countries, to educate more young Americans in medicine, such as caps on residence slots, and the requirement for medical students to have a BA before applying.

　　Last but not least, again, it is common sense that if two-thirds of expenditures with healthcare in the United States are tax-funded, as is the case nowadays, the incentives created by the rules of the game are such that the players will compete to maximize the rents they can extract with little regard for anything else.

　　My employer provides generous, comprehensive, and expensive health insurance that gives me flexibility and a modicum of incentives to shop around when in need of health services. The experience of my last twenty years living in the US, and not only this most recent episode, has shown me however that my best options usually are to go back to Brazil, to pay for whatever procedure I need directly to the providers, be that physicians, image or lab tests, or hospitalization. That way, I can get excellent care at reasonable prices when measured in US dollars and pay it using funds from my HSA.

　　The majority of Americans, however, do not travel abroad as often as I do or do not have the knowledge that better care is available in places in which the provision of medical services is regulated by more sensible rules. Brazil is a very dysfunctional society, one that has failed many of its people, and to show you that, I don’t need to go further than to the homeless couple sleeping under the entrance porch of a medical lab I went to early in the morning while there. Still, health services are arranged under mostly sensible rules, such as allowing for a significant part of those services to be provided by direct agreement between the patients and the health professionals, without the intervention of the government or other third-party payees, or without risking unreasonable malpractice litigation.

　　On the other hand, although health services are provided in the United States under bad rules, Americans still enjoy large swaths of life in which the institutional arrangements are such that people are rewarded for their good decisions and punished for their bad ones. People are rewarded for serving their fellowmen well and punished when not doing so. That is true in all spheres of social life where private property and freedom of contract still regulate human interaction, not distorted by privileges, government mandates, and regulations, as with health services.

　　Under more sane interpretations of the commercial clause in the US Constitution, the state oligopolies enjoyed by insurance companies would be dismantled instead of enforced. Under more sane applications of torts, interpretations prevented by statutes issued for many decades now, frivolous malpractice litigation would be curbed, not enhanced. Under laws that would level the playing field of the tax treatment given to health insurance, many of the misaligned incentives created by the fact that the beneficiary is not paying for the bulk of the health provision cost could be corrected.

　　If federal bureaucracies were to return the legislative power taken by the administrative state back to Congress, all the red tape that made the provision of health services in America so outrageously expensive could be reversed. After all, bureaucrats are unaccountable to the citizenry, nor have their interests aligned with the interests of the voters as elected politicians do. So, no wonder that agency capture is a widespread phenomenon, nor that their corporatist interest are the ones that usually prevail when they choose to exercise the political power delegated to them.

　　One does not have to go further than to market attempts to minimize these problems, such as creating “minute-clinics” by retailers and other “walk-in” services to see the potential for cost reduction if the burdens imposed by bureaucrats were reduced. Under the current rules, and even more so, if the lobby to limit them is successful, however, they are of limited value. For instance, you are monitoring with the assistance of a cardiologist a history of tachycardia. You are experiencing what seems to you an increased frequency in the episodes, your cardiologist does not have an opening in the next few months, the main urgent clinics do not provide such a service for reasons that I will not speculate, in most places, the only option is to go to an ER. In summary, those new, innovative, and so far, lightly regulated out-of-the-box health providers like informal economic activity in developing countries, which is better than nothing, a relief for many, but they are far from being an effective solution for the overall problem since the same lack of regulations that allow them to exist allows legal jeopardy that may compromise their long-term viability.

　　The bottom line is that healthcare is just one more instance in which bad political decisions have life-and-death consequences, and it is sad to see so much of the American strength being sapped by that.