Leaving aside for a moment whether the health-care industry is really dominated by the profit motive (given that almost half of U.S. health-care expenditures are paid for by the federal government, it is not clear which motives dominate) and whether Moore knows better than millions of individuals what their health-care needs are, the claim that a “motive” is a root cause of social pathologies is worthy of some critical reflection. The critics seem to suggest that if people and firms were motivated by something besides profit, they would be better able to provide the things that patients really need.

The overarching problem with blaming a “motive” is that it ignores the distinction between intentions and results. That is, it ignores the possibility of unintended consequences, both beneficial and harmful. Since Adam Smith, economists have understood that the self-interest of producers (of which the profit motive is just one example) can lead to social benefits. As Smith famously put it, it is not the “benevolence” of the baker, butcher, and brewer that leads them to provide us with our dinner but their “self-love.” Smith’s insight, which was a core idea of the broader Scottish Enlightenment of which he was a part, puts the focus on the consequences of human action, not their motivation.

What we care about is whether the goods get delivered, not the motives of those who provide them. Smith led economists to think about why it is that, or under what circumstances, self-interest leads to beneficial unintended consequences. It is perhaps human nature to assume that intentions equal results, or that self-interest means an absence of social benefit, as was often the case in the small, simple societies in which humanity evolved. However, in the more complex, anonymous world of what Hayek called “the Great Society,” the simple equation of intentions and results does not hold.

As Smith recognized, what determines whether the profit motive leads to good results are the institutions through which human action is mediated. Institutions, laws, and policies affect which activities are profitable and which are not. A good economic system is one in which those institutions, laws, and policies are such that the self-interested behavior of producers leads to socially beneficial outcomes. In mixed economies like that of the United States, the institutional framework often rewards profit-seeking behavior that does not produce social benefit or, conversely, prevents profit-seeking behavior that could produce such benefits. For example, if agricultural policy pays farmers not to grow, then the profit motive will lead to lower food supplies. If environmental policy confiscates land with endangered species on it, owners of such land who are driven by the profit motive will “shoot, shovel, and shut up” (that is, kill off and bury any endangered species they find on their land).

The same issues can be raised in the health-care industry. Before blaming the profit motive for the problems in the industry, critics might want to look at the ways in which existing government programs like Medicare and Medicaid, the interpretation of tort laws, and regulations such as those that limit who can practice what sorts of medicine might lead firms and professionals to engage in behavior that is profitable but unbeneficial to consumers. Labeling the profit motive as the source of the problem enables the critics to ignore the really difficult questions about how institutions, policies, and laws affect the profit-seeking incentives of producers and how that profit-seeking behavior translates into outcomes. Placing the blame on the profit motive without qualification simply overlooks the Smithian question of whether better institutions would enable the profit motive to generate better results and whether current policies or regulations are the source of the problem because they guide the profit motive in ways that produce the very problems the critics identify.

For example, high medical costs may well be a result of profit-seeking providers’ recognizing that government programs are notoriously bad at pricing services accurately and keeping good track of their expenditures. Ignoring the way institutions might affect what is profitable is often due to a more general blind spot about the possibility of self-interested behavior generating unintended beneficial consequences. Before we attempt to banish the profit motive, shouldn’t we see whether we can make it work better?

Placing blame for social problems on the profit motive is also easy if critics offer no alternative. What should be the basis for determining how resources are allocated if not in terms of profit-seeking behavior under the right set of institutions? How should people be motivated if not by profit? Often this question is just ignored, as critics are merely interested in casting blame. When it is not ignored, the answers can vary, but they mostly invoke a significant role for government. The interesting aspect of such answers is that critics do not suggest that we somehow convince producers to act on the basis of something other than profit, but that instead we replace them with presumably other-motivated bureaucrats or have those bureaucrats severely limit the choices open to producers. The implicit assumption, of course, is that the government personnel will not be motivated by profits or self-interest in the same way as the private-sector producers are.

How realistic this assumption is remains highly questionable. Why should we assume that government officials are any less self-interested than private individuals, especially when the door between the two sectors is constantly revolving? And if government officials do act in their self-interest and are motivated by the political analogs of profits (for example, votes, power, budgets), will they produce results that are any better than the private sector’s? If blaming the profit motive entails giving government a bigger role in solving problems, what assurance can critics of the profit motive provide that political officials will be any less self-interested and that their self-interest will produce any better results?

One will look in vain in Sicko, for example, for any analysis of the failures of state-sponsored health care in Cuba, Canada, Great Britain, or anywhere else. To blame the profit motive without asking whether an alternative will better solve the problems supposedly caused by the profit motive is to bias the case against the private sector.

How Will They Know?

Even this argument, however, does not go far enough. We are still, after all, focused on intentions and motivation. What critics of the profit motive almost never ask is how, in the absence of prices, profits, and other market institutions, producers will be able to know what to produce and how to produce it. The profit motive is a crucial part of a broader system that enables producers and consumers to share knowledge in ways that other systems do not.

Suppose for a moment that we try to take the profit motive out of health care by going to a system in which government pays for and/or directly provides the services. Suppose further that we could, somehow, ensure that the political officials would not be self-interested. For many critics of the profit motive, the problem is solved because public-spirited politicians and bureaucrats have replaced profit-seeking firms.

Well, not so fast. By what method exactly will the officials know how to allocate resources? By what method will they know how much of what kind of health care people want? And more important, by what method will they know how to produce that health care without wasting resources? It’s one thing to say that every adult should, for example, have a checkup every year, but should it be provided by an MD, an LPN, or an RN? What kind of equipment should be used? How thorough should it be? And most crucially, how will political decision-makers know if they’ve answered these questions correctly?

In markets with good institutions, profit-seeking producers can get answers to these questions by observing prices and their own profits and losses in order to determine which uses of resources are more or less valuable to consumers. Rather than having one solution imposed on all producers, based on the best guesses of political officials, an industry populated by profit seekers can try out alternative solutions and learn which ones work most effectively. Competition for profit is a process of learning and discovery. For all the profit-critics’ concern—especially but not only in health care—that allocating resources by profits leads to waste, few if any understand how profits and prices signal the efficiency (or lack thereof) of resource use and allow producers to learn from those signals. The most profound waste of resources in the U.S. health-care industry stems from the incentives and market distortions created by government programs such as Medicare and Medicaid.

Thus the real problem with focusing on the profit motive is that it assumes that the primary role of profits is to motivate (or in contemporary language “incentivize”) producers. If one takes that view, it might seem relatively easy to find other ways to motivate them or to design a new system where production is taken over by the state. However, if the more important role of profits is to communicate knowledge about the efficiency of resource use and enable producers to learn what they are doing well or poorly, the argument becomes much more complicated. Now the critics must explain what in the absence of profits will tell producers what they should and should not do. Eliminating profit-seeking from an industry doesn’t just require that a new incentive be found but that a new way of learning be developed as well. Profit is not just a motive; it is also integral to the irreplaceable social learning process of the market. Critics may consider eliminating the profit motive the equivalent of giving the Tin Man from Oz a heart; in fact it’s much more like Oedipus’ gouging out his own eyes.

This ranking is curious because the actual life expectancy of the average American differs very little from that of the average European. At birth, average life expectancy in the European Union is 78.7. For the average American it is 78. And this doesn’t adjust for factors that can affect the averages which are unrelated to health care, such as lifestyle choices, accident rates, crime rates, and immigration. Health isn’t entirely about longevity but it certainly is a major component. 

What is not mentioned by Moore, or others citing the WHO report, are the measures being used to rate the various countries and who is doing the measuring. There are many ways to nudge ratings in one direction or another that are not directly related to the actual item being measured.

For instance, one might produce a study on transportation. The purpose of transportation is to get people from where they are to where they wish to be. You might rate how quickly people can move, how cheaply they can move relative to their income, how conveniently they can move, and how free they are to move. 

You would think the United States would rate high in such a study. Americans tend to be wealthier than the rest of the world. There is widespread ownership of cars. Gasoline prices are lower than in most other countries. On average, the typical American can travel quicker, cheaper, and more conveniently than people in most parts of the world. But what if this index included other factors as well? For instance, if a major component was the percentage of commuters who use public transportation, that would push the United States far down in the ranking. A larger percentage of the people in other countries have no other option but public transportation. 

In 2000, when the report was issued, WHO was run by Gro Harlem Brundtland, a former prime minister of Norway and a socialist. She doesn’t think the results of a health system alone are important. Rather, she wants to know if the system is “fair.” In introducing the WHO report she wrote that while the goal of a health system “is to improve and protect health,” it also has “other intrinsic goals [that] are concerned with fairness in the way people pay for health care.” She is clear about the ideological factors she thinks are important: “Where health and responsiveness are concerned, achieving a high average level is not good enough: the goals of a health system must also include reducing inequalities, in ways that improve the situation of the worst-off. In this report attainment in relation to these goals provides the basis for measuring the performance of health systems.”

True to her ideological roots, Brundtland prefers socialized medicine over private care. Drawing her first conclusion about what makes a good medical system, she declares: “Ultimate responsibility for the performance of a country’s health system lies with government. The careful and responsible management of the well-being of the population—stewardship—is the very essence of good government. The health of people is always a national priority: government responsibility for it is continuous and permanent.”

One WHO discussion paper states, regarding “fairness” in financing, “we consider only the distribution, not the level, as there is no consensus on what the level of health spending should be.” Equal results, not necessarily good results, are the focus. 

When Moore or others refer to the WHO index as proof that private health care doesn’t work, they aren’t being totally honest because they fail to disclose that the index lowers the scores of systems that don’t satisfy socialist presumptions.

A Second Rigged Study

The New York Times in August editorialized that American health care “lags well behind other advanced nations.” The newspaper relied in part on the WHO rankings as proof. For the rest, it relied on a more recent study by the Commonwealth Fund. But that study, which compared the United States to five other wealthy countries, has weaknesses similar to the WHO study.

The Commonwealth Fund marked down the United States partly because “All other major industrialized nations provide universal health coverage, and most of them have comprehensive benefits packages with no cost-sharing by the patients.” Again the American system loses points because it doesn’t provide socialized medicine. And the Times neglected to note that “no cost-sharing” means the people have paid through taxes whether they receive the care or not. 

Non-Emergency Visits

The United States also was penalized because seeing a physician for non-emergency reasons is harder to do on nights and weekends than in the other five nations. The Fund said “many report having to wait six days or more for an appointment with their own doctors.” 

The survey didn’t look at the treatment of serious conditions. Waiting weeks or months for chemotherapy is not held against a health-care system, but waiting a few days to have a check up is. Waiting time for “elective” surgery is counted (the United States was a close second to Germany), but waiting time for non-elective, serious surgery did not count, though that is precisely where socialist systems do the worst.

This issue is not unknown to the Commonwealth Fund. In 1999 it published The Elderly’s Experiences with Health Care in Five Nations, which found significant delays for “serious surgery.” Only 4 percent of the American seniors reported long waits for serious surgery. The rate was 11 percent in Canada and 13 percent in Britain. For non-serious surgery the differences were more obvious: 7 percent in the United States, 40 percent in Canada, and 51 percent in Britain. 

In the latest survey, the United States came in dead last for health “safety,” but many of the scores were only a few points apart. For instance, 15 percent of American patients said they “believed a medical mistake” had been made in their treatment within the last two years. Notice this is merely patient perception and nothing objective. But the best score was in Britain, where 12 percent said this.

The United States is also marked down because 23 percent of patients report delayed or incorrect results on medical tests they took. That is far worse than the best country, Germany, at 9 percent. But what constitutes a delay? If a result is expected in a week but takes two, that is a delay. But if it is expected in three weeks and arrives then, that isn’t a delay. Thus what constitutes a delay depends on expectations, leading to counter-intuitive results.

The United States also lost credit because fewer Americans report having a regular doctor for five years or more. But Americans are more mobile than many other people. CNN reports that Americans move every five years on average. In comparison, Britain has a moving rate of 10 percent a year, or an average of once a decade. And 60 percent of those move about three miles.

Freer to Change Doctors

Americans are also freer to change doctors if they wish. Britain requires patients to sign up with physicians, and once they do so, they are pretty much stuck unless they want to end up on the waiting list of another physician. Patients often have to wait to get on the books of a physician and only then can they be treated; that is, they wait to get on a wait list. This is true even for heart transplants. The inevitable waiting is a disincentive to change doctors.

Another measure used by the Commonwealth Fund is centralization of medical records. If a country has a system that allows doctors anywhere to tap into the patients’ records, it is rated higher. The United States has no centralized database and so is rated lower. Many Americans may prefer to have their records private and dispersed. When the Clinton plan was proposed in 1993, one of the rallying points that helped defeat it was the centralization of health records.

Out-of-pocket expenses were counted against a system as well. In socialized health care these expenses are zero or very low but are replaced with taxes. Taxes, however, don’t lower a country’s score because the care “is free.”

Countries were also judged on the number of patient complaints. But different cultures have different attitudes toward complaining. Jeremy Laurance wrote in the Belfast Telegraph recently that the National Health Service needs “a healthy dose of American belligerence.”

Finally, the United States is ranked last among the six nations surveyed  in infant mortality. What is not discussed is that nations define infant mortality differently. Any infant, regardless of size or weight or premature status, who shows sign of life is counted as a live birth in the United States. Germany, which ranks number one in the Commonwealth Fund survey, doesn’t count as a live birth any infant with a birth weight under 500 grams (one pound). How valuable is a comparison under those circumstances?

One could easily design a survey that would rank American health care high and other nations low. But this does not mean the American system is what it should be. Its successes and innovation can be attributed to the vestiges of freedom, but government has saddled the system with so much intervention that it is far from market oriented. Instead of worrying about irrelevant international rankings, we should be working toward freeing the medical market.