starbucks4ever (99.54)

Voting with your feet often means a vote of confidence in the system

August 18, 2009 – Comments (4)

In the healthcare debate, opponents of the Canadian system have little else to do except to repeat that infamous "But they have lines" mantra. And of course we are presented with selective coverage of several hundred Canadians who cross the border to get treatment here. It goes without saying that HMO spimasters don't show us the inconvenient images of Americans going to Costa Rica to get treatment for 10% of the price, or the Eastern European immigrants combining a trip to their native country with a health care tour (I was one of those tourists, on at least two occasions). But these two opposite lines of trafic are very different in nature. The Americans going abroad are just choosing the cheaper option. There is really nothing to understand here. The Canadians choosing the more expensive, if quicker, option, is a more interesting phenomenon. It could mean disappointment with their current system, or else it could mean something entirely different. 

In any Starbucks cafe, the customers belong to one the two categories. There are coffee affectionados who feel that the other, cheaper coffee brands just don't make the cut. And then there are customers who have no particular objections to their local McDonalds who just feel that they can afford a $4 latte once in a while. In the former case, it's McDonald customers voting with their feet. In the latter case, it's discretionary spending. The irony is that this second type of customers must thank their cheap local McDonals for the fact that they now have some extra quarters to splurge on a premium brand of latte.

I remember that in the last years of the Soviet Union, all the liberal economists hailed the first private enterprises that just began to apear at that time. Many of those successful startups were the equivalents of Starbucks: cafes or fast food joints that charged several times more than the average price and offered good service, "atmosphere", and a better selection of food. Somehow these establishments never faced a lack of customers, which gave those liberal economists a reason to say something like this: "You see? The people are voting against socialism with their feet. If we only liberalize everything, such excellent private restaurants with become the common standard."

That was a pipe dream, and it became obvious the next day after the government listened to them and adopted their recipe. In hindsight, we can see now where they were wrong. The simple truth was that at the time, the people were still relatively well-off, and after the necessary expenses were made, there were still some extra rubles to go shopping with. When the bread for 18 kopecks disappeared from the now-private stores to appear again for a whole ruble a loaf, that was the end for these aspiring Starbucks wannabes. As their former patrons were now spending their last kopecks on milk and potatoes, these "green shoots" of capitalism had to either shut down or reposition themselves as exclusive restaurants for the very rich. The fact that under the old system, people were willing to go to a private cafe to order a 10-ruble glass of pomegranate joice was not an indication of their disappointment with the Socialist economy; it was an indication that Socialism had succeeded in bringing the price of bread down to 18 kopecks so that they could go shopping with the rest of the money.

Now, going back to the topic, this is how I am inclined to explain the medical tourism phenomenon. When you have cheap medical care from the State, that gives you the option to spend some extra money on a discretionary service. If Americans didn't have to save something like $100,000 for that inevitable day when their request for treatment gets denied by the insurance company, then sure enough, many would take that money to a premium hospital where the nurses are smiling, the bed linen is clean, and the surgeon has a diploma from Harvard. Including a trip to Ottawa if that's where such a hospital is located. If my hypothesis is correct, then the simple explanation that Canadians show some demand for expedited services becuase their basic system is efficient enough that they can afford it should lead us to a very different conclusion from the one that HMO spin masters have in mind.