A Tonic For Europe's Health Care

All over Europe, government-run health-care programs are awash in red ink. Britain, Germany, Italy, Spain, and France are all trying to control spiraling health-care costs, without much success. Efforts to cap spending, cut back on wasteful practices, and close hospitals are meeting fierce resistance. Meanwhile, service is deteriorating, and anyone who can afford it escapes to the tiny but growing private health-care sector for better care. Nearly 14% of British households now have private health-care insurance as an alternative to the National Health Service.

There's no argument that many of Europe's government-run health-care systems deliver certain kinds of quality care. In most parts of Britain, for at least a week, a community midwife will visit the home of every woman who has given birth, to make sure the mother and baby are well. The reasoning: By investing in regular follow-ups, the NHS can cut down on complications and expensive trips back to the hospital. A McKinsey & Co. study also showed that Britain is one of the best places for treating chronic diabetes.

But health care is rationed in Britain and on the Continent, and the elderly and very sick are often denied expensive treatment such as hip replacements or kidney dialysis. The best equipment is often unavailable, and waiting lists grow ever longer for people needing surgery.

The truth is that every time market incentives are offered to doctors in Europe's health-care systems, their productivity rises. The result is faster, if not better, care for the sick--and lower costs to the taxpayer. Increasing competition, expanding market incentives, and privatizing a share of health care are the solutions to Europe's medical crisis. It may be a message few want to hear, but it is unavoidable.

Before it's here, it's on the Bloomberg Terminal.