Last post I noted that many Austrians assume that public healthcare is a guaranteed public good. Today I will examine how this mentality endangers the continued functioning of the system. While I will only examine Austrian healthcare, Austria can serve a proxy for similar scenarios in other countries.
Healthcare is financed in Austria primarily through government subsidies and compulsory nationalized health insurance. Funding is raised through various taxes and health insurance contributions deducted directly from wage earnings. As such healthcare has a capacity limit. The total volume available is constrained by the government’s ability to levy taxes and charge insurance premiums.
Unfortunately, healthcare costs are exploding. In 2018, two years before COVID-19, experts warned of impending collapse. Most alarming is that over 42% of capital outlays are spent on treating chronic, yet preventable, conditions such as Type II diabetes and high blood pressure.
Too little focus is placed on prevention and personal responsibility. Individuals are allowed to neglect their health over years subsequently reaching critical conditions where they require dialysis and/or hospital care because of strokes or cardiovascular emergencies.
Annual Austrian healthcare expenditures are 1,000 euros higher per capita than the EU average, although average Austrian life expectancy is not significantly above the EU average. On average Austrians suffer approximately 20 years from preventable chronic illnesses before dying at extreme costs to the healthcare system. The situation is dire. Critical medical infrastructure is undeniably at risk.
Austria has some of the steepest taxes in the EU regardless of category – sales, labor, consumption, capital gains, etc. – as well as some of the highest social security contributions. Increasing healthcare system availability while maintaining current quality is unlikely feasible by levying additional taxes or raising insurance premiums. Any expansion of services can only be achieved through:
- budget reductions elsewhere. Such cutbacks, however, would limit the ability of the government to provide other critical services such as education, national defense, or public transportation. These tradeoffs would not be without societal costs.
- reducing overhead. Overhead optimization, however, can only achieve limited gains. At some point, further optimization is no longer possible without reductions in service quality.
- decreasing demands placed on the healthcare system.
It is the third course of action that the government has taken with ongoing COVID-19 lockdowns. Are these actions justifiable? Can they be extrapolated to address demands placed on the system by preventable chronic illness? Leave a comment.