Addicted to the Wrong Prescription

Posted: Sep 01, 2013 12:13 AM

Every now and then we see a flurry of news stories about the dangers of prescription drug abuse. We are told that more people misuse doctor-prescribed drugs than abuse illegal “narcotics.” Then the stories disappear for a while . . . only to return again.

The problem exists, it’s large, yet it’s never solved.

We just live with it. Some of us are harmed. The rest of us move on.

This could preface any number of stories:

  1. The tragedy of the War on Drugs.
  2. The sheer insanity of the drug prescription system.
  3. The bizarre inanity of journalistic messianism, with its absurd cycles of jacked-up crises and tarted-up solutions.

Instead, take a step back: The idea of being addicted to the wrong cure — to misusing an otherwise “good” drug — is something we all understand, at least some of the time.

Misusing a cure is no mystery.

A basic truth of pharmacology, too rarely acknowledged in popular discourse, goes something like this: there is no “good medicine” or “bad medicine,” just substances that, given the right diagnosis, work at the right dose. Take too little? Not enough good effect. Take too much? The effects become at first less useful, then, with more additions, positively damaging.

This principle is called hormesis. Think of it as the diminishing returns for drugs. And it applies to all sorts of things.

Medical insurance, for example.

There are reasons why third-party (“insurance”) payments are something we tend to prefer. Super-convenient. But the convenience comes at a cost, as mounting evidence makes quite clear: insurance (and other third-party payers) that remunerate doctors and hospitals directly is what’s driving much of the price inflation in this sector.

Automobile insurance overwhelmingly pays the insurer, and we have no crisis at all in this insured sector.

This was related with utmost clarity by Dr. Jeffrey A. Singer in his recent Wall Street Journal commentary “The Man Who Was Treated for $17,000 Less.” A patient got an astoundingly better price for a surgery by simply setting aside his insurance program and paying in cash. Singer explains why:

  1. “Hospitals and other providers make their Ôlist’ prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price.”
  2. “[M]ost people these days don’t have health Ôinsurance.’ They have prepaid health plans. They pay premiums to take advantage of a pre-negotiated fee schedule arranged for and administered by a third party.”
  3. “It is the third-party payment system that interferes with true price competition, so Ômarket clearing prices’ can’t develop.”

Singer reminds us that specialty services like Lasik eye surgery, which tend not to be covered by insurance policies, have improved in quality and gone down in price.

Alas, as he laments, the United States is “headed in the exact opposite direction” from a real, cost-reducing solution.


We’re addicted to convenience. That convenience, coupled with a controlled lack of competition, lets hospitals engage in absurd cost-plus pricing and trumped up fake pricing. We no longer act as consumers on a market, but beggars with rich uncles or Big Brothers. The market cannot work properly. Medicine has been allowed to become a “mixed economy” with few of the advantages of free markets. Progress in quality while prices decrease — the miracle of modern capitalism — has been left to other industries.

The reason lies not in markets as markets. It lies in government. And our addiction to it.

Yes, we are addicted to government — which common sense should tell us is poison in large doses.

To a nation addicted to third-party payers in medicine, Obamacare is nothing more than upping the dose of the same old drug.     [further reading]

Paul Jacob is President of the Liberty Initiative Fund which works with citizens nationwide to put freedom-enhancing initiatives on the ballot. His daily Common Sense commentary appears on the Web and via e-mail.

©2013 Paul Jacob