Free-lunch medicine: part II

Posted: Nov 14, 2003 12:00 AM

Any attempt at a rational discussion of the economic realities of government-controlled medical care is almost certain to run up against the trump card of the political left: The Poor.

The image that is often invoked is that of the elderly poor, forced to choose between food and medical treatment. Who could be so heartless as to abandon them to the vagaries of the free market?

This has proved to be a very effective political strategy for extending government power, not only over medical care but also over housing and other sectors of the economy.

The phoniness of this argument becomes apparent the moment you suggest that money be set aside specifically for dealing with the special problems of the poor, rather than bringing whole sectors of the economy under the dominance of politicians, bureaucrats and judges.

The amount of money needed to take care of the poor is often some minute fraction of what sweeping new government programs cost. But, while big government liberals are willing to use the poor as human shields in their political battles, their more basic strategy is to proclaim that everyone has a "right" to some "basic need" that they want the government to provide.

As a matter of practical politics, programs for the poor alone do not have as large a constituency as programs to give everybody some benefit, so that we can all have the illusion of getting something for nothing -- or at some arbitrarily defined "reasonable" or "affordable" price.

It is completely unreasonable to talk about reasonable prices.

Such talk amounts to saying that economic realities have to adjust to what we are willing to pay, because we are not going to adjust to economic realities. The biggest economic reality that gets ignored in discussions of medical care is that developing a single new medicine or training a single new doctor takes huge amounts of resources.

What we think we can afford has nothing to do with what pharmaceutical drugs cost to develop. Nor does it have anything to do with the costs of training a new doctor or building a new hospital. We are either going to pay those costs or we are not going to get the quantity or the quality that we want.

Schemes for re-importing American drugs from Canada or buying in bulk from pharmaceutical companies are essentially ways of shifting costs around -- without reducing these costs by one cent. Already government agencies, HMOs and others are engaged in shifting medical costs onto somebody else. But, for society as a whole, there is no somebody else.

No matter how much the costs are shifted around in clever shell games, those costs do not go away. That is the hard reality which no political rhetoric can change.

The only reason such rhetoric has even the appearance of plausibility is that price controls work in the short run -- and that is good enough for politicians, since elections are held in the short run. After all, when the government drives down prices paid to doctors, hospitals or pharmaceutical companies, there is not much that they can do about it immediately.

Doctors are not going to give up practicing medicine and become truck drivers. Medical schools are not going to be turned into bowling alleys or hospitals into skating rinks. Pharmaceutical companies cannot suddenly shift to manufacturing cars. So price controls seem to work in the short run -- but only in the short run.

When you confront doctors with more hassles with bureaucrats and lower payments for their services, do not expect the medical profession to remain as attractive to bright young people deciding what careers to follow. In the long run, every single doctor is going to have to be replaced by someone from the younger generation, or else we are going to have a shortage of doctors.

Britain, for example, has had government-run medical care for decades and nearly half their doctors are imported, often from Third World countries with lower standards of medical training. Canadian hospitals have less modern equipment available than American hospitals do. They depend on American medicines after destroying incentives to develop their own with price controls.

Is this what we are supposed to imitate?