Monday, August 09, 2004
You can't miss what you never had
[William Orzechowski, Ph.D., "Heart Burn After the Free Lunch," Tech Central Station, 2 August 2004.]
Free things from the government have a way of becoming awfully expensive. As this recent column from Tech Central Station points out, sometimes the cost goes far beyond what we can even be aware of:
As the campaign season heats up, expect lots of political one-upmanship on that old standby, health care. The bidding started with last year's Medicare Modernization Act, which for the first time adds a prescription drug plan to Medicare. This plan is expected to add $2.5 trillion in unfunded liabilities over the next ten years to the already ailing Medicare program. The bidding continued when Senator Hillary Clinton called (again) for universal healthcare coverage. Not to be outdone by the former first lady, Democratic presidential candidate John Kerry has his own costly health care coverage plan, which some experts believe could cost as much $1 trillion over the next ten years.
The explosive unfunded costs of these programs will create huge pressures for cost controls in the healthcare arena. As government attempts to push aside the private sector, one of the freest healthcare markets in the world would become even less free. Patients unfortunately would suffer the consequences as cost controls create their own costs -- the cost of lost innovation.
One sure consequence would be the stifling of innovative medical breakthroughs, like new drugs and medical devices that have long been the hallmark of the U.S. healthcare system. The U.S. is the world's largest producer of medical devices and diagnostics, and leads the world in drug innovation -- with only 5% of the world's population, the U.S has produced 45% of the world's blockbuster drugs over the past 25 years. No other country comes close to that share, because no other country fosters entrepreneurship and innovation like the U.S.
But as government takes on an increasing share of the expense of these medical innovations, it threatens to stifle medical advances in the name of cost control. The question is, will the American people recognize the cost of these lost innovations?
It is difficult to calculate the value of lost innovation, but the fate of the former Soviet Union offers a clue as to what happens when "control" overtakes "competition" as the organizing principle of an economy. The cost of control within Soviet society can be measured by the shortfall of innovations that never came to pass in the U.S.S.R., despite the talents and ingenuity of its people.
Yet it is very likely that the majority of Soviet society never felt the impact of lost innovation. Why? Because one cannot miss what one never had in the first place. It was only when mass communications and television enabled citizens to see the fruits of progress enjoyed by free societies that the Soviet people could truly realize the sacrifices they had been forced to endure.
The green-eye-shades through which bureaucrats view the world of healthcare has no such room for such vision; it cares first and foremost about costs. For an example of the green-eye-shade vision at work, look no further than Canada, the only industrialized country that does not allow for a private health care system. Adjusting for age, Canada ranks near the bottom of 24 OECD countries in terms of access to high tech medical devices like MRIs, CT scanners, and lithotripters, according to a recent Fraser Institute Study.
Certainly, the U.S. healthcare system is much more free than Canada's. But as politicians continue to expand the government's role in the health care market, cost controls will replace innovation as the hallmark of the U.S. healthcare system. The public needs to know that there is no "free lunch" in healthcare. Subsidized medicine has very real costs. Let's just hope those costs don't include medical innovation.
[William Orzechowski, Ph.D., "Heart Burn After the Free Lunch," Tech Central Station, 2 August 2004.]
Free things from the government have a way of becoming awfully expensive. As this recent column from Tech Central Station points out, sometimes the cost goes far beyond what we can even be aware of:
As the campaign season heats up, expect lots of political one-upmanship on that old standby, health care. The bidding started with last year's Medicare Modernization Act, which for the first time adds a prescription drug plan to Medicare. This plan is expected to add $2.5 trillion in unfunded liabilities over the next ten years to the already ailing Medicare program. The bidding continued when Senator Hillary Clinton called (again) for universal healthcare coverage. Not to be outdone by the former first lady, Democratic presidential candidate John Kerry has his own costly health care coverage plan, which some experts believe could cost as much $1 trillion over the next ten years.
The explosive unfunded costs of these programs will create huge pressures for cost controls in the healthcare arena. As government attempts to push aside the private sector, one of the freest healthcare markets in the world would become even less free. Patients unfortunately would suffer the consequences as cost controls create their own costs -- the cost of lost innovation.
One sure consequence would be the stifling of innovative medical breakthroughs, like new drugs and medical devices that have long been the hallmark of the U.S. healthcare system. The U.S. is the world's largest producer of medical devices and diagnostics, and leads the world in drug innovation -- with only 5% of the world's population, the U.S has produced 45% of the world's blockbuster drugs over the past 25 years. No other country comes close to that share, because no other country fosters entrepreneurship and innovation like the U.S.
But as government takes on an increasing share of the expense of these medical innovations, it threatens to stifle medical advances in the name of cost control. The question is, will the American people recognize the cost of these lost innovations?
It is difficult to calculate the value of lost innovation, but the fate of the former Soviet Union offers a clue as to what happens when "control" overtakes "competition" as the organizing principle of an economy. The cost of control within Soviet society can be measured by the shortfall of innovations that never came to pass in the U.S.S.R., despite the talents and ingenuity of its people.
Yet it is very likely that the majority of Soviet society never felt the impact of lost innovation. Why? Because one cannot miss what one never had in the first place. It was only when mass communications and television enabled citizens to see the fruits of progress enjoyed by free societies that the Soviet people could truly realize the sacrifices they had been forced to endure.
The green-eye-shades through which bureaucrats view the world of healthcare has no such room for such vision; it cares first and foremost about costs. For an example of the green-eye-shade vision at work, look no further than Canada, the only industrialized country that does not allow for a private health care system. Adjusting for age, Canada ranks near the bottom of 24 OECD countries in terms of access to high tech medical devices like MRIs, CT scanners, and lithotripters, according to a recent Fraser Institute Study.
Certainly, the U.S. healthcare system is much more free than Canada's. But as politicians continue to expand the government's role in the health care market, cost controls will replace innovation as the hallmark of the U.S. healthcare system. The public needs to know that there is no "free lunch" in healthcare. Subsidized medicine has very real costs. Let's just hope those costs don't include medical innovation.
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