Free-Lunch Medicine
by Thomas Sowell
(November 13, 2003)
It is always fascinating to see elementary economics make front-page news. It was front-page news in the Wall Street Journal of November 12th that there are long waiting times for seeing medical specialists in Canada and in other countries with government-controlled medical care systems -- but not in the United States, where some politicians are trying to get us to imitate these countries.
Shortages where the government sets prices have been common in countries around the world, for centuries on end, whether these shortages have taken the form of waiting lists, black markets, or other ways of coping with the fact that what people demand at an artificially low price exceeds what other people will supply at such prices.
This principle is not limited to medical care. There were waiting lines for food, undershirts, and all sorts of other things in the Communist bloc countries in Eastern Europe before the collapse of Communism in that region. You had to get on a waiting list to buy a poorly made car in India before they began to free up their economy from government controls.
You could go back literally thousands of years and find shortages under price controls in the Roman Empire or in ancient Babylon. But it is still front-page news today because elementary economics has not yet sunk in.
An OECD study shows that the percentage of patients waiting more than 4 months for elective surgery in English-speaking countries is in single digits only in the United States, where we "lack" the "benefits" of a government-run medical system. In Canada 27 percent of patients wait more than 4 months and in Britain 38 percent. Elective surgery includes some heart surgery.
Depending on what you are suffering from, and how much you are suffering, longer waits can be a cost that far outweighs monetary savings under price controls or government subsidies. Sometimes the wait can be fatal.
There is another kind of waiting -- waiting for new medicines to be developed for scourges like cancer, AIDS, and Alzheimer's. Countries with price controls on pharmaceutical drugs have far fewer of such drugs created than the United States does.
Yet Americans, who produce a wholly disproportionate share of the world's new life-saving drugs, are being asked to imitate price control policies in countries where such policies have dried up the costly research behind such discoveries.
These countries have left the development of new drugs to the United States. But if we follow their example by killing the goose that lays the golden egg, who can we turn to for developing new medicines? This could be the most costly free lunch of all.
None of the various schemes for lowering the prices of medicines seems willing to face up to the simple fact that each new medicine developed costs hundreds of millions of dollars. This huge inescapable fact seems to just evaporate from the discussion as politicians vie with one another for the best way to make these medicines "affordable" at "reasonable" prices.
Politicians who claim to be able to "bring down the cost of health care" are talking about bringing down the prices charged. But prices are not costs. Prices are what pay for costs.
No matter how much lower the government sets the prices paid to doctors, hospitals, or pharmaceutical drug manufacturers, none of this reduces the costs in the slightest.
It still takes just as much time, equipment, and training to turn a medical school student into a doctor. It still takes just as many hospitals to care for the sick. It still takes just as many years of scientific research and clinical trials to create a new medicine.
Those who are dying to control the prices of pharmaceutical drugs are oblivious to the fact that other people may be literally dying unnecessarily if they succeed. There is no free lunch, even though politicians get elected by promising free lunches.
Government price controls on medicines and medical care simply mean that these costs do not all get covered. This works in the short run -- and the short run is what politicians are interested in, because elections are held in the short run. But the rest of us had better think ahead, if we value our health.
Thomas Sowell has published a large volume of writing. His dozen books, as well as numerous articles and essays, cover a wide range of topics, from classic economic theory to judicial activism, from civil rights to choosing the right college.
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