Obamacare Re-visited

Now that the Supreme Court has decided on the constitutionality of Obamacare, it seems good to me to revise and re-post this examination of the economic and medical lunacies this program entails:

The president says his healthcare reform will help control health care costs, on the one hand, and to bring millions upon millions of new persons into the health care system, on the other.

Seen together, the president’s goals are contradictory and mutually exclusive.  Here’s why:  If you intend to introduce tens of millions of new health care consumers into the system, then the demand for health care products and services will rise dramatically.  When demand rises dramatically, prices rise dramatically as well.  If the president wants to achieve his first goal, that of reducing health care costs, then achieving his second goal will make it impossible.  What his left hand gives, his other left hand takes away.

What happens when (A) the government drives down prices, on the one hand, and what happens when (B) demand for health care products and services rises dramatically, on the other?   

When the government tries to control health care costs, the consequence for health care providers like drug companies, medical instrument manufacturers, and doctors, is to drive some of them out of health care altogether.  That is, if Washington restricts the profits of health care providers, some of those providers will re-allocate their quite considerable investments in directions away from health care, to places where government interference does not hinder or limit their financial success.  They simply leave.  In the wake of the coming government-induced exodus from the tyranny of price controls, fewer health care providers can or will remain.  Fewer providers mean fewer products and fewer services.  In your very first economics lesson, you’ll recall, you learned that when the supply of a thing goes down, its price goes up.

In other words, the president’s program to control health care costs will produce the opposite result.  I promise you, health care after the president’s reform goes into effect will not be cheaper than it is today.  The laws of economic reality make it so.  No one, including the Community Organizer-in-Chief, can change the laws of economics at will.  Health care after his reform will be more expensive than ever, far more expensive.

Count on it; plan for it.

The costs faced by a pharmaceutical company to develop new and effective drugs are staggering.  Laboratories and equipment are expensive.  Outstanding scientists demand high salaries.  The path to FDA approval is arduous, time consuming, expensive, and fraught with uncertainty.  The advertisement and distribution of the drugs that win approval are more costly still.  The upshot of all that expensive research, certification, and advertisement is dicey at best, and massive sums of money can be -- and have been -- lost.

In order to pay for the development, approval, advertisement, and distribution of new drugs and the cures they might make possible, therefore, drug companies must make enormous amounts of money on existing drugs.  If they do not, the development of new drugs cannot well continue.  Thus, by holding down prescription costs, by prohibiting what it considers exorbitant drug company profits, the government is, therefore, also prohibiting future drug development and future cures -- perhaps the one that will save your life or the life of a loved one.  We will never know what things could have been accomplished and would have been accomplished in future health care if the government puts a lid on prescription costs now.  Under Obama’s health care reform, more people will get sick, more people will stay sick, and more people will die.

Consider the doctors:  If the government puts a cap on what a doctor can make for, say, intestinal surgery, then the very talented and intelligent folks who otherwise would have worked very hard to become wealthy surgeons will figure out how to make a very good living in other ways, perhaps in architecture, nuclear technology, or international trade.  In the shadow of government-restricted prices (and therefore government-restricted incomes), fewer and fewer of those talented folks will decide to undergo the long, difficult, and exceedingly expensive path through college, through medical school, through residency, and through certification in order to become doctors who can expect to earn less for themselves and their families than they would have earned had they turned their talents elsewhere and followed an easier and less restricted path to greater wealth.  The same thing will happen with the pharmacists.  If the president’s program goes into effect, the result will be fewer doctors and pharmacists serving the millions and millions more patients the president wants to get into the system.  In other words, there will be long lines -- very long lines -- at the clinic, at the emergency room, and at the pharmacy. 

The lesson of price controls is not new.  Simply think of the government-imposed control on gas prices in the 1970s and the chaos, shortages, long lines and rationing that followed in its wake  -- only substitute health care for gas and clinics for gas stations.  As a result of Obama’s ridiculous program, we will have fewer doctors and fewer pharmacists, but 16,000 more IRS agents.

Or, to take a lesson from countries like Canada and the UK (where government health care plans have been in place for many years), waiting lines are unconscionably long and some people actually die waiting for their turn in surgery because there aren’t enough surgeons and operating rooms to meet the needs.  To avoid that fate, Canadian often cross the border to get medical care at their own expense in the US, in cities like Detroit or Buffalo, where medical care is far more readily available than in Canada.  In other words, they come to the system the president is trying to reform, and they leave the sort of system he is trying to emulate.  If the president’s counter-productive plan goes into effect, even Canadians will die. 

My point, if it’s not obvious, is that, judging by the incentives it creates and the consequences it generates, this is a health care plan from Hell.

But it’s worse even than that, far worse.  By introducing millions more folks into the system at the same time that his cost control measures are shrinking that system, the president’s plan will strain our remaining health care resources enormously, perhaps to the breaking point, laying an unbearable demand upon what survives of a health care supply system shrinking under the effects of ill-conceived government policy.  The results for millions of Americans needing medical care will be catastrophic.  In order to meet the burgeoning demands that an expanding clientele puts on a shrinking system, the government will institute rationing.

Put succinctly, price controls lead to shortages; shortages lead to higher prices and to long lines; long lines lead to rationing; rationing health care leads to suffering and death.

When family and friends suffer or die because they couldn’t get the health care they required, Americans will begin to regret the votes they cast in recent years, and they will struggle to return to the system that served them better -- if by then a return is still possible.  They also will regret the eccentric legal reasoning of a rogue Supreme Court Chief Justice who thinks his job is not simply to assess whether or not a law is constitutional, but who thinks that his job, and the job of his Court, is to make it so.

My dire tale of higher prices, shortages, long lines and rationing is understated.  I have purposely left the most expensive and most dangerous part of the President’s health care reform until the end.  To this point, I have focused primarily on health care providers and health care consumers.  I turn now to health care bureaucrats -- perhaps the most wasteful and dangerous element of the President’s entire misbegotten scheme.

Depending upon precisely what sorts of things one includes in the equation, health care is approximately one-seventh of the entire American economy.  To bring that much business under the watchful (but myopic) eye of government requires a simply enormous army of bureaucrats.  To them will fall the power of evaluation and analysis of every sort, and the power to enforce their decisions.  Almost nothing could be worse.

The notion that government bureaucrats and career politicians are competent to determine (from a distance, at a desk, or in a committee with other bureaucrats) what drugs “ought” to be prescribed, what tests “ought” to be conducted, what procedures “ought” to be undergone, and what “ought” to be the proper cost of every consultation, operation, test, or procedure in every American locality from Anchorage to Key West is unmitigated hubris and foolishness beyond measure.  Those bureaucrats do not even know or understand how little their own jobs and services are actually worth; they absolutely cannot know the worth of the jobs of medical researchers and neuro-surgeons in varied localities across the nation, and what they “ought” to be paid for doing them.  Nor will they know what things “ought” to be done for and by patients they have never met and never will meet.

Precious few of the apparatchiks empowered by the government to make these decisions will be medically trained.  Indeed, there aren’t enough properly trained bureaucrats in the world to make this program work.  Almost none will have seen face-to-face even one of the persons whose lives and health they hold in their red tape entangled hands.  Indeed, they will not be dealing with persons at all, as they see it, but with “cases” – cases that must be dealt with according to the case book, the standard operating procedures compiled by other bureaucrats in other parts of government who spend their professional lives vainly trying to do equally impossible jobs with equally deleterious effect.

Consider the bureaucrats.  Like all other persons, bureaucrats are creatures of incentive.  Those with careers in the medical bureaucracy will wish to succeed.  They will wish to rise ever higher in the bureaucracy, to be in charge of ever increasing portions of taxpayer money and to exercise more power than now they do.  In order to rise up the bureaucratic ladder, they must preside well over the affairs inside their bailiwick.  They must follow the rules.  They must keep their departmental budgets balanced.  While I am in favor of governments living within their means, the implications of doing so in government health care are staggering.

It often happens that almost 90% of a person’s health care expenses occur in the last two or three years of life. When we get old, we get expensive. If the government is overseeing the program by which your health care costs get paid, and if that program is dangerously low on money, the bureaucrat in charge of your case, who knows that it’s cheaper to die than to live, who knows that his budget is nearly depleted, and who wants to look good to his or her superiors, will be sorely tempted to reason this way:  “At 76, old Joe has had a long life.  His country has been good to him for many years.  It’s time for Joe to pay the system back.  It’s time for Joe to cash in his chips.  That way, Joe’s own physical suffering is ended; my personal and professional burdens are eased; and others can move one step forward in the waiting line.  If old Joe dies, it’ll be better for everybody, including me and Joe.”

If you think I am making this up, I absolutely am not.  I have seen it with my own eyes and heard it with my own ears directly from government bureaucrats themselves. 

When government bureaucrats invade health care, the inevitable result is something much like veterinary medicine:  If your dog is sick and you take it to the vet, the vet examines it and says, “Spot has a problem, and it will cost $300 to fix it.  What would you like to do?”  The vet says asks you, not Spot, because you are paying the bills. If you don’t have the money to pay for the necessary procedures, it’s bad news for Spot.  Spot might die.  When the government is in charge of paying your health care bills, and the bureaucrat in charge of your case doesn’t have the money for them, you’re Spot.