Private health care

Megan McArdle looks at why private health care is so important.

I  don't think Matt understands what worries me about national health care, or else he doesn't actually understand how the system in the Netherlands works underneath his interaction with an insurance company.  It isn't the cost.  It isn't the taxes.  It isn't the redistribution.  It isn't even the mandate, which is borderline plausible to me in the way that mandatory auto insurance is, and forced retirement savings might be:  the moral hazard is huge, because your neighbors won't let you die.

 

My objection is primarily, as I've said numerous times, that the government will destroy innovation.  It will do this by deciding what constitutes an acceptable standard of care, and refusing to fund treatment above that.  It will also start controlling prices.

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...all of those countries do precisely what I am concerned about:  slap price controls on the inputs, particularly pharmaceuticals.  Their overwhelming evidence indicates that I am 100% correct that a government run system in the US will  destroy the last really profitable market for drugs and medical technology, and thereby cause the rate of medical innovation to slow to a crawl.

 

To which Matt rejoinders that all the Dutch insurance companies are private.  Indeed they are, but they're essentially tightly regulated utilities.  There's no market discovery of drug prices; instead, the prices are set by looking at an average of the rates paid by government systems in nearby countries.  The government decides what is reimburseable. 

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Profits are the pull on the overwhelming majority of the innovation that actually results in a new drug or piece of equipment--not a good target, not an intriguing idea, but something you can actually use on a patient.  By pointing to the Netherlands as our possible future, Matt concedes that we'll end up removing those profits from the system.  Which I believe anyway, because how can we credibly expect politicians to hand fat profits to pharmaceutical companies now on the grounds that it will help voters twenty years from now maybe get access to new drugs?

 

Critics of our system say that it is horribly wasteful and inefficient.  I quite agree.  But innovation is horribly wasteful and inefficient.  It's quite common for drug researchers at mean-old profit-oriented pharma to go their entire lives without working on a drug that actually makes it past Phase III trials and into patients.  Those kinds of crazy bets are exactly the kind of thing that the centralized, rational, efficient systems that progressives like to build (or at least, dream of building) have the hardest time allowing.  And when such systems do make start spending big, they don't tend to get made where the biggest market is--i.e. the most patients with the strongest demand.  Instead the decisions are political:  which disease has the best organized interest group to lobby the government?

 Interestingly enough, here is where the left's particular form of anti-evolutionism raises its head.

The right generally opposes any notion that evolution -- spontaneous order and emergent complexity -- can arise in the natural world, so Darwin has to go, and nothing complicated can arise without an Intelligent Designer poking the system.

The left, on the other hand, as perfectly happy with emergent complexity in nature, but can't stand it in the marketplace.  Anything complicated has to depend on an Intelligent Commisar poking the system.

And both methods of achieving complexity are wasteful.  Both Darwininian evolution and human innovation are marked with spectacular successes on a road littered with countless failures -- experiments that failed.

It's tempting to believe a designer could do things more efficiently.  Indeed, this is the impulse that has driven despots and dictators for as long as there have been any.  But historically, dictatorships -- single-decider systems -- have always been out-competed by messy free societies.