Wednesday, March 24, 2010

Health Care in 2020

Reason Magazine's Ronald Bailey powers up the TARDIS and offers his view of health care from the year 2020.
With 2020 hindsight, things have gotten a bit better for everyone, but some major benefits have gone by the wayside:

Thanks to the health care reform legislation, a higher percentage of Americans are now covered by health insurance than ever before—up from 83 percent in 2010 to nearly 95 percent of the legal population now. About half of the newly insured are covered by Medicaid and Children's Health Insurance Program. Most of the remainder purchased subsidized coverage through the new state insurance exchanges. There have been some improvements in the overall health of Americans. Cardiovascular disease continued its decline because cholesterol lowering statins, which are no longer under patent protection, are more widely prescribed under new federally set treatment guidelines. Over the past 10 years, cancer mortality rates have also continued to decline, at least in part because people now covered by government programs or subsidized insurance now receive earlier cancer screening. Nevertheless, in 2020, cardiovascular disease and cancer remain the leading causes of death among Americans.

It seems like 2020 is a good time for American health care. But these benefits are what 19th century economist Frederic Bastiat would call the visible, or "seen" effects of health care reform. Bastiat pointed out that the favorable "seen" effects of any policy often produce many disastrous "unseen" later consequences. Bastiat urges us "not to judge things solely by what is seen, but rather by what is not seen." A bad economist looks only at seen effects, according to Bastiat, while a good economist tries to foresee the unseen effects of a policy. So trying to play the role of a good economist, what were some of the deleterious unseen effects of health care reform enacted back in 2010?

Since 2010, insurance companies had been turned essentially into public utilities with the feds setting strict minimum benefits requirements. The health reform bill also limited the administrative costs of insurers, which has ended up basically guaranteeing their profits. With competition all but outlawed, the increasingly consolidated insurance industry has had very little incentive to pay for new treatment regimens outside those specified by government standard-setting agencies. Federal government health agencies have been reluctant to authorize newer treatments because they often lead to higher insurance premiums that then must be subsidized by higher taxes.

Then there is the doctor dearth. The signs of the impending shortage were already clear back in 2010. For example, as reimbursement rates from government health care schemes tightened, more and more doctors were refusing to accept Medicaid and Medicare patients. After health care reform passed, the physician shortage was exacerbated when many doctors faced with declining incomes simply chose to retire early. Already bad in many areas back in 2010, waiting times for a doctor's appointment 10 years later have nearly quadrupled, reaching the Canadian and British average of about 110 days.

The hardest unseen effect of health care reform to evaluate is what it did to biomedical innovation. Innovation is a trial-and-error process, and making predictions about what might have been is speculative at best. But let's take a look back at where budding biomedical technologies to treat cancer, replace damaged organs, and develop new vaccines stood back in 2010.

Big pharmaceutical companies initially did fairly well under health care reform, but as the cost of health care rose partly as a result of covering more Americans, Congress enacted legislation allowing government health care schemes to "negotiate" pharmaceutical prices. The negotiation requirement quickly devolved into price controls that have ultimately turned the big drugmakers into little more than cost-plus government contractors. In addition, the feds have established a comparative effectiveness evaluation commission similar to the British National Institute for Health and Clinical Excellence which limits patient access to treatments based on their overall cost-effectiveness. The result of these restrictions is that investments in pharmaceutical and biotech research and development have fallen off sharply.


The seen aspect of health care reform is that it has had some success in providing more Americans with access to vintage 2010 medical therapies. The unseen aspect is that more people are suffering from and dying of diseases that might well have been cured had the Obama version of health care reform never been enacted. As a result of health care reform, Americans forfeited 2020 medicine in favor of more equal access to 2010 treatments.


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