H.R. 3200 Will Collapse Global Medicine

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What has been missing from the national discussion on health reform is an analysis of the dynamic consequences of significantly increasing the level of statism in the medical field.

If the United States implements H.R. 3200, the resulting conditions will not come to resemble that of any current Western medical system or bestow any of their purported advantages. The U.S. medical system will collapse, and it will take down every major medical system throughout the world with it.

H.R. 3200 would enact a series of synergistic causal sequences. This would start with an instantaneous increase in demand as new consumers enter the system or existing consumers demand more medical goods and services.

Clinics, practices, and hospitals currently rely on higher private insurance payouts to make up for the low reimbursement rates from Medicare. Under the new system, they would not receive it, either from the government plan or the private insurers. The government will not pay it. Insurance companies, required to cover pre-existing conditions, maintain coverage unconditionally, and cap premiums, will have no choice but to cut payments to providers.

This would quickly cut the profit margins of medical providers to unsustainable lows or convert them into losses. Many will go out of business in the short term, even if their industry representatives in Washington see no problem with conceding $150 billion "as an industry" to the government. This means a decreased supply of medical care.

The law of supply and demand will necessitate price increases for medical goods and services, but as providers, drug companies, and equipment manufacturers attempt to push up price levels in various ways, government will counter by imposing further price caps and limiting reimbursements to keep costs under control.

A quick glance at the pharmaceutical industry reveals an oncoming danger to global medicine here. The industry is one of the most profitable in the U.S. This profitability attracts investment capital, which is the stock seed planted to further advance pharma. The U.S. market makes up almost half of the sales of prescription drugs. This market is critical, because it makes up for the shortages incurred by drug price controls elsewhere.

With price caps imposed in the U.S., pharmaceutical, biotech, and medical equipment producers will raise the cost of future drugs and medical equipment, continuing their economic arms race with the government. The caps and limitations will also accelerate hospital, clinic, and private practice closings, exacerbating the cycle of increasing demand and decreasing supply in a positive feedback loop.

As the demand for medicine grows and the supply of it contracts, what is needed to keep the medical economy afloat is increased productivity. New technology and more efficient and effective techniques will have to come into existence to act as a downward force on prices and to satisfy demands that cannot now be met. Who will create them?

In a capitalist system, where capital and opportunity are plentiful, individual doctors pioneer new methods of surgery and treatment. Scientists conduct research, make discoveries, and use the knowledge to create novel drugs. Engineers develop new medical equipment or improve upon the old to aid doctors in their clinical practice. Businessmen create new management and insurance models to make the healthcare industry more productive, which in turn makes healthcare more affordable for the consumer.

The demolition of profits and a more austere and coercive environment will result in the flight of significant numbers of these people from the medical field. As the profits in the industry disappear, so will the supply of mental capital, as the best minds that would otherwise fuel the advancement of the sector will leave it for more profitable ones. It is worth noting here that the term "brain drain" was coined to describe such a loss from Great Britain after socialized medicine was instituted there in the 1950s.

This will be seen in many forms. There will be decreased interest in medical school among the best and brightest youth. There will be early retirements by experienced but frustrated doctors. The caps on prices and reimbursements will squeeze medical equipment manufacturers, who will lay off engineers and decrease their product development. Pharmaceutical and biotech companies will make cuts in research and development and lay off scientists, and their drug pipelines will become empty. Fewer smart people will choose a career in healthcare management or allied industries.

There will be no rescue of the medical system by productivity. Productivity in medicine will itself be in need of rescue.

The United States is the engine of medical innovation in the world. The collectivist medical systems in other countries cannot generate wealth by themselves; the net effect of statism is wealth destruction. They survive by a de facto free rider strategy on the profits and innovation in freer countries. Without the capital and the technological breakthroughs from the United States, their systems would be instantly unviable.

Other countries also strain to keep their socialized medical systems alive by initiating force against the private sector in every way permitted by modernity. They ration care or disallow treatments that are routine in the U.S. The imposition of drug price caps is widespread. France extracts massive sums of money from its people, including a 12.8% employer tax, a 5.25% income tax, and various other targeted taxes. Britain's NHS runs a £1.3 billion deficit ($2.1 billion). Its annual budget is £100 billion ($160 billion, or $1.6 trillion over 10 years), serving a population one-fifth the size of that of the United States.

While other countries decry the selfishness of the U.S., out of necessity, they cheat on their own philosophy of collective welfare by cutting slack to the private sector in ways that would be intolerable to the proponents of H.R. 3200. This includes the capping of legal liabilities and allowing drugs to be brought to market cheaper and more quickly than current Food & Drug Administration standards would allow. Such allowances are right, but they highlight the fact that these systems are a house of cards.

Precipitated by the decline in the U.S., the collapse of medicine across the globe would not be dramatic and loud, culminating in the cessation of all activity. There would still be doctors, patients, private companies, and motion between them. Instead, after initial and periodic convulsions-rapid adjustments and realignments, like an exothermic reaction leaving the world in a lower energy state-decay would set in.

The decay would be characterized by a pervasive increase in doctor shortages, unmotivated and incompetent doctors, overworked medical professionals, expensive and virtually useless public and private insurance plans, poor quality and deteriorating medical products and services, few biomedical advancements, desperate patients, black markets, unsafe medical tourism, physically and psychologically incapacitated patients, and foreshortened lives.

In such a state, world medicine would be vulnerable to powerful stressors that could push it past the breaking point. That stressor would likely be the onset of a flood of end-of-life demand by the Baby Boomer demographic, at which point the system would become irreversibly overwhelmed. At current life expectancies for U.S. males, this would occur around the year 2021.

At some point, all national plans would go bankrupt, necessitating either a move toward laissez-faire, or a descent into sub-industrial medicine.

Regardless of the details of the overhaul and the exact course of its implementation, we can know in advance that many people will die who otherwise would have survived. A major way that the laws of nature restore equilibrium in a new collectivist system is by killing off human beings. Human deaths are causally given because production decreases, and the disappearance of medical resources must lead to the ending of the lives which depend on those resources. Collectivism transforms a free medical system from a human safety net forever increasing in size, scope, and capabilities, into a game of musical lives, all the while its advocates croon about compassion and cost-savings.

Collectivism in medicine is a vain attempt to defy the law of causality and to substitute it with whim and want. All of the current proposed plans in Congress are premised upon collectivism. As such, they are unworkable, thoroughly incorrigible, and should be scrapped in their entireties. Only a move in the reverse direction, toward more freedom in medicine, can both save medicine and claim the mantle of morality.

Wendy Milling is a contributor to RealClearMarkets
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