New York Times Wants To Stop Medical Innovation Forever, Uh, I Mean, Adopt Health Care Price Controls

In an August 18 editorial, the editors of the New York Times made it explicit how their preferred version of a government run health insurance scheme, a.k.a., the public option, would compete with private health insurance. As the Times editors clearly explained:

… as the House legislation has progressed, the proposed public plan has steadily lost its power to impose lower payments on hospitals and doctors — as the government currently does with Medicare — which is critical to maintaining low premiums.

That's right "impose lower payments." In other words, price controls. One would think that the editors of a newspaper based in a city in which price controls (rent control) destroyed scores of thousands of housing units  would be adverse to recommending that this same economically ignorant policy be applied to something as important as health care.

As if to highlight the economic imbecility of the Times' editorial, the Washington Post is today running a sharp op/ed by orthopedic surgeon Marshall Ackerman. First, he asks some probing questions about the ignorant rhetoric that Congressional Democrats and the White House are slinging around in the health care reform debate. But as importantly, Ackerman makes it clear what will happen wiith regard to ever-tightening price controls:

Total joint replacement surgery for an arthritic hip and knee is a prime example of the difficulties physicians face and of the implications of health-care reform as envisaged by Congress and academic "experts." In 1971 I was paid $1,000 for a total hip replacement. Today, I would be paid approximately $1,600 for the same service. There is no multiplier—a surgeon can only do one patient at a time. We continue in our practice for the immense satisfaction we receive from knowing that this surgery does more to restore a high quality of life to patients than any other surgery, and for the gratitude patients show. We implant devices because we believe, based on medical literature, that they are the best choices for patients. The overwhelming majority of surgeons have not received fees from implant manufacturers—many times lowering the profitability of our hospitals.

Consider the implications when a global fee will be paid to the hospital: Then hospital and physician incentives will be aligned, and patients will bear the cost of the search for ever-cheaper implants and techniques, such as a return to cemented total hips. Forget metal-on-metal bearings, resurfacing, rotating platforms, high-flex knees, navigation systems or bilateral replacements. And if our hospitals are financially penalized for occurrences such as infection and deep-vein thrombosis after surgery, who will operate on the obese, the hypertensive or the diabetics among us? Experience with government funding reveals a never-ending spiral of decreased reimbursements in the name of restraining costs. In the end, this will come out of the care we all receive.

Let's make it more explicit. A total hip replacement cost $1,000 in 1970. If doing that procedure had kept up with the rate of inflation, the cost would be about $5,500 today. Instead, Medicare pays $1,600. Of course, procedures and technologies have improved which would cut down on the costs, but medicine is still labor intensive which means that costs can be cut only so much.

As I explained my column, "2005 Health Care Forever," government health care price controls will ultimately mean that we all get the same crappy health care for eternity: 

Harvard University economist Kenneth Rogoff sees health care expenditures rising to perhaps 30 percent of a country's GDP over the next 50 years. If the US adopts a nationalized health care system, taxes will have to double for pay for it. Rogoff also observes, "[I]f all countries squeezed profits in the health sector the way Europe and Canada do, there would be much less global innovation in medical technology. Today, the whole world benefits freely from advances in health technology that are driven largely by the allure of the profitable U.S. market. If the United States joins other nations in having more socialized medicine, the current pace of technology improvements might well grind to a halt."

Which suggests the following thought experiment—what if the United States had nationalized its health care system in 1960? That would be the moral equivalent of freezing (or at least drastically slowing) medical innovation at 1960 levels. The private sector and governments would not now be spending so much more money on health care. There might well have been no organ transplants, no MRIs, no laparoscopic surgery, no cholesterol lowering drugs, hepatitis C vaccine, no in vitro fertilization, no HIV treatments and so forth. Even Canadians and Britons would not be satisfied with receiving the same quality of medical care that they got 45 years ago.

Everybody pays more to obtain improved pharmaceuticals, imaging technologies, cancer therapies, and surgical techniques. The happy result is that average life expectancy has increased by about eight years since 1960.

As Rogoff suggests, the nationalized health care systems extolled by progressives have been living off the innovations developed by the "only country without a universal health care system." I wonder how Americans would vote if they were asked if they would be happy freezing medical care at 2005 levels forever?

Read Ackerman's whole Post op/ed here.