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

Ronald Bailey | August 20, 2009

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. 

Comments

Abdul|8.20.09 @ 11:29AM|#

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.

Here's a solution: by legislative fiat, the government can double the amount of satisfaction that doctors' get in order to offset the lower payments.

It's win-win!

|8.20.09 @ 11:30AM|#

As usual with the Washington Post the real education is in the comments. My God there are some stupid hate filled lefties out there. Those comments are appalling.

JB|8.20.09 @ 11:30AM|#

The NYT editors are ignorant in every way. These people have no clue how anything works.

They just pretend Obama has his magic wand that solves all problems. Delusional fools.

Xeones|8.20.09 @ 11:34AM|#

That cartoon is 43x funnier than anything published as a Friday Funny on the subject.

|8.20.09 @ 11:34AM|#

Is Obama his own religion yet?

Tomcat1066|8.20.09 @ 11:36AM|#

Remember that these lefties honestly believe that any argument against Obama's plan is an attack on the poor and uninsurable, rather than simply a group of people who disagree with him about the best way to improve health care in this nation. Hell, there are plenty who think everything is fine. I'm not one of them, but I damn sure don't think that Obama's going to fix anything.

Mike in PA|8.20.09 @ 11:37AM|#

I agree! That cartoon is hilarious! You guys should have saved that one for tomorrow! Now, I can safely assume Friday morning will be a disappointment.

|8.20.09 @ 11:40AM|#

Screwing with American technological innovation in biotechnology is screwing with my chance to live ten million years. So, piss off, New York Times.

Are we going to enslave doctors, by the way?

Xeones|8.20.09 @ 11:40AM|#

That's always a safe assumption, Mike in PA.

The Angry Optimist|8.20.09 @ 11:42AM|#

Are we going to enslave doctors, by the way?

Yes - but it will be "temporary", so enlightened "liberals" can sleep better at night. It's the abrogation of rights for the greater good, so utilitarian-wise it's alllll goooood.

Warty|8.20.09 @ 11:44AM|#

John, this one is my favorite.

First of all we should stop casting aspersions and demonizing each other but join together in trying to figure out the best solution for our country. Yes, Dr. Ackerman, it is a sad reality, but where I practice there are doctors who own clinical labs and radiology suites. Maybe up there in the Washington area docs are more ethical and not driven by the profit motive.

Stop demonizing me, you misery-feeding profiteer scum!

|8.20.09 @ 11:46AM|#

You know, legal fees are far more ridiculous and don't have a robust insurance system to help out poor people in need of legal services. Therefore, we should socialize the legal profession. Except for in-house counsel, who don't bill hourly, anyway.

We should also socialize 75' LED TVs. For the children.

BakedPenguin|8.20.09 @ 11:47AM|#

I know it would be hard to compile, but it would be interesting to see a list of "medical innovations (drugs, surgical techniques, medical devices, etc.) that have had the greatest impact on longevity and quality of life in the last 30 years", and see what country they came from.

While there would be some degree of subjectivity, this would put a great deal more force into the free(r) market arguments.

The Angry Optimist|8.20.09 @ 11:49AM|#

Once we socialize the legal profession, there will be no need for in-house counsel. I could farm out my counsel on the government's dime.

|8.20.09 @ 11:57AM|#

"You know, legal fees are far more ridiculous and don't have a robust insurance system to help out poor people in need of legal services. Therefore, we should socialize the legal profession. Except for in-house counsel, who don't bill hourly, anyway."


Pro I have been making that agrument for a long time. Legal services can be just as vital as medical services. Yet, we have a system where poor people are forced to rely on poorly paid public defenders while the rich get the highest dollar services. Further, people routinely go bankrupt because of legal fees associated with divorce or criminal issues. People routinely put off vital legal services like estate planning because they can't afford a lawyer. And unlike medical care, you really do have a constiutional right to legal representation in some cases. There is clearly a crisis in the legal industry. If single payer is the answer for medical care why not for legal services?

I have never had one lefty give me a straight answer to that. They just say "that is rediculous" and move on. But really it isn't.

Alan Vanneman|8.20.09 @ 11:58AM|#

I'm totally a "Ron Guy," in fact I have it tatooed on my forehead, and I'd take Ron over the NYT editorial board seven days a week, but I'm kind of unimpressed by this, particularly the hip thing. I'm guessing the good doctor picked the operation that made his case, not the one that didn't.

There's no discussion at all of the widely varying frequency of treatments across the country, with little impact on health, not to mention those boring horror stories, some of them actually contributed by Reason writers themselves, of sleazy insurance company policies.

Lastly, Ron quotes himself about predictions that health care costs, if left unchecked, will rise to 30% of GDP in the next 50 years. "If the US adopts a nationalized health care system, taxes will have to double for pay for it," Ron exclaims. But if we don't adopt a nationalized health care system, we'll still have to pay for it anyway, won't we?

Anonymous|8.20.09 @ 12:00PM|#

You fucking wingnuts. These aren't "price controls," and Nixon isn't in the off-White House.

It's a council of experts who decide how much care society owes to an individual. When the red light starts blinking, the individual is obligated, by virtue of a lifetime of nutrition and exercise and health care, to submit for renewal to the protein bank for the benefit of society at large.

If anything, terrorist Nazi Aryan bubba-humpers carrying swastikas and GUNS in front of peaceful Democratic Congresspersons are the "death panels"!

<strike>strike through</strike|8.20.09 @ 12:00PM|#

Nice to hear from that truly persecuted minority (the doctors) for a change. They've been oddly absent so far from the discussion on how best to throttle their livelihoods.

|8.20.09 @ 12:01PM|#

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."

QFMFT!

Invisible Finger|8.20.09 @ 12:02PM|#

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.

Medicine is now also more lawyer-intensive than in 1971 which means the costs would have increased.

|8.20.09 @ 12:04PM|#

True story: Some legal services (like intellectual property work) are being outsourced to India. . .right now.

|8.20.09 @ 12:09PM|#

To go to Venemen's point above. Why is paying 30% of our wealth for healthcare necessarily a bad thing? What are we supposed to spend it on? Paramids? A colonial empire? I-pods? We live in a world where the basics of life are incredibly cheap. Even the poor people have TVS and a roof over their head and AC and luxuries only the rich had 50 years ago. Further, if the singularity types are right or even half right we could be close to a medical revolution that greatly increases our lifespans.

What if the choices are as follows:

1. Leave things as they are and spend 30% of our GNP on healthcare in 20 years but get a ton of kick ass inventions that allow us to live into our 90s and still have a high quality of life, or

2. Socialize the whole thing and spend only 20% of GNP but live with a much slower rate of innovation and severe rationing of care.

I think option number one sounds pretty good. I mean what are we going to do with the extra ten percent that will do as much good as spending it on healthcare?

|8.20.09 @ 12:18PM|#

"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."

"One would think" was your first error. This is the NYTimes, where thought, logic, and reason haven't been displayed for years. It's simply the publishing arm of the Democratic Party.

As to witnessing "scores of thousands of housing units" having been destroyed--well NYTimes editors don't live in them, and don't live near those neighborhoods; such destruction is entirely outside the editors experience.

And Pinch and Punch are likely to be well acquainted with real estate developers who've gotten wealthy off the redevelopment of warehoused (taken off the market and emptied) apartment buildings--or in the conversion to co-op ownership. So rent control works for some folks.

Rich|8.20.09 @ 12:29PM|#

Pro I have been making that agrument for a long time. Legal services can be just as vital as medical services. ... I have never had one lefty give me a straight answer to that.

John (& Pro), I second that argument and experience. The closest I have gotten to a "straight answer" is something like "physical/mental health is God-given and legal 'health' is an artifact of human activity". Go figure. What about clothing, a place to live, video games, ...

Rich redux|8.20.09 @ 12:30PM|#

Per John: Pro I have been making that agrument for a long time. Legal services can be just as vital as medical services. ... I have never had one lefty give me a straight answer to that.

John (& Pro), I second that argument and experience. The closest I have gotten to a "straight answer" is something like "physical/mental health is God-given and legal 'health' is an artifact of human activity". Go figure. What about clothing, a place to live, video games, ...

Anonymous|8.20.09 @ 12:31PM|#

2. Socialize the whole thing and spend only 20% of GNP

Except for the other 30% GNP listed as "administrative". But that's synergy, since it's also used for mining medical records for ways to cut costs, spying on your internet access, and shooting dogs.

|8.20.09 @ 12:40PM|#

Uh, one question: Didn't we try this global payment thingie, and to try and...O, what's the word??? maintain health.
They were called...um...don't tell me!
O yeah!
Health Mainteance Organizations. HMOs
Now we get them with the added benefit of gubermint efficiency.

|8.20.09 @ 12:44PM|#

Why is the free market, which has done an unparalleled job in delivering a large variety of products and services to a great number of people, not the right answer for medical services? It's so obvious that the difference between medicine and, say, cellphones is that the government already has meddled in the healthcare market so much as to dramatically skew the pricing, availability, and even the quality of medical services.

The market works. Let it work. If we must play at the margins, do it within the free market system by providing vouchers or some other payment scheme. That would affect the market, too, but not as dramatically. Deregulation of insurance and other reforms--particularly at the state level--would do many times as much good in actually getting medical services to the greatest number of people than anything the government is planning to do. Or even could do.

|8.20.09 @ 12:46PM|#

NO CO-OP'S! A Little History Lesson

Young People. America needs your help.

More than two thirds of the American people want a single payer health care system. And if they cant have a single payer system 76% of all Americans want a strong government-run public option on day one (85% of democrats, 71% of independents, and 60% republicans). Basically everyone.

Our last great economic catastrophe was called the Great Depression. Then as now it was caused by a reckless, and corrupt Republican administration and republican congress. FDR a Democrat, was then elected to save the nation and the American people from the unbridled GREED and profiteering, of the unregulated predatory self-interest of the banking industry and Wallstreet. Just like now.

FDR proposed a Government-run health insurance plan to go with Social Security. To assure all Americans high quality, easily accessible, affordable, National Healthcare security. Regardless of where you lived, worked, or your ability to pay. But the AMA riled against it. Using all manor of scare tactics, like Calling it SOCIALIZED MEDICINE!! :-0

So FDR established thousands of co-op's around the country in rural America. And all of them failed. The biggest of these co-op organizations would become the grandfather of the predatory monster that all of you know today as the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT health insurance industry. And the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT healthcare industry.

This former co-op would grow so powerful that it would corrupt every aspect of healthcare delivery in America. Even corrupting the Government of the United States.

This former co-op's name is BLUE CROSS/BLUE SHIELD.

Do you see now why even the suggestion of co-op's is ridiculous. It makes me so ANGRY! Co-op's are not a substitute for a government-run public option.

They are trying to pull the wool over our eye's again. Senator Conrad, if you don't have the votes now, GET THEM! Or turn them over to us. WE WILL! DEAL WITH THEM. Why do you think we gave your party Control of the House, Control of the Senate, Control of the Whitehouse. The only option on the table that has any chance of fixing our healthcare crisis is a STRONG GOVERNMENT-RUN PUBLIC OPTION.

An insurance mandate and subsidies without a strong government-run public option choice available on day one would be worse than the healthcare catastrophe we have now. The insurance, and healthcare industry have been very successful at exploiting the good hearts of the American people. But Congress and the president must not let that happen this time. House Progressives and members of the Tri-caucus must continue to hold firm on their demand for a strong Government-run public option.

A healthcare reform bill with mandates and subsidies but without a STRONG government-run public option choice on day one, would be much worse than NO healthcare reform at all. So you must be strong and KILL IT! if you have too. And let the chips fall where they may. You can do insurance reform without mandates, subsidies, or taxpayer expense.

Actually, no tax payer funds should be use to subsidize any private for profit insurance plans. Tax payer funds should only be used to subsidize the public plans. Healthcare reform should be 100% for the American people. Not another taxpayer bailout of the private for profit insurance industry, disguised as healthcare reform for the people.

God Bless You

Jacksmith - Working Class

Twitter search #welovetheNHS #NHS Check it out

(http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/)

(http://www.youtube.com/watch?v=IbWw23XwO5o) CYBER WARRIORS!! - TAKE THIS VIRAL

|8.20.09 @ 12:51PM|#

Jacksmith (from Oliver)? More like Jack-off.

|8.20.09 @ 12:54PM|#

That's it! I'm boycotting Marshall Ackerman!

I'll limp before I let him be reimbursed at a loss again!

|8.20.09 @ 1:02PM|#

You know, legal fees are far more ridiculous and don't have a robust insurance system to help out poor people in need of legal services. Therefore, we should socialize the legal profession. Except for in-house counsel, who don't bill hourly, anyway.

You fool! It's the food and shelter markets that need to be nationalized!

Farmers will just have to accept less for their subsidized crops, the Grocery Czar will set growing quotas for each year, and home builders will have to get by without an orgy of credit spigots torqued wide open. The govt. will have lumber sales once per year at a location TBD, where 2x4's and 4x8's can be purchased for construction that year.

Everybody needs to tighten their belts. For the children.

Anonymous|8.20.09 @ 1:09PM|#

Why is the free market, which has done an unparalleled job in delivering a large variety of products and services to a great number of people, not the right answer for medical services?

I have a theory.

Existence is non-transcendent materialism => only physical goods and deeds matter => utility as a measure of happiness is nonsense => zero-sum economy => wealth is finite => all monetary transactions are theft of resources leveraged by (rich's) capital and (poor's) hunger => markets are oppression.

Also, democracy, as the visible hand of the masses, is the legitimate tool for enforce the will of society as a collective on its individual members -- it's simply one organism sorting itself out. So nothing democracy does can be bad. Anything that is bad is a subversion of democracy and the will of the people, or fooling the people into doing something that's not good for them ("stole the election" is the common refrain).

Furthermore, all existence being non-transcendently material and relative to frames of reference, evil does not exist. What one might perceive as "evil" is only the profound ignorance of an individual about his own good and the good of the human race. It is government's role, as efficient central planner and tool of the devine decision-making demos, to ensure all individuals achieve their full potential within humanity's known limitations.

|8.20.09 @ 1:17PM|#

"This former co-op would grow so powerful that it would corrupt every aspect of healthcare delivery in America. Even corrupting the Government of the United States."

Every?
Even the cute korean pharmacist down the block?

DAMN YOU BLUE CROSS/BLUE SHIELD!!
DAMN YOU TO HELL!

alan|8.20.09 @ 1:25PM|#

Lastly, Ron quotes himself about predictions that health care costs, if left unchecked, will rise to 30% of GDP in the next 50 years.

Extrapolations by current price conditions for upcoming years is not exactly solid science, in fact it is kind of a dumbed down metric.

I hold in my hand a book I bought as a kid in 1982, The Omni Future Almanac, edited by Ben Bova. Here is some predictions about prices for the year 2010:

Pound of Hamburger --- $22.75
Pound of Bacon --- $12.00
Head of Lettuce --- $05.00
12oz Coca Cola --- $04.75
movie ticket --- $33.00

I realize the Federal Reserve is doing everything that it can to make this prediction come true, but I doubt if it will quite get us there in six months.

So use your common sense, and don't be a 'tard. Only a fraction of the factors that will make up the cost of any give purchase by that time are currently known.

As an added bonus, this book is indeed an early proponent of Green House fear mongering. Remember when we lost Bangkok back in 2000?

IceTrey|8.20.09 @ 1:29PM|#

I don't know why opponents don't just focus on the lack of Constitutional authority for government run health care. Forget all the quibbling over this plan or that. Just say it's unconstitutional and be done with it

|8.20.09 @ 1:30PM|#

No! Not Bangkok! It's the city where you'll find a god in every golden cloister!

|8.20.09 @ 1:32PM|#

Alan: More or less what John said.

alan|8.20.09 @ 1:33PM|#

SugarFree | August 20, 2009, 1:30pm | #
No! Not Bangkok! It's the city where you'll find a god in every golden cloister!

As the Thai prostitute was spraying me with something golden colored right in my face, I swear her clitoris looked like the Virgin Mary praying.

|8.20.09 @ 1:36PM|#

IceTrey,

I agree, of course, but that ship sailed long ago. They'll justify it under the Commerce Clause, or Equal Protection, or as an extraconstitutional national security requirement.

Bangkok. Phuket. What's up with the Thais, anyway?

|8.20.09 @ 1:43PM|#

As the Thai prostitute was spraying me with something golden colored right in my face, I swear her clitoris looked like the Virgin Mary praying.

I can see that. There's not much between despair and ecstasy.

Jim Treacher|8.20.09 @ 2:07PM|#

Nancy Pelosi likes to talk about how the Democrats have been trying for universal health care since 1912. If they'd succeeded back then, today she'd look like a 69-year-old woman instead of... well, whatever that's supposed to be.

Alan Vanneman|8.20.09 @ 2:10PM|#

Ron,

Re more or less what John said:

John said that

1)if we stick with the (vaguely) free-market thing we've got now, in 50 years we'll be spending 30% of our GNP on health care and be getting kick-ass health care.

2)if we go the government route we'll be spending 20% of GNP on health care and be getting so-so health care.

But what you said was that in 50 years we'll be spending 30% of GNP on health care and if we have a gov't run program we'll have to double our taxes! Your whole point was that our taxes would be doubled, which would be a bad thing in itself, regardless of its impact, if any, on health care.

So I guess what you meant was "Instead of saying what I said I should have said what John said, more or less."

IceTrey|8.20.09 @ 3:13PM|#

Pro,

Of course the proponents will try to find some way to justify it. That's why opponents should sharply focus one just the one single issue of constitutionality. They should just keep repeating it over and over again. Don't even discuss any other issue they have with the plan. Just keep hammering home thew FACT that the Congress doesn't have the authority to do what it's trying to do.

|8.20.09 @ 3:13PM|#

Alan: Yes, doubled taxes themselves are bad, but in this case, they would have been doubled to pay for crappy non-innovative health care. So not only do we get the economic drag of higher taxes, we also don't get the benefit of wonderfully effective new medical treatments.

Some TV hunter|8.20.09 @ 4:32PM|#

We should also socialize 75' LED TVs.

We're gonna need a bigger den.

|8.20.09 @ 5:47PM|#

A little anecdotal evidence -

guy I worked with in the military not too long ago has bad knees from decades of being large and very active. he has difficulty moving around now and takes pain medication to take the edge off and has to take care when moving around.

He goes to see the doctor to discuss his option, one of which is knee replacements. Doctor wants to tray steroids and gel injections first rather than surgery. Neither will allow any significant healing, at best they'll keep the injury from getting worse.
the reason milmed is reluctant to do the surgery is that he's too young. Mid 30's means he'll live long enough to need the replacement knees replaced.

They'll leave him to spend another decade, decade and a half to deal with this and the continual treatment he'll need just to avoid the cost of another surgery later.

The military medical services are a government run single-payer health care system. It does somethings well, many things so-so, and is subject to the latest political fads. For example we spend who-knows how much each year to vaccinates servicemembers against flu - a segment of the population least likey to get it and most able to survive the infection if they do.

|8.20.09 @ 6:35PM|#

We're gonna need a bigger den.

Well, then, that's your Human Right also. Why should only Teh Rich have big dens?

Michael Ejercito|8.20.09 @ 9:40PM|#

What is wrong with price controls?

No more than $2 for a bottle of aspirin.

No more than $60 for an X-ray.

No more than $50,000 for installation of cybernetic implants to the spinal cord.

TallDave|8.21.09 @ 11:08AM|#

In other words, price controls.

All together now, Econ 101 graduates:

Price controls lead to shortages.