Government Medicine's Prejudice Against Innovation, The Atlas Society

October 20, 2004 -- One would think that the invention of a new device that could keep patients with serious heart problems alive would be a cause for celebration. But if the invention is in the context of socialized medicine, that is not necessarily the case.

The federal government's Food and Drug Administration has just approved for wide use a device that temporarily replaces most of the heart until a donor organ can be found for transplant. In 1982 the first artificial heart, invented by Robert Jarvik, was transplanted into a patient. Since then the record survival time of a patient with this experimental device has been 620 days. Jarvik's modified device, now okayed by the FDA, initially could save the lives of several dozen individuals annually. But many believe that this approval will spur further developments and improvements of such devices, possibly leading to a permanent mechanical replacement, which could benefit thousands. Of course, one might well ask whether the overcautious FDA is responsible for two decades of delays that added to development costs and cost lives.

But according to the Washington Post, "Critics questioned the value of the $100,000 device, saying it will only add expense to the nation's already bloated health care bill without increasing the number of heart patients who survive." The latter concern arises from the fact that eventually a patient with this artificial heart will need a transplant of a real heart and each year there are only about 2,200 donor hearts for 4,000 Americans who need them. Of course, the limited supply is due in part to federal laws that bar individuals from selling their organs after death -- they can give them away for free but cannot allow their grieving relatives to benefit from their sale.

The limited supply of donor hearts is due in part to federal laws that bar individuals from selling their organs after death.

Yet the Post article does unwittingly indicate the deeper nature of the cost problem with the phrase "the nation's already bloated health care bill." The "nation" or, more specifically, the government pays for much of our health care costs, principally through Medicare and Medicaid, and through these programs controls many prices. But in a free market a health care bill would be from the supplier of good and services for the individual recipients of such goods or services. The current problem is caused by collectivization.

When the government took over medical costs for retired Americans in 1965, the private market for such insurance, which gave the elderly greater control over their own health care and created competition that helped to controlled costs, disappeared. In that year the cost of Medicare hospitalization insurance alone was projected to be $9 billion by 1990; the actual cost was $66 billion. Politicians faced contradictory pressures: to hold down costs on the one hand while supplying more government benefits for individuals as a means to buy their votes on the other. Holding down costs can mean discouraging the best care and technology possible for patients and looking for every opportunity to extract fines from doctors for the minor paperwork errors that are inevitable with the thousands of pages of incomprehensible government regulations. Of course, to pay medical bills the government could and always does raise taxes.

New medical technology can indeed be costly. But if insurance were truly a matter between private suppliers and private individuals, and if choices concerning care were in the hands of individuals and their physicians, then politicians would not need to worry about higher costs to the "nation." That's why the idea of medical or health savings accounts, which would allow individuals to set aside money tax-free for their routine expense, combined with high-deductible catastrophic insurance policies would be preferable to the current mess of a system that gives rise to concerns that lifesaving inventions are just too costly for some collective entity rather than celebration that those inventions can save the lives of real flesh-and-blood individuals.

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