The 'costs' of care

Saturday, November 7, 2009

by Thomas Sowell

We are incessantly being told that the cost of medical care is "too high" - either absolutely or as a growing percentage of our incomes. But nothing that is being proposed by the government is likely to lower those costs, and much that is being proposed is almost certain to increase the costs.

There is a fundamental difference between reducing costs and simply shifting costs around, like a pea in a shell game at a carnival. Costs are not reduced simply because you pay less at a doctor's office and more in taxes - or more in insurance premiums, or more in higher prices for other goods and services that you buy, because the government has put the costs on businesses that pass those costs on to you.

Costs are not reduced simply because you don't pay them. It would undoubtedly be cheaper for me to do without the medications that keep me alive and more vigorous in my old age than people of a similar age were in generations past.

Letting old people die would undoubtedly be cheaper than keeping them alive, but that does not mean that the costs have gone down. It just means that we refuse to pay the costs. Instead, we pay the consequences. There is no free lunch.

Providing free lunches to people who go to hospital emergency rooms is one of the reasons for the current high costs of medical care for others. Politicians mandating what insurance companies must cover is another free lunch that leads to higher premiums for medical insurance - and fewer people who can afford it.

Despite all the demonizing of insurance companies, pharmaceutical companies or doctors for what they charge, the fundamental costs of goods and services are the costs of producing them.

If highly paid chief executives of insurance companies or pharmaceutical companies agreed to work free of charge, it would make very little difference in the cost of insurance or medications. If doctors' incomes were cut in half, that would not lower the cost of producing doctors through years of expensive training in medical schools and hospitals, nor the overhead costs of running doctors' offices.

What it would do is reduce the number of very able people who are willing to take on the high costs of a medical education when the return on that investment is greatly reduced and the aggravations of dealing with government bureaucrats are added to the burdens of the work.

Britain has had a government-run medical system for more than half a century, and it has to import doctors, including some from Third World countries where the medical training may not be the best. In short, reducing doctors' income is not reducing the cost of medical care; it is refusing to pay those costs. Like other ways of refusing to pay costs, it has consequences.

Any one of us can reduce medical costs by refusing to pay them. In our own lives, we recognize the consequences. But when someone with a gift for rhetoric tells us that the government can reduce the costs without consequences, we are ready to believe in such political miracles.

There are some ways in which the real costs of medical care can be reduced, but the people who are leading the charge for a government takeover of medical care are not the least bit interested in actually reducing those costs, as distinguished from shifting the costs around or just refusing to pay them.

The high costs of "defensive medicine" - expensive tests, medications and procedures required to protect doctors and hospitals from ruinous lawsuits, rather than to help the patients - could be reduced by not letting lawyers get away with filing frivolous lawsuits.

If a court of law determines that the claims made in such lawsuits are bogus, then those who filed those claims could be forced to reimburse those who have been sued for all their expenses, including their attorneys' fees and the lost time of people who have other things to do. But politicians who get huge campaign contributions from lawyers are not about to pass laws to do this.

Why should they, when it is so much easier just to start a political stampede with fiery rhetoric and glittering promises?

Thomas Sowell is a senior fellow at the Hoover Institution at Stanford University.