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Government Medical Policies are Bad Medicine

Government incentives for medicinces aren't the same as yours.

By Will Offensicht  |  March 31, 2009

When government chooses to use its awesome tax powers to create a subsidy, it has profound and undying effects on the economics of the affected industries.  Most government subsidies go on forever - solar energy subsidies started 30 years ago during the Carter administration, continued mostly unabated ever since, and show every signs of increasing today.

Every once in a while, however, someone advocates cutting a government subsidy, and then the fun begins.

The New York Times published "Evidence and Health Care Reform" which opens with:

Medicare has proposed not to pay for so-called virtual colonoscopies because there is not enough evidence that they would benefit people aged 65 and older.  That may be disappointing for older Americans who would prefer a virtual exam to a real one.  But those sort of judgments will be fundamental to any successful health care reform effort.  Eliminating unproven procedures and reducing needless costs is necessary if the nation is to improve the quality and lower the cost of care over all. [emphasis added]

We have no quarrel whatsoever with the Times' desire to "eliminate needless costs."  By definition, eliminating needless costs lowers the cost of health care without reducing quality.

However, the word "needless" is there for a good reason.  If eliminating a cost reduces quality, the cost was not "needless."

What's more, "needless" and "unproven" are not synonyms, though they're often used as if they were.  For the moment, let's ignore problems with "proving" any medical procedure, and assume you are taking a well-researched drug.  The first time you take any drug, legal or illegal, it's unproven for you.

You have no idea whether it'll help you, hurt you, or do nothing.  You might be allergic to it.  It might interact with another drug you're taking.

Until you've taken the drug for a while, you won't know; that's why doctors call what they do "medical practice." Each time you take an unfamiliar pill or medical procedure, you're an experiment with a sample size of one.

Let's ignore the issue of individual reactions and assume that the FDA's practice of testing with large samples is able to show whether a procedure such as virtual colonoscopy is effective or not.  What do we do when someone dreams up a brand-new procedure?  It's "unproven" by definition.

There's no way to determine whether it will work or not without trying it over and over.  Only then can it become "proven."

Right now, private companies decide what drugs or procedures to test.  Suppliers research new drugs and procedures, then get permission for "clinical trials."  Assuming the FDA grants permission for the trial, the company pays the costs.  Thus, choices of what drugs and devices to test lie with profit-oriented businesses.

Once the drug is approved, there remains the minor problem of getting medical insurance companies to pay for it, of course.

This graph from the Wall Street Journal of Jan 9, 2009 p B1 shows that drug research costs are going up while the number of drugs approved is going down.  It's getting harder and harder to get new drugs through the approval process.  The more it costs to get a drug or procedure approved, the more companies have to charge for it to get their money back.  The more expensive the pill or procedure, the less likely that insurance companies or government health care systems will want to pay for it.

We've written of a drug that greatly reduces the probability that breast cancer will come back.  The drug costs so much that New Zealand's health care system refused to pay for it.  Women wanted it so badly that the current government ran for office on a platform of paying for the drug; it's now approved.  Good for democracy, not so good for the budget.

That's part of the down-side of the Times' view that Medicare should not fund "unproven" procedures.  There are still enough private medical insurance plans, each with a slightly different mix of coverages, that there's some chance a new procedure will be paid for often enough to gather data about whether it works or not.

If Medicare won't pay right away, any successful drug or procedure will get the attention of the AARP or some other lobbying organization and it will eventually be approved; the question of what to pay for is more political than medical.  In order for a lobby group to realize the treatment exists so they can agitate for it, however, somebody still has to try it somewhere first.

The Times is quite correct in regarding Medicare's proposal not to fund virtual colonoscopies as news with a capital N.  There are few new medical procedures offering a more patently obvious and appealing improvement over current practice than the difference between a virtual colonoscopy and a real one.

One can readily imagine the furious oldsters who want to avoid proctological indignities; it will be interesting to see the end result of this collision between Medicare bureaucrats and the elderly who will not take this decision sitting down.  If there's one group of people who knows how to be a pain in the posterior to bureaucracies, it's the AARP - and no doubt they will if it's the only way to avoid a literal pain in the posterior to themselves.

We all know, however, that what the government may not be able to get away with in this case, it can certainly do for less well-known and well-demanded procedures - and it surely will.  Everybody has a colon, and half the population has breasts; but unlucky you, if you suffer from some rare and exotic illness unblessed with a powerful pressure group.

The Road From Here

There is a disturbing note to this news item.  As the government takes over more and more of the health care system, developing and approving new medical procedures will become purely political.  Senator Specter (R-PA) recently earmarked $10 billion for cancer research, continuing a long tradition of political meddling in research funding.

The cancer research community wants us to believe that the fact that Senator Specter suffers from cancer has no relation whatsoever to his earmark, just as Rep. Murtha would have us believe that his earmarks have nothing to do with the campaign contributions he gets from the recipients of our generosity.

As government gets more and more involved, medical conditions from which powerful people suffer will be researched at public expense; whatever ails us common folk will go on the back burner because private companies wont be permitted to make enough money to get back their research costs.

The Times supports making medicine more effective, of course, but the only way to do that is to try out new, unproven procedures.

The harder it gets to try anything new, and the more rules companies have to jump through to get permission to test an innovation, the fewer improvements we'll see in health care unless researchers move overseas.

Even more frightening, there's a powerful incentive for the government not to make health care more effective - the longer people live, the longer they collect pensions.  We can't afford our current pension commitments because people are living longer than expected.  If retirees live even longer, our pension mess gets worse.

Welcome to government-controlled health care.  When you're dying because the system doesn't think you'll benefit enough from an expensive drug, just think of how much money you're saving the pension system!