Saturday, November 01, 2008

Economic Impacts of Socialized Medicine

Hola, Unrulies, from sunny Deer Park, Tejas, where Obama's likely to lose by several percentage points. Fortunately that does not matter to our chances of having a thoughtful, reflective President for the next four to eight years - we currently should have enough electoral votes to give McCain Pennsylvania and still win in 89% of possible scenarios (see for the full analysis). And now on to the great red fear of this election, socialism.

European social democracies have not managed to repeal the laws of economics, regardless of how they try. Some of their greatest failures are due to trying. In the medical field, the United States produces more new drugs (marginally more effective or slightly fewer side effects than their ancestors) because in Europe under socialism (gasp), the doctors don't always prescribe the latest-and-greatest drug. They may try an older drug or a supplement first, so the value of the intellectual property, the patent, is much less than here for new drugs. But let's look at a great Texas myth, that doctors will go broke if we socialize the medical system.

According to Republican mythology, the law of supply and demand will somehow be suspended under a socialized medical system. Consider, a doctor studies for eight years then does two years of grueling internship before being released to finance his first Jaguar and begin paying down all that debt. That means, should new rules of how much a doctor is paid go into effect tomorrow, it will be ten years before the market for doctors (and their fees) can react in a meaningful manner. Here's where the Republicans forget all that free-market bullshit in favor of their talking points.

Insuring everyone would increase the number of medical consumers by about 47,000,000 in the United States. The supply of doctors would not change for some time. So demand increases for medical services, supply does not. Now what, Econ 101 graduates, does that do to the price of medical services? It increases them. Now let's imagine the Government steps in and puts price controls into place. What happens then? Doctors leave the medical profession to go work on oil rigs, to become Blackwater security goons in Iraq or to become ski instructors. The supply of services goes down while demand goes up. Soon the situation becomes untenable, the Government has to increase fees and med schools begin filling up. So in either case, doctors actually end up making more simply because demand for their services has increased. In one case, they have to go through some hard times but in the end, they're making more than today due to simple supply and demand.

Easy to forget that when it doesn't match your faith. Again, as I read somewhere earlier this week, any time a Republican talks about free markets, you should laugh heartily.

p.s. I forgot to mention that doctors already have price controls inflicted upon them but not by the Government. Insurance companies through their "in-network" fee schedules, control the price of services. Don't know about you but I'd far rather have some neutral bureaucrat somewhere controlling prices than some profit-driven insurance company employee.

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