Tuesday, July 31, 2007

Centenarian told to wait 18 months for care.

No doubt you’ve heard the old joke about the man who walks into a store to buy something. He looks at the price and complains to the shop owner that they are “ripping people off and the guy down the street has it at half that price.” The shop keeper says to him, “So why don’t you buy it down the street?”

“I would, but they don’t have any.”

National health care is a similar sort of enterprise. They brag it’s a lot cheaper but the shortages (not having any) is a problem. And the plight of Olive Beal illustrates this.

Olive is a senior citizen. That’s a modern euphemism that means she’s old. Her eyesight isn’t that good. She has to use a well chair and she has trouble hearing. She went to the National Health Service doctor who examined her and told her she definitely has to have a new hearing aid. The one she has now doesn’t work for her.

The glitch is that every health service in the world has to ration care. The advocates of socialized services, like the NHS, try to pretend that: 1) this doesn’t happen; 2) if it does happen it doesn’t happen often; 3) that when it happens it is not that significant.

For Olive it was significant. She was told that the she can have a new hearing but she must wait one and half years for it. Apparently that’s not bad for the government system. A spokesman for the Royal National Institute for the Deaf told the Guardian, “I am afraid this is a common problem. In some parts of the country there are over two year waiting lists, which is shocking.”

It may be that the bad publicity about Olive’s situation will bump her to the front of the line so that the British Labour government can show everyone how well the system works. That just means that people already on the list have to wait longer themselves. It doesn’t solve the problem it merely makes it disappear from the headlines.

Olive’s granddaughter, Marie Scott, 52,.... Hold on! Isn’t that a typo? Shouldn’t it be 25? Nope. The granddaughter is 52. Oliver happens to be 108 years old. That’s the only reason she is getting publicity -- unlike the many others waiting for a hearing aid.

There is something absurd in a system that asks a women who is 108 years old to wait another year and a half for a hearing aid. In essence they are denying her the hearing aid. Certainly they are aware that her ability to wait that long is highly doubtful.

No socialized system of health care has been able to get around the rationing issue. When consumption of health care is not directly paid by the consumer the demand for health care will always exceed the supply.

And every nationalized system tries to ration in one way or another. The Canadians and Brits ration health care through the use of waiting periods. In Germany the care is rationed by underpaying physicians, working them long hours and placing a huge percentage of the costs on their shoulders -- that creates supply problems when it comes to physicians.

The French tried to avoid rationing to the current generation of consumers by running up massive debts that will eventually mean rationed care to future generations. They are basically denying care to their children or grand children. In New Zealand they tell you which treatments you may have and which you may not. If what you need is not on the approved list too bad. If what you need is approved you are in luck, provided you can afford to wait.
Another common trait of these systems is spiraling debt. The care is costing more than they can afford. Each year they are finding it more and more difficult to keep the system running.

Another way these countries keep down their cost is that they are subsidized by American health consumers. Here is how that little scheme works.

Pharmaceutical companies spend billions developing new drugs. When they develop something that seems to be effective they seek a patent. The patent allows them to market the product over a span of 20 years and then its public domain. So they have to recoup the costs of that drug, and all the costs of drugs that didn’t work, in that relatively short time period.

The moment they apply for the patent the 20 year time clock starts ticking away. The problem is that it can take almost half that time just to get the drug through the regulatory process. So the time period to recoup their costs is dramatically reduced by bureaucratic inefficiency and regulatory red tape.

Let us now say that eight years down the road they have the approval to market the drug. Let us say it is efficient and effective. It’s a winner. These socialized systems want the drug. But they aren’t particularly interested in the R&D costs, etc. They want to know how much it costs to produce one pill. And they generously offer to pay the producer a small profit on top of that marginal cost.

This is only a profit on the marginal cost of producing pills not on the total cost. And international patent law is set by governments who are the monopoly health care providers in many of the major drug markets. Under that law the government can declare the drug as something needed by their citizens and then ignore the patent. In essence they can then take the total marginal profit income for themselves at the expense of the people who developed the treatment.

With that threat hanging over the head of producers they know that a profit on the marginal cost is better than nothing. But there are still the research and development costs of this drug and for those that weren’t winners. So how do they cover that cost? They sell the same drug at a higher price in the United States. This is what the whole reimportation debate is about.

Of course, if the US put in a similar health system they could also threaten to confiscate the formulas and discoveries of the pharmaceutical industry. Then everyone would supposedly pay only the marginal costs of production. The problem with that is this means there is no longer any reason to invest in pharmaceuticals. Better to open a taco stand. The net result would be a collapse of the research and development of new drugs. But that keeps down the health care costs -- no new drugs, no new expenses. And the advocates of socialized health care will call that efficiency. And a second goal of the socialists would also be accomplished -- equality. Everyone would be equally denied the drugs that never came into existence. Equality and a low price! Who said socialism doesn't work?

Photo: Olive Beal. I don't know what she's drinking but I think she's going to need a few refills.

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