I keep hearing that the government should get involved in the medical field as the field is filled with "inefficiency" and the government will fix that. So, to show just how misguided that is, let me give just one example of how the government "fixed" and "inefficiency" and the high cost we paid until the free market stepped in and somewhat ameliorated the situation.

As everyone knows, new technologies are expensive. When something is first introduced it costs a lot and only the wealthiest can afford it. After some time the huge profits allow for some expansion and teach the companies some more efficient processes, and prices come down to where the middle class can buy it on credit or after saving up. As that happens, the greater demand allows larger scale production, prices drop and gradually it comes within reach of everyone. That was the case with cars, with the VCR, with computers. But it doesn't only apply to consumer goods. Even large capital goods which are only rented or purchased in part also show similar patterns. Air travel was once the province of the rich, same with cruise ships. Theater and opera and orchestral performances were as well. So even if certain goods are only purchased in small numbers by companies that hire them out, over time they come down i price and companies can afford to lower prices.

So, why do medical technologies cost more, not less?

Well, that is where the government comes in. The government has a lot of say over what hospitals can do and cannot do, and to "keep costs low" they enact a lot of really silly policies. For example, they limit the number of cardiac cath labs in a given region, or the number of trauma centers, on the theory that hospitals would compete with one another for profits form high profile departments and drive up costs. (Never mind that in every field competition drives DOWN prices, the government knows best.) Similarly, when medical technology expanded form the simple x-rays of generations past into all manner of fancy electronic imaging, the government decided that mass purchases would cause costs to rise. Forget the pattern I described above, the government was convinced the way to keep prices low was to keep the number of MRIs and CT scanners bought to a minimum. So they instituted "Certificates of Need", requiring hospitals show that not only did they need a device, but a comparable device was not available at any other local hospital. In other words, there was to be a cap on the number of MRIs per region.

There were some exceptions to this, such as when high profile specialty hospitals were denied needed devices and public outrage caused the government to go back on their policies. But by and large the government managed to thwart any attempts to introduce mass production of imaging tools, by keeping demand artificially low. And thus for quite some time medical imaging prices showed a flat pricing trend. Unlike every other form of electronics, medical imaging remained largely constant in price.

However, two trends served to stop this. First, the explosion of technology caused improvements which made MRI and CT scans cheaper, despite the lack of demand. Of course, hospitals could not take much advantage of this, as they had already purchased their devices and could not buy more unless the government approved. But then came the second trend, a glut of capital thanks tot he inflation of the late 80's and early 90's. Granted, it was a harmful trend overall, but ti left many investors with money to burn. And as a result, some private firms were created to perform imaging. As the government could not restrict what private firms bought, these private imaging centers sprung up all over the country, buying up several devices and offering their services to hospitals and others restricted by the government. As a result, prices for imaging did gradually begin to decline, despite the government.

But please bear one thing in mind, the only reason we have some relief from the high cost of imaging is because the government's control was limited to certain specific medical facilities. They could not stop private firms from offering comparable services on a smaller scale. That will not be the case when the state takes over all insurance. At that point, there will be no wiggle room in which private solutions can work around government stupidity. At that point we will be wholly at the mercy of regulators, and, as this story should demonstrate to you, that is a frightening prospect.

POSTSCRIPT

Before anyone objects, there are some states where imaging centers do require a certificate of need. It all depends on how the law is written. (States differ in how they define the need for a Certificate of Need, but I do not know of any state that does not require them in some form. Though I may have missed on that does not.) Likewise, in some regions, doctors had enough leeway that they established their own imaging practices before the trend developed nationwide. My point is still valid. The government is trying to cut costs by fighting against economies of scale and preventing new technologies form being disseminated widely. That is insanity. And even after the harm of this policy should be obvious to all, the state still continues to do the same.

POSTSCRIPT II

One final point. I mention only MRI and Ct int he post above, but that is not the entire scope of the CON rules. Inf act, they extend well beyond imagining of any kind. As far as I know, they still apply to any large scale of durable medical goods. I imagine the definition would include anything, outside of buildings, for which depreciation allowances are taken. So the area of medicine over which the government has the ability to say "yea or nay" is quite great.

POSTSCRIPT III

When I speak above of "the government" a lot of the time it is state rather than federal government. However, as the states are funded pretty heavily by the feds, and as medicare and medicaid have a huge influence on practices nationwide, most states follow a very similar policy, largely encouraged by federal policies and practices. So it may be technically inaccurate to speak of one policy, but, in essence there is a single, back door federal policy. There may be some local variation, but by and large state policies hew close to federal policy. And, where there is no formal federal policy, states simply mirror one another. (This is similar to the war on drugs, where state efforts to legalize to one degree or another have been thwarted by the feds, or drinking laws, where the feds force a drinking age of 21 through withholding of highway funds. The same for seat belt laws, helmet laws, many state welfare and unemployment policies, and so on. Many areas nominally left under state control are truly subject to a single federal policy enforced through the courts or through the federal purse strings.)

NOTE: As originally posted, this article contained a huge number of dropped words. I normally do not try to excuse my typos, as they are the result of nothing but carelessness and haste on my part. (Eg. My constant swapping of "form" for "from" and "sue" for "use".) However, in this case I really can't fathom how I could have failed to type four or five words in a row. TH's editing interface was acting strangely today, so I am tempted to blame that, but I also know that, from time to time, my medication has caused me to experience bizarre problems with writing. So, at the moment, I am unsure why the original draft came out so oddly flawed. Whatever the cause, I have tried to repair the worst omissions. If I missed anything, please put a note in the comments and I will do my best to fix it.