The high cost of medical care and the resultant high premiums for insurance are a continuing concern to most Americans and to the business firms which employ them. Widespread concern about availability and affordability have led to proposals for reform which often call for a greater role for government in the provision of health care.
In light of the continuing raid on the Social Security Trust Fund, it would be imprudent to entrust the Federal Government with total control over the financing of medical care. Nor would such an approach deal with the causes of medical inflation.
Medical care is expensive for a variety of reasons. Development of new medical technology must be paid for; the capital expense of implementing new technology also must be paid for.
As people live longer, demand for medical care increases. Illnesses that were once fatal can now be treated by modern medicine; this also increases demand for care.
In other industries, new technology and increased demand actually leads to lower costs and lower retail prices. In medical care, the opposite seems to be the case. Why?
Technology innovation costs more in the medical field than in other industries because of government regulation. In particular, in order to be approved for sale, a new medical drug must be proven to be safe and effective. Costs of developing a new drug, testing and getting approval from the Food & Drug Administration, now costs as much as 350 million dollars, and takes 12 years.
Prior to 1963, a new drug could be approved if it were shown to be safe. Use after approval would determine if it were effective. At the time, the cost of developing new drug and getting approval was on average about 22 million dollars. A return to the policy in force before 1963 would cut the cost of medical innovation.
Excessive litigation directed against doctors, hospitals, and pharmaceutical companies also drives up the cost of medical care. In major cities, doctors pay as much as 200,000 dollars a year in malpractice insurance premiums. Massive awards in lawsuits under the rubric "punitive damages" is the cause of such high premiums.
Patients need the protection afforded by the right to sue in case of malpractice. We can protect the patient and lower costs by maintaining the right to recover actual damages, and eliminating the category of "punitive damages."
A couple simple reforms to decrease the costs of government intervention can help make medical care more affordable.