Mis-evaluating centrally planned healthcare

One of the things that makes Socialism unworkable as an economic system is the unavailability of true market prices to allocate resources and make other necessary choices. As it turned out, the economic failure of communism was much delayed by the presence of much freer markets around the world which served up example prices to copy. These were lousy prices to use, but far better than nothing.

When I had someone tell me that the outcomes of the Canadian healthcare system were just ducky, I realized that a system in isolation and one with a US healthcare system south of its border will have substantially different outcomes.

As abysmal as the US healthcare system is, it is now effectively the only remaining system in the world in which drug companies have some incentives and funding to develop new products. The new product funding can only come as long as existing products earn sufficient profits, which either are re-invested directly, or serve to attract new outside investment.

The fabled low drug costs in Canada are entirely the result of the fact that Canadian sales do not support new development. Drug manufacturers are only willing to sell drugs at close to marginal manufacturing cost if the level of leakage back into the US is not sufficient to destroy US pricing and profits.

The Canadian government should be a strong opponent of universal healthcare, etc., in the US, since the loss of the ability to ride on the back of the US system is likely to drive Canadian costs and supply to levels which threaten the survival of governments all by itself.

Regards, Don

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What has universal

What has universal healthcare got to do with drug prices ? I can see a monopsonic effect, but there are many countries to which drug can be sold to, it can't be that.

Whatever Obamacare turns

Whatever Obamacare turns into, it seems highly likely that the government will control prices and usage, and sharply further reduce the profitability of drug companies. To the extent the drug companies decide to stay in business, they are likely to insist that Canada and other countries start to pay their own way.

Regards, Don

Then you have an issue with

Then you have an issue with price control which is different. There are many countries with socialized healthcare who do not attempt to control the price of medicine. If anything, most government price control is in the form of patents who actually prevent competition.

I think the high cost of drug in the US is mostly the result of the hight cost of FDA approval, but I do not know the subject well, just a guess.

The problem with healthcare:

The incentive systems are all screwed up. Patients have to go with the insurer that their employer mandates, regardless of how they are treated. Insurers try their best to avoid paying for medical procedures, but it's doctors who are harmed by this, not the patient. Doctors try to do as many procedures as possible, but it's the patient, not the insurer, that takes the fall.

Basically, you have the patient, the insurer, and the doctor. In every combination, A gets to decide how much B screws over C, rather than having his actions feed back on himself. No wonder the market is screwed up.

One way to fix this would be to have doctors bill by time, not procedure, and have insurance be an after-the-fact reimbursement of a percentage of the costs. If a doctor does too many procedures, they eat the costs and the patients go elsewhere. If the insurer fails to pay up on time, the patient picks another insurer. THAT's the way the free market is supposed to work.

Here is a doctor's-eye-view of the problems with the current system, and is well worth a read.


In the socialist countries the govt doesn't sponsor scientific research?

Socialist scientific

Socialist scientific research is highly unlikely to lead to actual goods except for military ones. No matter how good the raw ideas might be, socialism has no ability to turn them into real, affordable goods.

Regards, Don

Ah why the military

Ah why the military exception then?

This is ridiculous, you're making way too strong claims to oppose socialized health care, it's actually hurting your point.

Canada is an exceptional case

because they know that when push comes to shove the US will protect Canada's north, east, and west border. The money they save on the military side is put into their social budget and still at every provincial and national election election there is a fight is over money for medical care.