Megan McArdle does the whole economist thing.
8th July 2009
And explains it in terms so simple that even Democrats ought to be able to follow along.
One key thing to remember is that there’s a big difference between a situation where the government is a sizeable buyer/producer, and one where the government is essentially the only buyer/producer. In the latter case, the market still works, even if the government presence distorts it–prices are set by supply and demand, research is done, and so forth. Indeed, it is not well appreciated on the left how dependent Medicare is on private insurers to tell them what the competitive price is for the treatments and products it pays for–if the private sector went away, Medicare would have to develop some sort of pricing system, and so would all the health care systems abroad. Once the government becomes the dominant player, however, everything changes.
Right now, the US has a market–no matter how screwed up–for medical goods. It is not a good market. But no one in the market, except Medicare, has enough pricing power to totally undermine the market mechanism, so it grinds out an equilibrium that bears some resemblance to consumer demand. In turn, Europe can buy those market-produced products. But if you kill the last market, everything suddenly looks very different. What’s the right price for innovation? What should we research? Those questions stop being decided on the basis of the number of consumers served, and start being decided on the basis of who has the best lobby.
It’s not uncommon for Americans getting treatment in Europe to be asked “You’d never be able to afford this in America, right?” by their doctors and nurses, when “this” is stitches or antibiotics. I’d be terrified of switching places with an American too, if American health care were actually one eighth as bad as most Europeans seem to believe. Yet despite that, as far as I know the net migration is actually the other way.