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Forbes.com

 

Medicine Gets Cheaper

March 01, 2004

By Peter W. Huber

Whatever it cost to develop the whooping cough vaccine or to distribute it free, the cost must surely have been dwarfed by the economic gains that came from freeing up mothers to engage in other pursuits.

The cost of health care in the U.S. has been declining steadily for the last 50 years. It will decline faster still in the next 50. All of the doleful commentary about mushrooming costs and budget-busting programs ignores the principal economic costs of illness, which are falling fast, and the science of pharmacology, which is transforming the economics of health care.

By far the largest economic cost of illness is lowered labor productivity. Sick people can't work, and when adults die in their prime, they take all their intelligence, skills and initiative with them. Until recently, the cost of illness among children and the elderly was also shouldered mainly by the healthy adults who devoted countless hours to their care. Such costs aren't reflected in revenues to doctors or hospitals, still less in federal insurance programs. They are felt in lost corporate profits, lower wages and, for many women, tireless but entirely off-budget toil in the home.

Several developments radically changed this economic calculus in the second half of the 20th century. Vaccines all but eradicated many of the most common childhood diseases and substantially curbed infectious disease among adults as well. However much it cost to develop the whooping cough vaccine or to distribute it free to families who couldn't afford it, the cost must surely have been dwarfed by the economic gains that came from freeing up mothers to engage in other pursuits. Antibiotics had a comparable impact. Tuberculosis was a fantastically expensive disease a century ago--think of the balconies in the mountains of Davos or New York's Saranac Lake. Polio meant braces and iron lungs. Those costs have all but disappeared.

But while the costs of incapacity, home care and the sanitarium declined, spending on hospitals and physicians rose sharply. Families began outsourcing their health care, particularly for the elderly. This pushed the costs out into the open, where they could be covered by insurance programs and decried by budget experts. The real cost of health care--avoiding disease or recovering from it--certainly continued to drop fast, but now the costs were incurred not in time but in dollars--often government dollars--and that of course changed the debate.

Most of those dollars, however, are still spent buying time--the very expensive time of doctors, nurses, geriatric attendants and countless others who have replaced mom in the business of soothing the fevered brow and changing the bedclothes. Hospital care currently consumes 31% of our on-budget health spending; physician and clinical services another 22%. Most of these dollars go for manual labor--"manual" in the sense of hands-on, the cost of paying one person to look after another, working from the outside in.

Prescription drugs, which currently account for only 11% of our on-budget health spending, work from the inside out. And as vaccines and antibiotics have already demonstrated, they can change the economics of health care fundamentally. They are extremely expensive to develop, but once developed, they usually cost comparatively little to manufacture. Early on in a pharmacological assault on a grave disease, drugs invariably raise costs, because at first they only stretch out the disease, they don't beat it, and so we end up paying more for the drug and more for the physician, too. But in the end drugs get good enough to beat the disease outright and thus displace doctor and the hospital altogether.

With the extraordinary advances that bioengineering now makes possible, we are at the threshold of an entirely new era in pharmacology. There can be no serious doubt that in due course we will find drugs to halt colon, breast and lung cancers in their tracks, drugs that curb obesity and thus heart disease, and that will not merely suppress the HIV virus but cure AIDS completely. A new pharmacology of the brain will cure depression and halt the onset of Alzheimer's. With the advances in molecular science that have occurred over the past few decades, all of these once inscrutable scourges are now--essentially--problems in diligent engineering.

Yes, very difficult and expensive problems, as engineering problems go. But when well-engineered molecular machines displace manual labor, costs don't rise, they fall. We will indeed spend more on drugs in the coming years than anyone has allowed for in existing budgets. They will be cheap at the price.

Original Source: http://www.forbes.com/global/2004/0301/061.html

 

 
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