Innovation welfare

Here and here I wrote about how competition is good for consumers because it gives them more options to choose from, even if those options are among government-provided services. If one police department, school district, fire or road department isn’t doing a good job, perhaps the one next town is better.

In this post at Carpe Diem, Mark Perry writes about how the Mayo Clinic is beginning to offer more choices in health care for Canadians. From his post:

According to this news report about Mayo’s insurance programs for Canadians, “the publicly funded health system in Canada decreases the choices available to patients, and can also result in delayed diagnosis and treatment. That’s why, within the national system, it’s good to offer choices for those who need diagnosis confirmation or even treatment for serious illness.”

Then Perry asks a great question:

Where will Americans go when/if we adopt Canadian-style medicine?

I believe that one thing that makes it possible for other countries to socialize their medical care without full implosion (though with long wait-times and less effective treatments and other negative trade-offs) is the existence of what’s left of the free market in medical care in the U.S. and other parts of the world.

The U.S. medical market helps in at least two ways.

First, it gives those country’s citizens a choice. If they can’t get treatment in a timely manner, or at all, in their country, they can come to the U.S.

Second, the free market in the U.S. still spawns a great deal of innovation in medical care that the health systems in other countries can adopt. In this sense, the free market in medicine has been supplying government health systems — not particularly known for innovation (which makes sense if you understand the incentives) — a kind of innovation welfare.

Without these two positive effects, there would be many more disaster stories from these countries that would sink their medical systems politically.

If we clamp down on the free market in the U.S. and these two positive effects go away, I will expect to see socialized medical systems deteriorate so quickly that it would start a general political trend back toward accepting more free market in medicine.

Unfortunately, in the meantime, we will have lost or delayed countless life saving innovations.

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