The Post Can't Talk About Patent Distortions in Health Care

The Post has a good front page article that reports on the frequent use of costly scanning equipment by doctors who get high reimbursements from insurers or Medicare. There is an obvious problem of incentives here. Once the doctor owns the scanner, he has an incentive to use it as much as possible in order to get high fees. The standard economists remedy would be to take the money out. This could be easily done if we stopped financing research into medical devices with grants of patent monopolies. If, instead of imposing an artificial monopoly on the market, the government paid for research upfront (which could be done by the private sector) then imaging equipment would be cheap. Then doctors would have no incentive to play games and rip off insurers. Unfortunately, most economists are too busy yelling about items like 5 percent tariffs on imported shoes to worry about medical equipment that sells for 100 times its production cost.

--Dean Baker