David Leonhardt rightly complains that President Obama's health care plan does nothing to change the incentives for doctors to prescribe expensive forms of care, even when there is no evidence that this care will lead to better outcomes. However, Leonhardt fails to take the extra step and ask why this care is expensive. In most cases, the care is more expensive because it involves expensive medical equipment and drugs, with a healthy dash of high doctors' fees as well. The reason that medical equipment and drugs are expensive is that they have government granted patent monopolies. In the absence of such monopolies medical equipment and drugs would be cheap in nearly all cases. The huge patent rents that these monopolies allow medical supply companies and drug companies to earn also give them incentive to mislead doctors and the public about the benefits of their products. The patent monopolies are justified as being necessary to support the development of new equipment and drugs, however there are more efficient alternatives. However, that would require bigger thinking than NYT columnists are yet prepared to undertake. [The WAPO has the same problem.
--Dean Baker
