As I was pondering the nature of our health care, some interesting questions came to my mind.
Mentioning them as part of a serious discussion could have made them look like conspiracy theories. While I am not a fan of conspiracy theories, I do believe in the power of incentives.
Incentives make the world go around. Money and power are just the most obvious ones.
So here is the scenario:
Let’s suppose that a miraculous new invention, a pill that costs pennies to manufacture would add an extra 20 years to the life of anyone who takes it.
Not every day, just once. What would happen? How would the world react? What would politicians do? What would the drug industry do?
The finances of most western democracies are in the red. A recent article in the National Post illustrates the problem perfectly with very real numbers. Unfunded pension liabilities are probably the biggest component of the problem. Citigroup is also concerned: The Coming Pension Crisis.
So is RWC Partners and the OECD. As one of its publications puts it:
Most countries have separate pension plan for public sector employees. The future fiscal burden of these plans can be substantial as the government usually is the largest employer, pension promises in the public sector tend to be relatively generous, and future payments have to be paid out directly from government revenues (pay-as-you-go) or by funded plans (pension funds) which tend to be underfunded. The valuation and disclosure of these promises in some countries lack transparency, which may be hiding potentially huge fiscal liabilities that are being passed on to future generations of workers.
The largest pension fund in the United States is almost bankrupt. And I could, of course, go on.
Now think again about the suggested scenario!
Most government pensions are still defined benefit plans.
Any growth in life expectancy would bring the collapse of the system a step closer.
How would politicians react to a miracle? It would spell doom to the scam they perpetrated on us. Will they just cut the benefits? Raise retirement age? Compel the retired to return to work? Bury the invention?
Can you imagine the panic before the collapse? Ida May Fuller, the first recipient of monthly social security payments, after paying into the system for only three years, lived to be 100 years old.
She collected $22,888.92 in payments on a total contribution of $24.75.
Now imagine this imbalance multiplied by millions.
How would the drug companies react? They would do everything in their power to capture and patent it. Then they would jut make money on it.
We have some indications. Ever heard of Car-T cell therapy? The miraculous new cancer treatment with a 90% success rate? Novartis is selling it for $475,000.- per treatment.
Once the procedure is known, the manufacturing is routine lab work using standard equipment. How much could that possibly cost? A few thousand dollars? Definitely NOT six figures.
Still, eventually the price will come down, passing the ball back to the politicians. Eliminating cancer will only make the unfunded liabilities problem even more pronounced.
Our existing political systems have a number of strong incentives. Politicians are incentivised to lie, to promise the blue from the sky and to spend recklessly and make promises that may get them (re)elected.
When it becomes clear, that they cannot keep their promises, they are incentivised to hide that fact with short-sighted and short-term policies. Anything that will push the reckoning beyond the next election.
Bad monetary policies (below market interest rates), bad fiscal policies (excessive borrowing) and corrupt spending policies (spending to buy votes).
The economic bubbles we created can burst any time. A miraculous extension to our lives would be a pin that bursts it. Politicians wouldn’t like it. Neither would the Pharmocracy.
Do you see a solution?