If our rulers wanted to reduce medical costs…

…there are two things they would do.

First, they’d eliminate taxation on income earned by persons who are providers or consumers of medical services. No income tax, no payroll tax, no tax on buildings, no sales tax, nothing (pdf).  Huge drop in medical costs, along with an increased income available to pay them.  Of course this change would increase land rents, as all enterprises would suddenly be much more productive.  These rents, or the analogous land values, would be taxed instead, to provide whatever governmental revenue is needed.

Second thing they would do is to reduce patent protection on medical drugs and appliances.  I don’t know that it needs to be eliminated, but probably the 20-year term should be shortened to, say 10 years. Preferably this should apply to existing patents, but at a minimum future patents would be restricted.  This would reduce drug and equipment prices, as more generics could become available. Many analysts believe patents are more of an obstacle than an encouragement to innovation.  Even if that is incorrect,  it seems that most new drugs are hardly essential, and are profitable only because so many consumers have no choice about paying for them.  Is there one person who would have died if some new expensive patented drug didn’t exist?  Of course, but there are many people who die because they can’t afford adequate medical services.

Of course, even if the above two actions reduce medical costs 90%, there will still be someone with a rare and serious illness, costing $2 million to treat.  Reducing the cost to $200,000 is great progress, but not everyone has $200,000.  So, once taxes on productive activity are abolished and patents are reformed, I  have no problem with government using some of the revenue from collecting the land rent to fund treatment which if privately paid would lead to financial catastrophe.