Basic Economics and Unintended Consequences of Federal Vaccine Courts

We all know that health care costs are very high in the United States, maybe “out-of-control”.  Many reasons for why are proffered, but the simple explanation is what is taught in freshman-year college Economics classes.  The out-of-control costs are the classic result of a Third-party Payer System.  Out of control costs are universal in any Third-party Payer System.

In a normal market system, buyers check the prices that sellers want to charge, which results in a natural market equilibrium and a fair price.  In a Third-party Payer System, buyers do not check prices because a third party is paying the bill.  In a Third-party Payer System, prices become inflated.

How prices get inflated in a Third-party Payer System can be compared to a teenager buying a car with his parents money vs. his own money.  Say the parents tell him that they will give him up to $10,000 to buy a car.  Whatever of the $10,000 budget he doesn’t spend, the parents keep, not him.  So what does he do?  He buys as much car as he possibly can for the $10,000.  Now what if it was his own $10,000?  What if he found a car for $5,000 that was almost as good as a $10,000 car?  He has a natural incentive to select the best value, the $5,000 car so he can keep the other $5,000.  If the parents provide the money, it is a third-party payor system.  If it is his money, it’s a natural market.

The American medical system and health insurance system is a Third-party Payer System. Most Americans have health insurance that covers that vast majority of their health care costs.  As insureds we pay a flat monthly rate for their insurance plus a small fraction of the cost of the services we use when they use certain services.  (think $20 copay on $300+ doctor visit)

The problem is that the more health care services we use, whether or not really necessary, means that the money we pay for our health insurance is a better value.  It’s like going to an all-you-can-eat buffet.  You pay maybe $20 no matter how much you eat – the more you can eat, the better value you receive for your $20.  So the natural incentive is to use as much health care as you can (stand) because our insurers are picking up the tab.

With this Third-party Payer System understanding, it makes sense why American health care costs are so inflated and while doctors, pharmaceutical companies, and medical device makers make money hand over fist.  We, the American insureds, are not checking prices – we don’t care what our health care costs, and we want as much health care at the buffet as we can get.

So then with this in mind, why is it that American vaccine makers cannot make any money making vaccines due to possible vaccine injury liability unless the Federal government protects them?

Think…. Well they could.  They could charge whatever they wanted for vaccines and our insurance companies would pay it, but that wasn’t enough.

The vaccine manufacturers successfully lobbied the Federal government  to create Federally funded Vaccine Courts to handle claims for compensation for injury from vaccines, with compensation to victims of vaccine injury being paid by a Federal fund. Vaccine manufacturers have successfully shifted any possible liability to the Federal government, to tax payers.

With Federal Vaccine Courts in place, vaccine manufacturers have limited incentive to make sure that their products are safe.  The Federal government has unwittingly agreed to protect them from everything, albeit with good intentions for the benefit of public health.

So this leads us to the next basic economics issue.  With no incentive to limit their liability and prevent injury from their products, what will be in the primary interest of vaccine manufacturers?  Safety?  I think not (until there is public outcry).  It will be profit with only limited regard to liability and safety.  

And that is why we have problems like this one:  http://www.realfarmacy.com/cdc-admits-98-million-americans-received-polio-vaccine-contaminated-with-cancer-virus/

There are multiple other examples, but this one was from today.  Just look for yourself.

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