There’s No Such Things as a Free L̶u̶n̶c̶h Test

In a short-sighted blunder, India’s Supreme Court has ruled that private labs cannot charge for coronavirus tests:

NDTV: “The private hospitals including laboratories have an important role to play in containing the scale of pandemic by extending philanthropic services in the hour of national crisis…We thus are satisfied that the petitioner has made out a case…to issue necessary direction to accredited private labs to conduct free of cost COVID-19 test,” the court said.

Whether the private labs should be reimbursed by the government, will be decided later, Justices Ashok Bhushan and S Ravindra Bhat said in a hearing conducted via video conferencing.

The Supreme Court’s ruling will reduce the number of tests and dissuade firms from rushing to develop and field new drugs and devices to fight the coronavirus. A price is a signal wrapped up in an incentive. Instead of incentivizing investment, this order incentives firms to invest resources elsewhere.

Nor do private labs have a special obligation that mandates their conscription–an obligation to fund testing for all, falls on all.

The ruling is especially unfortunate because as Rajagopalan and Choutagunta document, India’s health care sector is predominantly private:

…India must rely primarily on the private sector and civil society to lead the response to COVID-19,…the role of the government should be financing and subsidizing testing and treatment for those who cannot afford to pay. India’s private healthcare system is better funded and better staffed than the government healthcare system, and it serves more people. It is estimated to be four times bigger in overall healthcare capacity, and it has 55 percent of the total hospital bed capacity, 90 percent of the doctors, and 80 percent of the ventilators.

The temptation to requisition private resources for state use in an emergency is ever present—but Indian policymakers must resist that temptation because it will compromise instead of increase capacity.

Benevolence is laudatory but even in a pandemic we should not rely on the benevolence of the butcher, brewer or baker for our dinner nor on the lab for our coronavirus tests. If we want results, never talk to suppliers of our own necessities, but only of their advantages.

Comments

So while the world suffers, labs want their pound of flesh.

Without "their pound of flesh" there will be more suffering, but at least you've got sanctimony to console people.

So that is it. Either sick people play ball or die.

What kind of nonsense is this? They are humans too and need money to survive. Initially many labs started building cheap and effective testing kits. Now if they are not guaranteed reimbursement, what is the motive to build any new testing kits? Are you willing to lose the only revenue to test fellow humans?

What we really need are slaves. No need to pay anyone. Just throw in a bit of food once in a while, and whip them when they complain.

Works in the USA. When we do not want to play a whole government sector jumps on our ass. We, especially the urbanites, are slaves, we cannot escape the system. Nor can we vote ourselves out of the mess, we are a republic, not a democracy. Voting for freedom seldom works in a republic, as our own civil war can attest.

So, we are left with creating an illusion and calling it our priors, and lowering our intelligence to suit the establishment. We give up.

The miracle of underground transactions will save the day.

It's almost as if there is a reason they are so common in India.

I think you're right, and it means a loss for accurate reporting.

Bravo Alex. This is what the economics profession is made for.

The difference between a hero and a predatory opportunist is measured in dollar terms with a tricky tipping point. If humans are too wired to smell out opportunists in this situation, it is counterproductive for all of us.

There are a lot of entrepreneurial hustlers out there in both the good and bad sense of the term. We need hustle right now. I'd rather try to identify and mop up bad actors after the fact.

Bravo, someone dropped their priors and tackled the whole problem.

reimbursement at a later stage is not 100% as effective as a price

but it's not 0%

price gouging is more than just a moral outrage in India, there'a a lot of very poor people on short-term informal contracts with zero "benefits" as American HR refers to it.

There's an easy way to fix that: the government can provide a safety net and pay for the tests for the poor. Instead of putting all the burden on the drug company and potentially killing the goose, the burden is distributed.

For anyone following the “so many of us already have been exposed” debate, Denmark has released the results of a 1,000 sample antibody survey. According to Google Translate:

"4.1.2.  Revised planning basis

Statens Serum Institut informs on the basis of antibody studies in 1,000 blood donors in the Capital Region, lost in the period 1-3.  In April, 2.7% had been detected with antibodies, which, with a sensitivity of 70%, corresponds to 3.5% of those examined had already been infected with COVID-19.  Statens Serum Institut states that if this figure is transmitted to the entire population of the Capital Region, it is equivalent to approx.  65,000 people may have been infected as early as 26 March.  At this time, 917 confirmed cases of infection were found in the region.  This means that there can be up to 70 times more infected in the community than confirmed cases.

In the work of the State Serum Institute in modeling the development of the epidemic in Denmark, on the basis of studies in, among other things, Iceland and Germany, it has been decided to work with the real number of infected in Denmark being 30-80 times higher than the number that remains.  ver proven"

https://www.sst.dk/-/media/Udgivelser/2020/Corona/Status-og-strategi/COVID19_Status-6-uge.ashx?la=da&hash=6819E71BFEAAB5ACA55BD6161F38B75F1EB05999

I get 4.3 million, upper end, in New York City are infected, out of 19 million. This based on 77,000 confirmed cases in the city. I used the 70 times ratio.

According to this, then, half the population of NYC becomes immune in about two weeks. At that time they likely half a quarter infected and half immune.

They already are at 'whack a mole' equilibrium, or very close. The quarter of the newly infected in two weeks likely bottled up in separate neighborhoods with cops and docs on the prowl.

If this is accurate and typical this is very good news. The epidemic will be over in a few months and it's also evidence that mortality rates are much lower than assumed.

Again, I think we need to prioritize serological studies.

This is a supply signal back to the government (kind of a like a price signal, really): you need to fund this. I think you're overreacting by ignoring the *political* part of the political economy

This is exactly correct. In a country like India, with so many in poverty, the social signal of "buying a cure" entails greater hazard than any other country. Also I find Indian private labs/doctors more benevolent than their Western counterparts, simply because they cannot ignore the poverty they potentially choose to price-out.

Alex moonlights as a scholar of Indian jurisprudence

Some goods are "mandatory public" : if some sector of population couldn't get it, then nobody can.

Food, Clothing, Fresh Air, Shelter, and now health care.

Attempt to make it available for "some" would get averse public reaction.

This is why Indians think cow urine is the cure for coronavirus.

"This is why Indians think cow urine is the cure for coronavirus.'"
To say that Indians believe this ls Like saying Americans think faith healers can cure any ailment including cancer

And what about anti-vaxxers: Jesus (or someone of the other two from the Trinity) will save us?

India's Supreme Court made a ruling on a case that wasn't twenty years old? Impressive.

Imagine instead of Supreme Court, parliament has enacted a law called Covid Response Act 2020 and that allows the government to commandeer labs and private hospitals to enable tests for $2 a piece.

Sorry if somehow that reminds you of DPA.

Is that the sound of deafening silence here abouts?

FWIW, I think thats a bad judgement. Humans work on incentives - fame/money - and this disincentivizes the non-altruistic. Altruistic don't need effing Supreme Court judgements/edicts.

https://marginalrevolution.com/marginalrevolution/2020/03/the-defense-production-act.html this doesn't welcon DPA either. So AT is being consistent.

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