According to two new surveys of healthcare executives and "opinion leaders" (it is unclear what that credential entails), there is support for federal health information technology initiatives. In one survey¹, 60 percent of the health insurance executives surveyed agreed that the government should require the use of certain electronic data exchange formats for organizations who handle insurance claims. In the other survey², investments in health information technology was named the number two priority for congressional action in the healthcare arena. Number one was expanding coverage for the uninsured.

The follow-up question that should have been asked is, "What justification do offer for using the government to divert other people's money and resources away from their uses and applying them to your projects?"

There certainly are opportunities in healthcare information technology. PNC, the sponsor of the first study, noted that it takes an average of 52 days for a hospital to receive payment for an insurance claim, and that many claims must be resubmitted because of errors or questions that lead to claim rejections on the first try. Many more areas of the industry would benefit from better information technology, too.

But "it could be better" is not a valid argument for government intervention. Everything could be made better, cleaned up, optimized. The fact that it is not being done is not an invitation for central planning to step in, but an indication that such investment is not the best use of economic resources at this time. As explained by the Austrian economist Ludwig von Mises, "Technological backwardness and economic inferiority are two different things and must not be confused."³ In this given industry, yes, health IT could be technologically better. But right now, achieving that comes at a greater cost to the rest of the economy than it is worth.

The call for government-funded initiatives to bring the state of IT in healthcare up to speed with more "mature" industries such as finance and retailing bears a resemblance to the "infant industry" argument for protection (a form of subsidy). Health information technology, proponents say, is underdeveloped, and hospitals are unable to survive open competition. Regarding the argument advanced for protecting industries in development, Mises writes:

Its supporters assert that temporary protection is needed in order to develop processing industries in places in which natural conditions for their operation are more favorable or, at least, no less favorable than in the areas in which the already established competitors are located. These older industries have acquired an advantage by their early start. They are now fostered by a merely historical, accidental, and manifestly "irrational" factor. This advantage prevents the establishment of competing plants in areas the conditions of which give promise of becoming able to produce more cheaply than, or at least as cheaply as, the old ones. It may be admitted that protection for infant industries is temporarily expensive. But the sacrifices made will be more than repaid by the gains to be reaped later.

The truth is that the establishment of an infant industry is advantageous from the economic point of view only if the superiority of the new location is so momentous that it outweighs the disadvantages resulting from the abandonment of nonconvertible and nontransferable capital goods invested in the already established plants. If this is the case, the new plants will be able to compete successfully with the old ones without any aid given by the government. If it is not the case, the protection granted to them is wasteful, even if it is only temporary and enables the new industry to hold its own at a later period. The tariff amounts virtually to a subsidy which the consumers are forced to pay as a compensation for the employment of scarce factors of production for the replacement of still utilizable capital goods to be scrapped and the withholding of these scarce factors from other employments in which they could render services valued higher by the consumers. The consumers are deprived of the opportunity to satisfy certain wants because the capital goods required are directed toward the production of goods which were already available to them in the absence of tariffs.⁴

Protectionism from competition abroad is treated as different than domestic subsidization, but both erect artificial barriers to entry and both promote economic inefficiency.

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¹ PNC Financial Services Group.

² Commonwealth Fund survey, conducted by Harris Interactive, Inc., January 17 2006 - February 8 2006. N = 251. Method = online/email.

³ Mises, Ludwig von, Human Action: A Treatise on Economics (Yale Univeristy, 1949), p.508

⁴ Ibid., p.509

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