I understand your logic and I can see "lying" to children since children don't have decision power or the ability to really understand. But there are many problems with your example. First, like it or not a person should at least have the right to face reality - even if that is impending death, coming hardship etc. Second, the patient may wish to explore the ailment, pursuing alternatives or adding holistic approaches in addition to what the medical staff is doing - for which the falsehood defeats any possible alternatives added to it.
Your example also strips away the patient's ability to make decisions on the truth. Chemotherapy is very controversial as generally it shuts down the immune system and has horrific side effects. The doctor telling the patient the chemo is "beating back the cancer" - if false or questionable - has so many obvious problems. A person does have a right to refuse chemo and pursue other options. I can't find the link, but I read that a study in the UK found that for certain forms of cancer, the patient not only lived long, but reported having a much higher quality of life without chemo.
I also know someone who faced the chemo question for skin cancer. The chemo tore her apart, completely crippled her in energy, spirit and employment - though the skin cancer itself only caused a minor scab-like look and itched. She stopped the chemo and instead had the cancer removed by a plastic surgeon and followed up with natural alternatives. There is no evidence the cancer was not completely removed. The doctor who prescribed chemo didn't do cosmetic surgery and thought she couldn't afford the specialist for the surgery. So instead, he had only told her the chemo would ultimately beat the cancer and that chemo was the only option she had.
Instead, all the chemo was doing was destroying her life. He told her only chemo could treat it because that is all he himself offered - and falsely guessed the woman couldn't afford surgical removal because she didn't have insurance. Actually the woman is quite wealthy, she was furious when she learned the real truth, obviously would never go to that doctor again and warns all people she knows facing cancer that doctors lie about chemo - thus a residual negative unknown to other people who might benefit from chemo.
People need the truth. The truth can be hard, but at least the person is making decisions and dealing with their emotions in terms of reality.