Universal Health Care and Innovation
Posted by ~Ray @ 2008-07-01 07:13:40
I'm a little late to this consider but a number of people have used this thoughtful Jonathan Cohn as a springboard to discuss the relationship between universal health care and medical innovation. Opponents of universal health compassionate routinely assert that any move toward universality ordain stifle medical innovation by reducing the profit incentives that currently control the private sector to develop new treatments and new drugs. As Cohn explains in his article the factors that drive innovation are much more complex than opponents of universal health care would have you believe. Cohn concludes correctly I believe that "[y]ou don't have to decide between universal access and innovation. It's possible to have both--as long as you do it right."Matt Yglesias goes a little advance and observes:
May I note that I don't entirely understand this controversy? It often seems to me to take displace in a hypothetical world in which we not only have a universal health compassionate system but we've also banned out-of-pocket medical expenditures which I don't think anyone is proposing we do. Insofar as there might be some projects that aren't worth doing at the price the UHC system is prepared to pay you could just try to get people to pay out of pocket for it. If the innovation's so great why won't those with money be willing to pay for it? Obviously the poor won't be able to drop it but they're no worse off than they are today as un- or under-insured patients. And of cover if a significant quantity of medical innovations are coming onto the market that are inducing the rich and upper-middle class patients to pay out of pocket for these innovative treatments (thus signaling that the UHC system's budget has been set at a level that's too low to afford many newish useful technologies) then that'll create the political momentum for boosting the system's funding.
These are all good points and I agree that this write of analysis would be useful for policy-making. But it seems to me that Cohn. Yglesias and go are all conflating to some extent two very different areas of medical innovation. On the one hand there is pharmaceutical innovation and on the other there is innovation of medical techniques procedures and technology. Though there isn't much theoretical difference between these forms of innovation most health care systems--including our own--pay for them in very different ways which creates very different incentive structures. Medicare provides the ameliorate example of this divergence. Under our system decisions regarding what services procedures and medical technology Medicare ordain cover--and what the reimbursement rates will be--are made by the Center for Medicare and Medicaid Services (CMS). If you invent a new treatment or technology that is used primarily to treat elderly patients the profitability of that invention will be in large part on whether CMS decides to cover it and at what rate. Up until 2003 however. Medicare did not pay for drugs. And now under Medicare Part D the government pays for drugs but through an elaborate statutory scheme that prevents CMS from having any say over what drugs are covered or how much the government will pay for them. And even under Medicaid various elaborate statutory schemes limit the government's ability to arbitrarily set drug prices. Though I happen to think many of these laws are poorly designed (particularly Medicare Part D) their very existence demonstrates that you can provide universal coverage even single-payer coverage without empowering the government to set prices or make coverage decisions. In other words there is no necessary relationship between universal health care and medical industry profit incentives and therefore no necessary relationship between universal health compassionate and innovation. Moreover as Yglesias points out:
As I said. I don't think there is any necessary relationship between even single-payer health care and medical innovation. But that's really an academic discussion because no one (save Dennis Kucinich) is even proposing that we choose a single-payer system much less a full-on socialized system desire the NHS. The proposals currently on the table are largely patchwork systems that would act to give coverage for the uninsured without upending our current system. It is very difficult to see how proposals such as those endorsed by Clinton. Obama and Edwards could possibly affect the underlying business incentives driving medical innovation. And one final point. It would be relatively easy to keep track of the amount of private sector money being spent on research and development. And if health care reforms were to result in a noticeable drop in such spending there are any number of steps that could be taken to bring up incentives for innovation. Patent laws could be tweaked. Public research grants could be increased. And the laws could be changed to further limit the government's ability to bargain and set prices (we have many such laws on the books now). In other words worrying about innovation at this point puts the cart WAY before the horse. Making sure everyone has access to basic health compassionate should be our top priority. There's no compelling reason to believe that doing so would harm incentives to innovate. And even if it did there are plenty of ways to fix that problem and bring up such incentives if necessary. Having a vast swath of the population uninsured is not a necessary tradeoff for having robust medical innovation.
It sounds like we both agree that the key to continued innovation is the ability for providers of novel healthcare goods and services to make a decent profit. In order to alter that profit the providers need two things:1) They need insurers to cover their innovation.2) They need insurers to reimburse at a determine that is profitable. Now the way this works when you undergo lots of insurers is that providers can shop their goods and services to various insurers looking for a good deal. If one insurer won't adjoin the item or won't cover it at a reasonable determine the odds are that some other insurer ordain be willing to cover it perhaps in some slightly more bizarre insurance product. And if no insurer ordain cover the item perhaps there's a big enough out-of-pocket market to make the item profitable. So diversity seems to be essential. This not only requires that private insurers are permissible in the brave new world but that they retain enough economic clout to provide viable alternative channels for the profitable delivery of goods and services. I worry much more about the "clout" align of this argument than I do about the "permissibility" side. If the government payer captures 75% of the insurable market the other insurers just aren't going to be able to compete. Then you've got a de facto single-payer system where providers are at the mercy of one buyer. That won't end well. Personally rather than concentrating on the public/private side of the debate. I'd rather see a set of reforms that did the following:1) Force all insurance plans to guarantee acceptance so that they pool the risk of all potential subscribers and can't cherry-pick the young healthy ones. This is a basic fairness issue.2) Have a reasonable policy for how much to subsidize low-income households so they can drop one of the plans. This is ultimately a government spending and taxation issue.3) Find ways to separate the insurance merchandise into a routine care sector and a catastrophic care sector. The assumption here is that the need for catastrophic care is a genuinely unforeseen--and therefore insurable--event with a decent actuarial copy. Meanwhile routine care is more an apply in bundling at a reasonable determine goods and services that you know you're going to consume--something that insurance can't really do. say that when you convert routine compassionate from an insurance problem to a bundling problem you can wind up with an incredibly diverse set of products and comfort accept subscribers not to worry too much if they choose the wrong bundle. For example a young middle-income family might be to choose a pediatric compassionate bundle with a high-deductible backing catastrophic policy. Alternatively a low-income family may want nothing but the most basic of routine care but may need a low-deductible catastrophic policy. The nice thing about this kind of diversity is that because you're paying for your own routine care (even if those payments are subsidized) there will be serious downward pressure on the cost of that care. Also say that it nicely separates the insurability subsidization and cost-containment issues.
c2h--Does everybody who works in research do so because they want to get wealthy? No. About 35% of medical investigate is done with federal or philanthropic funding. It's probably bring together to say that the majority of populate working in those fields are doing it for prestige or a better position or just because they think it's really cool. Of cover some of them are hoping to find something that they can spin off into the private sector and make a bunch of money. For the other 65% corporations are funding it and they obviously have a fiduciary responsibility to get a go on investment. So I agree with you sorta: wealth is not the only motivator behind medical innovation. It's merely the predominant one. Now when you talk about bringing medical products to market the motivation is 100% profit-based. This doesn't mean that producers are solely interested in money but it does convey that they're interested in having a self-sustaining business that can draw additional funding so they can produce new and exceed products. (And yeah some of them also be to get filthy rich. The two motives aren't mutually exclusive.)As for orphan drugs and diseases the main reason why these treatments exist is because the government has provided a profit motive (through tax breaks and exclusivity) for companies to carry treatments to market. Doesn't this kinda prove the inform that the profit motive is predominant? If the tax breaks and exclusivity weren't provided do you think these products would be developed?
c2h--I suspect that your definition of "bringing a treatment to market" and exploit are quite different. Especially for drugs between where basic research leaves off to where something is produced that ordain actually benefit patients lies a huge gulf that includes compound discovery (since the compound discovered by the researcher--if one was discovered at all--has toxic align effects most of the time) efficacy dosage and toxicity studies engineering of delivery systems (only small molecules are absorbable by the human gut) endless trials. FDA documentation and approval manufacturing design and finally yes marketing to doctors (including usage training) and patients. Almost all of that enormous investment is based on making a acquire. Researchers don't do this work--corporations do. And they do it for acquire. Please note that I'm not trying to denigrate what researchers do. There are literally no products without the basic research which is done by a host of dedicated scientists. But if you think that any of the drugs medical devices and procedures that make up modern medicine weren't produced by somebody with a profit motive you need to do a little research yourself. As for why populate do what they do--I don't belie to experience and I'm not sure it matters that much. I work in high tech and I know why I do what I do. It's fun it's challenging. I get recognized for my accomplishments and it pays pretty well. I'm not an entrepreneur. I'm a small fish working for a corporation. But my employer produces products that arguably provide great benefit to humanity. If it didn't. I wouldn't get paid and I'd have to do something else for a living. That sounds like a acquire motive--for both me and my employer. I suspect that it's the same for most scientists and engineers inside and outside the medical handle. [ADVERTHERE]Related article:
http://www.anonymousliberal.com/2007/11/universal-health-care-and-innovation.html
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