May 25, 2005

The Innovation Dilemma

I see Leif Wellington Haase of the Century Foundation has put out a new proposal for mandatory individual health insurance. Awesome. Rather than list all the problems with this sort of approach, though, I think I'll just link to the best argument against individual mandates that I've ever read, by... Leif Wellington Haase. Uh, right.

Cute games aside, it seems that Haase has changed his mind, no longer favoring single-payer health care, because of the innovation question. If guv'mint took over the health insurance system, he thinks, it would just tamp down costs and reimbursements—especially when fiscal stability was at stake and those crazy politicians needed to keep spending down—and hence, no one would have any incentive to innovate or try out nifty new health technologies. Life would suck! Haase's plan gets around this, supposedly, by requiring all private insurers to offer three health plans—basic, pretty good, and shiny Cadillac—with the expensive Cadillac tier being the one that motivates and drives technological innovation.

Well, okay. But look, is it actually true that single-payer plans squelch innovation? Let's do anecdotes first, since they're fun. Look at this list. Seems like our single-payer neighbor up north has been pulling off all sorts of surgical firsts over the years: first heart-valve transplant, first double lung transplants, ah, they were even the first to use pig liver tissue to keep a patient alive! If that's not ingenuity, what is, etc. On the other hand, our dear single-payer friends across the Atlantic, what with their NHS and all that, don't seem to be winning any of the all-important transplant races. Tsk tsk! And of course, the first transplant ever was done in Boston—'twas a kidney—so perhaps the U.S. is in fact the alpha male here and everyone else is just following our lead. Or something.

But enough transplant silliness. When all is said and done, the United States is probably vastly more innovative than the rest, for some generally accepted value of "innovative." (We'll quibble with that later.) But why is this? In theory, it's because the private insurance system in the United States more or less forces medical providers to compete not on cost but on quality. Hence, innovation! But notice: there's nothing intrinsic about single-payer that prevents this from happening—you can have government take over the insurance industry and still leave a competitive provider market, as is the case in Canada and France. In France, I believe, you're also allowed to purchase additional private insurance to pay for nifty extras and experimental surgery and the like, so really, there's nothing here that necessarily limits innovation from occurring, in theory.

Shifting tracks a bit, when it comes down to it, the American advantage in innovation seems to come from a few sources. One, we have a bunch of top notch universities that attract world-class medical researchers, many of whom receive plum research subsidies from... the federal government. (The National Institute for Health alone shelled out over $28 billion in research money last year.) That's important. I don't know offhand how important it is, but this isn't the sort of thing that would necessarily just disappear if we switched to a single-payer system. (Pfizer claims that 57 percent of all biomedical research comes from private industry -- fine, but is this the sort of thing that could easily be supplanted by public subsidies? If so, we're talking, what, $50 billion a year? In the grand health care spending scheme, that's peanuts, and could in theory come from savings elsewhere in switching to single-payer.)

Second, at the moment many relatively well-off Americans don't seem to mind letting health care costs balloon—in part because those Americans who do consume a lot health care and drive medical innovation generally don't pay a lot out-of-pocket. This is also important. It's worth noting that many of today's health care technologies simply don't help control costs. Exactly the opposite, in fact. And that's presumably because, as noted earlier, providers largely compete on quality rather than cost. So costs go up as niftier and niftier technologies get hauled out.

Now many conservatives want people to pay more out of pocket in order to rein in private health care spending. Okay, fine, but then presumably providers are going to start competing on cost—since that's what people will be looking for—and the character of technological innovations is going to be transformed, from the current paradigm of quality-improving innovations to innovations that involve new and cheaper variations on old techniques. Again, that's just a theory, but it seems like a sound one, and not something I think many conservatives have grappled with. Is this the sort of shift in innovation conservatives want? Well, is it? Maybe it is. Personally, I think that our nation's overall quality of life would be better today if innovation had been driven by a desire to control costs and make various technologies available to all, rather than new "quality-improving" devices that are very expensive, limited to only a few consumers, and may or may not do all that much "good" when it comes down to it. (It's all about the QALY control!) At any rate, any sort of cost containment reform is going to restrict medical innovation to some extent.

It's also worth asking: innovation where? It's no secret that our health care system focuses on hospital care and drug treatment, thus placing a high priority on acute care, and de-emphasizing a lot of preventive and even rehabilitative care. So naturally, that's where much of the innovation goes. I've heard—and I can't find anything to verify this, so dispute away—that a good deal of technological advances in the United States are concentrated in the field of surgery. And why not? The procedures aren't very closely regulated, and the specialists get paid by the buckets. But it's also not clear that more specialists lead to better health outcomes—indeed, one study showed that areas with more specialists were correlated with worse health outcomes.

On the other hand, health care reforms that placed a greater emphasis on ambulatory and preventive care could, in theory, lead to more technological innovation in those areas. And perhaps that would be better overall for the nation's health. Someone should find out! At any rate, I haven't really answered anything here, but the general question that usually gets asked on this topic is: "How do we best encourage medical innovation?" That seems crude. Medical innovation isn't monolithic. A better question, I think, is: "Where and how should we be steering medical innovation?" For all the impressive technological advances made here in the U.S., I'm not convinced they've always been heading in the right direction.
-- Brad Plumer 2:19 AM || ||