Overrated: Health care innovation

Personally, I’d like to survive the next five years. I expect this will always be my position on the matter.

But should I have the same goal for the public at large? Is maximizing health really a good social policy? Here’s a novel answer: no.

I don’t object to titanium hips, defibrillator implants or other modern marvels. But as rich people’s life expectancies climb past 80, we should ask: what’s the goal here?

It’s not a trivial question; the best argument against public health care is that it slows general increases in health by dampening innovation. I agree.

But innovation is a price I’m willing to pay. My policy goal isn’t maximizing health, it’s maximizing happiness. At this point in our health-care progress, maximal happiness will come from keeping everybody sorta healthy, not keeping two-thirds of us extremely healthy.

Would I prefer cancer to be cured before I die of it? You bet. But I’m not going to vote against health care for everybody else in order to keep myself alive for a few extra years. That would be macabre.

13 Responses to Overrated: Health care innovation

  1. TheGnat says:

    I don’t necessarily disagree, but much of that article is nonsense. The number of people without health insurance (read: without health care), and those without insurance that will actually help them in any way, is much larger than 1/3 of the U.S., at least last I heard. (Let’s face it, if youve got Grinnell College’s insurance, you’re insured. Not that it covers anything, at all)
    Additionally, I’ve never heard of queues in Canada, and much innovation has come from Canada at least. It’s faster than the states at clearing new medical practices and drugs for use, such as laser eye correction, which is down to science in Canada and still pretty much art in the States. If I get LASIK one day, it won’t be in the U.S.
    I know that there is no way I’d want my aunt to be anywhere but Canada right now, because she has leukemia. Her insurance is the universal one that Quebec provides. I’m guessing that the article is confused by statistics out of Canada at least, because it isn’t actually “national” health care. Each province deals with socialized health care in its own way. And then you’ve got the territories, which are for the First Peoples, and who knows how those mess up the statistics, because they *do* have national health care, but….well, they don’t *like* using government services.
    Of course, I think it’s hard to analyze health care issues without having been on the side of the issue that suffers most while pundits play: no insurance, and no health care. That’s where I am. It isn’t fun, especially when you end up with chronic health issues that could have been prevented. Currently, I’m playing the “waiting for a loose filling to fall out so I can go to a dental college to get it fixed rather poorly for very little money, and hey if they screw up, the fix is free!” game. A friend of mine did this with a root canal recently, he’s now in constant pain because they messed up, he’s scheduled for a fix of it in another month. Talk about queues? Would either of us have to deal with that trade-off in Canada? Only if we wanted to help student dentists get better at their jobs. Someone’s gotta be their victim, after all.

  2. Brandon says:

    I am not sure if I can get on board with this Mike. I think your argument suffers from an epistemological problem not solved by recent research in ‘happiness research’. Specifically, the measures of happiness, particularly over issues of life and death, break on the shore of interpersonal comparisons of utility or happiness. When you are talking about interpersonal transfers of resources (taxing the rich, reducing health advancements for the rich for the benefit of the less well off) you must be able to make these interpersonal comparisions in order to argue that you are maximizing happiness rather than maximizing a happiness index. How can one argue that a rich person that is going to die from a disease that WOULD HAVE BEEN preventable at that time under an unreformed health care plan values his life equal to or less than those whose lives will be improved or saved under the new plan? the 1-10 or 1-7 scales can’t capture this because they are bounded. Translating quality of life values into money is problematic due to the fact that different individuals value money differently. That certainly isn’t a valid common metric then. Bill Gates would probably sacrifice more money for frends than me, because I simply have less to sacrifice.

    That said, in democratic and western thought individual’s lives are valued equally. One man one vote and so forth. In that regard, I have no problem with saying that this trade is the just one, but I can’t ground this arguement for wealth transfers on empirical measures of happiness, but instead on axiomatic ethical grounds.

    In constrast to you, I don’t see the innovation arguments particularly compelling, Nor do I see happiness arguments. I think there is a better argument to be found by examining the fundamental causes of non-sustainability of medical price increases.

  3. Mike says:

    Wait, nobody told me I had to come up with arguments for my arbitrary political positions!

    Mr. or Ms. Gnat:
    I definitely agree that medical discoveries (and, perhaps more importantly, wide adoption of recently discovered techniques) can come from publicly-funded systems; my assumption is just that, in general, it will tend to happen more slowly in a Canadian system than in the United States.

    About 15 percent of Americans are uninsured. (It’s a Census PDF from last year.) With “two-thirds,” I was taking a stab at the number of underinsured, but I wouldn’t define “underinsured” as “low-premium/high-deductible.” I’d define it as “those whose health is suffering because they can’t afford to fix it.” Some people in “excellent” or “very good” health — as two-thirds of us claim to be, according to the Census — are overinsured. (At the moment, I’m one — knock on wood.) Others have crappy insurance coverage but don’t use it, like me in my last job — I’d guess those people have it just about right. Others have crappy or zero health insurance and need it. Those are the only ones in my 33 percent. Do those definitions or estimates seem unfair to you? I admit they’re very rough.

    I agree that actually measuring my hypothesis would be methodologically difficult, and maybe you’re right that I shouldn’t invoke happiness research for this argument. That pseudoscientific gloss — it’s so pretty!

    Seriously, though, isn’t it possible for a pundit like me (as opposed to an academic like you) to make a happiness argument without empirical support?

    Also, I’m curious as to why you don’t find the innovation argument compelling.

  4. Brandon says:

    More to say in a bit, but I want to get this out. The problem with your argument is not empirical. I don’t mean to say that one must run out to collect and analyze hard data before they state an opinion. BUT, when one grounds their position on a principle – such as maximizing happiness – then that principle must -in principle- be possible to maximize. As I said, the problem isn’t empirical (that you don’t have the data) the problem is epistemological (you CAN’T get the data). Your argument would be as strong if you were to say you wanted socialized healthcare because you wanted to maximize God’s love or the number of angels dancing on the head of a pin. I do not hold pundits responsible for running their own analysis, but I do request that if they don’t choose to find the analysis others have done, that their position, at least in principle, should be defensible in a way that is interpersonally communicable and verifiable. In short, the position must be scientifically sound before it is a justifiable opinion about the collective futures of an individual and their community. If it isn’t, then we are not having a deliberation to ascertain some level of truth, but rather we are swapping religious views. You belong to the church of happiness, I to the church of God, and the Gnats to the church Canadian Health.

    That is no way to run civic discussion! At least not in my Republic!

  5. Mike says:

    Waitaminit, Brandon — data isn’t the only language in which we can converse, is it?

    I thought your original point was that we don’t have a method for quantitatively comparing the amounts of happiness produced under a socialized-medicine scenario and a private-medicine scenario. This seems true, for the reasons you laid out.

    I’m no epistemologist, but I work under the assumption that data exists, even when it’s unavailable. So when data is completely unavailable, I’m comfortable relying on internally consistent/theoretical/faith-based arguments instead. I do want to maximize the number of angels dancing on that pin, dammit! Do you agree that the number of angels seems likely to increase under situation X? If so, that’s something to work with.

  6. Mike says:

    To clarify, I realize that unverifiable arguments are inconsistent with the scientific method. My contention is that the scientific method needn’t be the only basis of public policy.

  7. TheGnat says:

    Mike, if that’s the definition for the 2/3s argument, then that’s fair. But I still see no basis for the lack of innovation. Besides, what use is innovation if few people even have access to it? (IE: In Japan, they’ve developed a walking robot, which a disabled person could sit in, and get up and down stairs and inclines. Problem? It’s still bulky, couldn’t fit in a car, and way too expensive).

    And yes, I’m tired of the scientific method being practically the only way to go about things. There’s no reason to put a box around thinking and debates!

    (Oh and it’s Ms ^^ )

  8. Mark says:

    Ms. Gnat,

    The argument in favor of innovation, even when it is very expensive and available to a limited number of people, is the same as the argument for early adopters in other fields. If I (or, more realistically, my multi-billion dollar company) can develop a cure for cancer, great. But what if it’s so expensive that only 1% of the people with cancer can afford it?

    Well, if you are rich enough to afford my cure, and you have cancer, chances are you’re going to pay my price, as high as it is, and be cured. As more people use the cure, the theory is that I will eventually be able to gain some efficiencies of scale, and perhaps develop a better (ie, cheaper) mechanism for the cure. Over time, the price will come down and the treatment will be available to an increasingly broad demographic.

    For a point of comparison, the first DVD players were many hundreds of dollars when they were released. Only people notably more wealthy than me could afford to watch their movies that way, and even the ones who could were limited to a small selection of available films. Now, however, you can get a low-end DVD player for $50, and there is no such thing as a movie that isn’t available on DVD. The reason this happened is that the first people out of the gate were willing to pay the high price. Over time, manufacturers and engineers were able to drive the price down, and as volumes of sales went up, the price continued to drop due to efficiencies of scale.

    In addition, even very expensive breakthroughs which are not practical to apply on a broad scale can serve to inspire other breakthroughs. Even if my cure for cancer is so expensive that the average person will never be able to afford it, it’s quite possible that the research I did to develop the cure might well serve as the basis for a much cheaper treatment for cancer. Sure, you can’t afford to be cured, but I can, for a much lower price, offer you the chance to more effectively treat the disease. Without innovation at all, you’d never have these kinds of secondary discoveries.

    This may or may not be a compelling argument in the case of medicine, but it is a logical one. I don’t know, in light of the points Mike raises, if I agree with this argument, but I figured I’d articulate it for the reference of everyone involved in the conversation.

  9. Brandon says:

    I will duck the discussion about whether civic discussions must be upon firmly rationalist (that is to say) scientific grounds to possibly and independent posting that I lay down on the site. I will just say that I am of the view that all civic discussion, to be towards the purpose of forming a decision with regards to a social decision, must take place upon such scientific grounds if the discussions are to be truely civic, productive, and likely to lead to a positive outcome. My position yields moral and ethical discussions a very specific purview beyond which that discussion should not tread.

    With regards to pricing in the medical industry, the problem here is that the market mechanism is dysfunctional. Average prices are skyrocketing beyond what can be explained by inflation, simple aggregate demand and/or influx of expensive innovations. Something in the incentive structure of this industry is pushing up prices and crowding out greater and greater proportion of citizens. This ‘health system’ in other words is not compatible with a stable market. As such, the price pattern of a new innovation does not follow the pattern of a new DVD player. Instead it would be as if the new DVD player was twice as expensive as the current DVD player, but in the meantime both the old DVD player is continuing to go up in value so that less and less people can buy it. Thus, once the new DVD player reaches the nadir equilibrium price, half as many people can buy it as could be the old DVD player. This is not to say that innovation is to blame for this problem, but only that the potential welfare gains are smaller than the innovation argument that Mark lays out would suggest. In a well functioning market the story would be exactly like what Mark describes. However, the health care market is not a well functioning one.

    This is one reason I don’t find the innovation argument terribly compelling. The other reason is that the market mechanism in the type of economic situation I describe does not direct innovations in a way that is acceptable, even by the paretian morality of classical economics. Due to the ever more exclusive price floor for medicine, new developers will focus on medicines that will be sellable to those able to pay above the future price floor. Thus, current consumers are not paying for innovation that they may ever benefit from, and diseases that affect mass uninsured will go unresearched… UNLESS the government artificially creates incentives for innovation. This is the next point.

    Innovation in medicine is not something that the market is actually even that good at inducing. But even if one thinks that it is, they must admit that public and pseudo-public moneys (government and foundations) guide much of the research and innovation that is likely to lead to the great breakthroughs. Thus, it seems to me that whether public or private mechanisms are best at driving innovation in medicine the answer would have to be ‘who knows’. Indeed, the major breakthroughs of modern medicine such as penicillin and the polio vaccine where not developed by, nor distributed through the use of the market mechanism.

    I find that most arguments in favor of the ‘magical innovative properties of the American Medical Industry’ either base their story on a theoretically simple (and largely inappropriate) analogy of a perfectly competitive market, or empirically on a very selective viewing of the facts: For example, they like to point towards are high tech medical care, but like to ignore where, how, and by whom much of that technology was developed (public sector sources).

    Much like global climate system, I think that the specific processes by which the medical system is heating up are difficult to parse. However, it is clear that decentralization of medical industry decisions is causeing through these difficult to pin down processes is causing medical system heat up. And, as with the global climate system, I don’t think it is practical, moral, and democratic imperitive for our society to change the healthcare system to one that is more centralized, universal, and publically responsible.

  10. Brandon says:

    Mike… it is officially your job to nag me to write up a post for this website entitled: Civil Debate and Public Discourse: An Arguement in Favor of Rationalism as Norm.

  11. Mike says:

    Accepted re: rationalism, Brandon.

    Re: innovation-

    As for your first point, that’s the first time I’ve heard anybody say straight up that we can’t account for health care costs by factoring in the growing number of treatment options. But I’ll assume you’re right about this recent market dysfunction, because you’ve studied such things.

    However, I’m unconvinced that the recent inflation in health costs is so earth-shattering that we should toss feel-good classical economics out the window. Nobody would argue that poor Americans haven’t seen big improvements to available care over the last 50 years, and we can surely thank feel-good classical market forces for much of that.

    As for your second point (the one about innovation coming from the public sector) I’d agree that we can’t be sure how much is coming from where. I’m definitely in favor of both public and private research! But:

    – It would make sense for a lot of great breakthroughs to come from the public sector, while incremental discoveries come from the private
    – “Innovation” doesn’t refer only to discoveries, it refers to adoption of new techniques, and a decent market system has got to be better at this than a public one.
    – How many significant, useful medical discoveries originate in the USA? How many elsewhere? How does our public research spending compare to other countries’? I suspect (perhaps incorrectly) that for all our research spending, we still punch above our weight, thanks in part to the relatively rapid return on investment that comes from our market.

    By the way, please keep in mind that my original argument (like Mark’s response, I think) was just sympathetic to market forces, not worshipful of them. I only make these Hayekian arguments in the service of Mother Russia.

  12. Brandon says:

    I hear you. The problem with the (mind you only one) analysis I have seen that tries to make the argument that the number of treatable problems is increasing healthcare costs is that they are noting trends. The number of treatments increase over time, so do healthcare costs! Of course, the number of cats owned in the U.S. has increased too! But, even if these arguments are correct, do we expect this trend to stop? If not, how long until the medical system becomes unaffordable to anyone but the most wealthy (which, of course, will push up the price even faster – items for wealthy people are known to suffer huge ‘fad’ effects, and price instability)? The point is, that regardless of the ’cause’, which I can’t identify, the system is not sustainable, even with current arguments.

    RE: the market and ‘new techniques’. I would not argue that market forces in the medical labor market may not be a good thing. Providing doctors with incentives to develop new techniques, and to ‘practice medicine’ is not something I would be willing to toss out the window. However, like all markets, more government regulation can be used to make this competition efficient while not bankrupting the system. I am not ‘anti-decentralization’. I am merely saying that the market model cannot be adequately used to describe ‘ the medical industry’, or the ‘medical research and production industry’. The Hayekian market can be faithfully used to model certain parts of the medical industry, and if so, I am sure these parts work well. I am a fan of the market of Mark Montgonery Microeconomics course. If most markets truely operated as these models predicted, in most cases, it would indeed be a pareto optimal place (for whatever that is worth).

  13. laikal says:


    As always, your perspective is nuanced and informative. It’s like you study policy or something. I’m actively ignoring the third or fourth superficial lecture I’ve gotten on pareto optimality right this very second!

    Mike, the article you linked to (“the illusion of socialized health care”) was so incorrect by the second or third paragraph that I couldn’t read it. The united states, through the university system, has always enjoyed considerable health care innovation through public, nonmarket, means. This is not a reflection on you, though :). I share your concerns.

    Besides which, there are flaws in our health care system beyond those that Brandon points to (market failures) and beyond any concern about rising prices: why in the world are Americans taking so many pills, undergoing surgeries, and getting reslongulously expensive test batteries at the drop of a hat in the first place? We may or may not be happier and healthier than ever before; we’re also more extensively medicated and operated on than ever before.

    This is obviously not something I can scientifically comment on at the moment, and probably merits its own thread.

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