Can We Get Free Market Innovation in Healthcare?

 

nurse2Everyone knows how the dead hand of the FDA turns the development and delivery of new drugs into a multi-billion dollar process. And everyone knows about the liberal wish-list of compulsory coverage for health insurance products. But the extent to which regulation has progress-proofed the status quo is rarely appreciated. From ‘Certificates of Need’ — whereby investments in health facilities require the blessing of central-planning bureaucrats — to the socialization of insurance pools through ‘Community Rating,’ to forced coverage of pre-existing conditions, everything in the current system either unwittingly or deliberately resists innovation.

Where only giant organisations with vast compliance departments can meet the inhumanly complex requirements of ever-shifting regulation, where laws, upon regulations, upon rules bake-in the assumption that health insurance is the only means of delivering health outcomes, is real innovation possible? Where can the Ubers, AirBnBs or Googles of health possibly come from? Indeed, where can the sliced bread, resealable bags, or pop-tops of health come from? Where is the room for the thousand little improvements that can make life so astonishing for consumers, when the law assumes that the way things were done in 1964, 1972, or 1986 is the only way they can be done, and woe betide anyone who suggests otherwise?

America has a thriving industry inventing the next machine that goes “ping.” What it doesn’t have is innovation — let alone continuous innovation — in the wider sphere of health delivery. Instead, it has chosen to preserve, in the amber of legislation and interest-group enforced inertia, a particular industry configuration.  Sadly, there is precious little political appetite for breaking the mold.

So, to answer my question: no, we can’t get to free market innovation in healthcare from here. At least, not without major and radical surgery.

Image Credit: Shutterstock user Yuganov Konstantin.

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  1. iWc Coolidge
    iWc
    @iWe

    There is a massive gray area in health care – it is medical care outside the US. Whether ordered in by internet or sought via “health tourism”, there IS a market in health care that is beyond the reach of the FDA.

    It is not that different from “off label” drug prescriptions. They are happening widely, despite the FDA.

    • #1
  2. genferei Member
    genferei
    @genferei

    iWc: There is a massive gray area in health care – it is medical care outside the US. Whether ordered in by internet or sought via “health tourism”, there IS a market in health care that is beyond the reach of the FDA.

    This is an excellent point. The demand is there — the laws prevent it being (legally) met. Perhaps widespread civil disobedience is the best hope? Not so much the Uber of health as the Silk Road… 

    • #2
  3. iWc Coolidge
    iWc
    @iWe

    genferei: Perhaps widespread civil disobedience is the best hope?

     Nobody is going to fight the system. People will just work around it. And they do: doctors heal patients via off-label uses of drugs against the FDA’s best efforts.

    • #3
  4. Mendel Inactive
    Mendel
    @Mendel

    A great deal of the problem can be found by taking a step back from criticizing “the state” and looking at our collective selves in the mirror.

    The examples of innovation in this thread – Uber, Google, Air BnB – are all in sectors of moderate to low importance in our lives. If Uber uproots the taxi system, most people won’t really care.

    But we are deathly afraid of dying. Much of the vise-like grip the government has on the healthcare market derives from our basic fear of our own mortality, coupled with the fact that medicine is much more complex and invasive than other goods and services we need to survive, such as food or clothing.

    • #4
  5. Mendel Inactive
    Mendel
    @Mendel

    I would also disagree that there is a general lack of innovation in the healthcare sector. In fact, in some fields, there is probably too much innovation.

    The number of new drugs and medical devices coming onto the market is staggering, even with onerous FDA regulation. But this makes perfect sense: we (and many other Western countries, even those with price controls) overpay and overconsume these products, often through generous fee-for-service programs like Medicare.

    The irony is that we have great innovation at the high end of healthcare while the delivery of basic services is still stuck in the Middle Ages thanks to regulations like Certificates of Need. As usual, government regulation has resulted in the rich having access to great healthcare while the poor have difficulty getting antibiotics.

    • #5
  6. hawk@haakondahl.com Member
    hawk@haakondahl.com
    @BallDiamondBall

    See _The Innovator’s Prescription_, by I forget who.  No, we cannot get there from here.  but there is a there there, unlike here.

    • #6
  7. user_82762 Inactive
    user_82762
    @JamesGawron

    gen,

    I think the first thing we are learning from the ACA is just how great a guy our old insurance agent actually was.  He gave us multiple plans from multiple companies, pointing out weaknesses and strengths, and then let us decide.

    The whole premise of the ACA is that Uncle Sam knows more about health insurance than your local insurance agent.  We have already determined that Uncle Sam is fabulously less efficient than your local insurance agent as the price of the ACA policies are through the roof.  However, psychotics like Zeke Emanuel still claim that it’s those bad policies that you foolish people don’t understand that you shouldn’t buy that are the problem.

    I would be willing to allow a system whereby all health insurance policies sold in the US would be required to be submitted to a Federal rating system before the customer signed on the dotted line.  Like your gas mileage ratings on new cars or calories on the box of cookies, presumably an informed consumer would make better choices.  The rating system would consist of an overall rating number and then a set of individual ratings for specific areas.  This could be done via computer so when a policy quote was generated by your agent he could even have an instantaneous federal rating for you.  If Zeke Emanuel wouldn’t endorse this he would be admitting that there really is nothing that the Federal Government knows that can help the consumer anyway. 

    To cast ignorance into the boiler plate of law is phenomenally stupid.  Sounds just like Zeke and the ACA.

    • #7
  8. MarciN Member
    MarciN
    @MarciN

    Mendel: Much of the vise-like grip the government has on the healthcare market derives from our basic fear of our own mortality, coupled with the fact that medicine is much more complex and invasive than other goods and services we need to survive, such as food or clothing.

     I agree with most of what you’ve said, but I think the food industry is a good example of the free market delivering life-saving and life-taking products.  

    I love to cook and do a lot of it.  And it never escapes me that people trust me and I have to know what I’m doing when it comes to handling food.  I marvel at the responsibility that the food industry accepts.  One of your chefs makes a mistake and you’re out of business.  

    The food industry faces many of the same challenges a hospital faces–maintaining a sterile environment, for example.  

    The government regulates but does not choke off the food industry–although I’m sure the food industry would disagree, and I understand that.  :)  I do realize that Peppridge Farm and King Arthur Flour feel very controlled by the government.  

     

    • #8
  9. Mendel Inactive
    Mendel
    @Mendel

    That’s a great point, Marci. I had also noticed the difference in our acceptance of the food industry compared with our persistent fears of healthcare. I wonder if the differences might be due to any of the following:

    – we have many millenia of experience in food safety
    – food is often much less intrusive than medicine into our bodies
    – foods and food safety is much easier to understand than the complex field of medicine
    – people die of “bad medicine” much, much more frequently than they do of food poisoning.

    By its nature, medicine will probably remain much more experimental than medicine, and as such we should probably have much more caution around a new drug than a new children’s cereal. But I would hope we could reach the point at which we trust drug companies to make the traditional antibiotics without every sneeze in the factory having to be reported to the FDA.

    • #9
  10. user_645127 Lincoln
    user_645127
    @jam

    Some tidbits of info…

    There is a way to be exempt from Obamacare, legally and at low cost. I wrote about it here.

    There are a number of doctors who are abandoning insurance. I am not familiar with the behind the scenes details of how their practices fund themselves, but one such doctor has a blog here. His practice can be found here

    There is an informative blog regarding being a “self pay patient.” Located here.

    • #10
  11. genferei Member
    genferei
    @genferei

    Jennifer: Some tidbits of info…

    Fascinating stuff!

    Particularly fascinating is the way one of the selling points for the cash-only physician model is that, not being in receipt of government funds, they don’t have to upload your medical records to the government. It’s like being on the lam and only being able to visit mob doctors to have the bullet removed.

    Hooray the government: we’re all escaped felons, now!

    • #11
  12. genferei Member
    genferei
    @genferei

    The case of food is interesting because it demonstrates that there is so much more to innovation than just ‘new products’. Think of the huge number of ways food is distributed now: supermarkets, hypermarkets, convenience stores, restaurants, fast food drivethrus, food trucks, hotdog stands, vending machines, farmer’s markets, door-to-door delivery, special courier packaging, delivery bikes, delivery vans, bake sales, etc. etc. Think of the advances in packaging in just the last decade.

    Now think about this: if the potato was developed today, it would be banned from sale, as toxic unless properly cooked.

    • #12
  13. Ross C Inactive
    Ross C
    @RossC

    I doubt we get to free market but on the small side.

    Did tax treatment for employer offered plans and individually purchased plans ever get levelized, either both taxed or both deductible?

    I am all about incremental positive movement, but I wonder if anything can get done. 

    • #13
  14. Southern Pessimist Member
    Southern Pessimist
    @SouthernPessimist

    I recently read a well reviewed book on this topic. The Cure in the Code: How 20th Century Law is Undermining 21st Century Medicine by Peter Huber. I thought the book was a little light on policy recommendations but was a fascinating explanation of the science behind the use of genetic research in product development. It appears to me that it takes an epidemic such as AIDS or Ebola to get the FDA to use common sense.

    • #14
  15. user_129539 Inactive
    user_129539
    @BrianClendinen

    1. – Remove the Federal Barrier that gives states the power from prevent cross-state sales of insurance. This would allow a person to buy insurance from any state and reduce the cost of all forms of insurance. I don’t have to buy entertainment or cars made in my state, why should I have to do it with insurance.

    2.- Get the FDA out of the job of Drug approval. Switzerland did not regulate drugs till the 90’s and they never had any issues and their drug industry boomed.

    3.- Tax structure in which employees pay significantly less for insurance than individuals.  Health saving accounts were supposed to do this but they have way to many limitations. Allow HSA to have no fixed weekly limits, and no penlites for not using the money by year end. If you withdraw it for non medical use, have 401k rules. Pay FICA/Taxes + 10% penalty. This would also have to mean that employees now pay 100% of FICA for individuals to get the full tax savings. The fact you get your money stolen from your HSA if you don’t  spend it by year end, needs to stop.

    • #15
  16. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Leave health care policy to the States, with federal involvement limited to ensuring free trade of health care products and services across State lines (and perhaps public health emergencies and research, ie the CDC, as well as preventing disease entering the USA from foreign sources).

    • #16
  17. genferei Member
    genferei
    @genferei

    Misthiocracy: Leave health care policy to the States

    OK, let’s do that. What should that policy/those policies be? Certificates of Need, community rating, onerous licencing requirements etc. all started at the State level.

    • #17
  18. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    genferei:

    Misthiocracy: Leave health care policy to the States

    OK, let’s do that. What should that policy/those policies be? Certificates of Need, community rating, onerous licencing requirements etc. all started at the State level.

    I dunno. It’s up to the people of each State, and their elected representatives, to decide that.

    For me personally, living in the People’s Democratic Republic of Ontariostan, an individual mandate to purchase private health insurance would be a vast improvement over the current government-run, tax-funded, single-payer health care regime.

    • #18
  19. Mark Belling Fan Inactive
    Mark Belling Fan
    @MBF

    Brian Clendinen: The fact you get your money stolen from your HSA if you don’t spend it by year end, needs to stop.

    Some banks charge fees for maintaining a low balance, but I am not aware of any that confiscate your entire balance at midnight on December, 31st. Perhaps you are thinking of an employer sponsored HRA? A privately owned Health Savings Account follows you your entire life, and the balance can build and build and build. There are caps on annual contributions.

    • #19
  20. user_189393 Inactive
    user_189393
    @BarkhaHerman

    Just because there is no innovation here does not mean there is no innovation….

    India is selling pharmaceuticals to more and more people in the world (read here).   

    More human trials happen overseas due to the restrictions in the US. (read here).

    There is always my favorite M.D. Peter Diamandis working on the tri-corder challenge (read here), and the Nokia sensing challenge (read here).

    And, of course, since Obamacare the private medical industry grows ever bigger – Government monopolies usually mean the creation of a two tier system, for the masses and the “haves”.

    • #20
  21. Pony Convertible Inactive
    Pony Convertible
    @PonyConvertible

    You are absolutely correct.  I work for Cook Inc.  A medical device company that was the maker of the first angioplasty balloon.  This device has since saved millions of people from painful invasive, and expensive, surgery.  It has also saved countless lives.  Our founder, before he died a few year ago said what he did in the 60’s isn’t possible under today’s regulatory environment. 

    Who knows what great medical leap we are missing due to expensive and wasteful regulations.

    • #21
  22. JimGoneWild Coolidge
    JimGoneWild
    @JimGoneWild

    MBF: MBF Brian Clendinen: The fact you get your money stolen from your HSA if you don’t spend it by year end, needs to stop.   Some banks charge fees for maintaining a low balance, but I am not aware of any that confiscate your entire balance at midnight on December, 31st. Perhaps you are thinking of an employer sponsored HRA?

     I think  you’re right.

    • #22
  23. JimGoneWild Coolidge
    JimGoneWild
    @JimGoneWild

    genferei–

    I always wonder if the Silicon Valley and Wall Street talents could be drawn over to healthcare, what a wonderful opportunity it would be. All the innovations and products and companies that would rise out of that–can you imagine. Remove regulations, take the gloves off and cancer could be gone. Think about the cell/mobile phone. The phone monopoly consent decree was 1983? 15 years later cell phones become popular. 25 years later they are a way of life for everyone including the poor.

    Hopefully, ObamaCare will die a quite death and the free market can explode the health care industry .. for the better.

    • #23
  24. MLH Inactive
    MLH
    @MLH

    JimGoneWild:

    genferei–

    I always wonder if the Silicon Valley and Wall Street talents could be drawn over to healthcare, what a wonderful opportunity it would be. All the innovations and products and companies that would rise out of that–can you imagine. Remove regulations, take the gloves off and cancer could be gone. Think about the cell/mobile phone. The phone monopoly consent decree was 1983? 15 years later cell phones become popular. 25 years later they are a way of life for everyone including the poor.

    Hopefully, ObamaCare will die a quite death and the free market can explode the health care industry .. for the better.

    But aren’t a lot, if not most, of those Silicon Valley folks raging liberals who the think that medical care is a right and that the feds should provide it?

    • #24
  25. Mendel Inactive
    Mendel
    @Mendel

    MLH:

    JimGoneWild:

    genferei–

    I always wonder if the Silicon Valley and Wall Street talents could be drawn over to healthcare, what a wonderful opportunity it would be. 

    But aren’t a lot, if not most, of those Silicon Valley folks raging liberals who the think that medical care is a right and that the feds should provide it?

     I don’t think that’s the main problem. Whatever Silicon Valley programmers’ political views, if there’s money to be made, they’ll try to make it.

    I think the real problem is a different one. We all agree that healthcare delivery is stuck back in the 1960’s or earlier. But instead of being pushed into the 21st century through high-tech innovations (like George Savage’s chip-in-your-stomach-that-talks-with-your-smartphone), the biggest help would be if healthcare could progress into the 1980s, with providers able to set their own prices and choose their own customers.

    Maybe the tech sector can figure out a way for a mother of modest means to get her child antibiotics at 2 AM without waiting for hours and paying a few hundred dollars. But there’s also a decidedly low-tech solution to that problem: deregulation.

    • #25
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