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On Collectivized Medical Progress
When it comes to fixing our healthcare system, there are several fundamental disconnects between progressivism and conservatism. One of these, perhaps the main one, relates to the advisability of collectivizing healthcare expenditures via taxpayer subsidization and debt accumulation. Conservatives tend to view the collectivization of healthcare financing as the root of the problem; whereas progressives tend to view it as the answer to the problem. (Obviously, for this to be true, among other things conservatives and progressives must be defining “the problem” differently.)
As a conservative I hold to the view that any real fix of our healthcare mess is going to require individuals to take on much more of the financial responsibility for their own health, and that doing so is both morally desirable and fiscally mandatory. I also believe it is going to be extraordinarily difficult to get a substantial proportion of the American public to accept personal responsibility for something that, they have been convinced, is and ought to be a right. I think most of us here understand how difficult that will be. But as we formulate our arguments in this regard, we are obligated to take a sober look at another major issue we face as we fight to individualize healthcare expenditures. It is an issue which, I fear, judging from the content of the debate, has not yet occurred to many of us.
While we conservatives (and especially libertarians) might like to think otherwise, when you look at the big picture it becomes apparent that collectivizing the bills has not been the unmitigated disaster we like to claim. There have been substantial benefits, and chief among these is the incredible progress we’ve made in medical learning and medical technology over the past half century or more. In fact, the taxpayer subsidization of healthcare has been the catalyst for an incredible golden age of medicine.
It turns out that, the moment everything that is deemed “healthcare” is “covered” by taxpayer-supplied or taxpayer-subsidized health insurance, and therefore payment is guaranteed for virtually any medical product by the full faith and credit of the United States government, a huge amount of investment money suddenly appears to fund research and development in every aspect of medicine you can imagine. And the next thing you know, you’ve got medical progress.
Medical entrepreneurs figured out in about a minute and a half that to be successful, all they had to do was to come up with a product that offered a measurable benefit to some group of people with some illness — no matter how marginal that benefit might be, or how expensive their product — and they were certain to have a ready market for their product, not to mention a customer who would pay the going rate without complaint (well, for at least the first several decades). The more products you could develop, the greater your profits. And so, especially beginning in the 1960s, R&D budgets went through the roof.
An utter explosion in medical progress, virtually all of it arising in the United States, began at that time. With a bit of sputtering, it continues until this day. Except for the Manhattan Project and the moon shot, the kind of concentrated scientific effort that was applied to advance the science of medicine during these few years is unsurpassed in human history. And like the Manhattan Project and the moon shot, it was ultimately funded by the taxpayer.
I am of course not arguing that everything that was developed and sold to the healthcare marketplace during this time has been non-crap. There has been plenty of crap to please anybody.
However, the medical technology that has been developed since the 1950s has done immeasurable good. Uncountable heart attacks and strokes have been prevented or aborted; cancers have been cured or beaten back; people who formerly would have been crippled can conduct normal daily activities without assistance; and some scourges of mankind (such as smallpox and polio) have been nearly vanquished altogether.
With all this good stuff, however, has come a big problem. We are spending ourselves into oblivion. For, as a side effect of this explosion in medical progress has come an explosion in medical spending, spending to such a degree that, unless we bring it under control, we are headed for societal chaos.
The point I am trying to make is that the rate and magnitude of medical progress we have enjoyed in our lifetimes has been financed by a collectivized, no-limits, ultimately disastrous payment system, and not by “natural” market forces.
It is certainly possible, in theory at least, to devise a more fiscally responsible payment system, based to a much greater extent on personal responsibility, while still allowing incentives to exist for medical progress to proceed. In fact, medical progress is poised for a major leap forward given today’s technological advances. But under a new, less collectivized system, the type of progress we see, its pace, and the way it becomes distributed across the population, will look a lot different than it does today — a lot different than we have all come to expect. We had better understand these changes, and manage expectations accordingly. If we are not prepared to do so, we will be vulnerable to withering attacks, for yet another reason, by the fairness mavens of the left.
Published in Healthcare
DrRich,
I agree with you that there have been massive advances in medicine and that they have been made to a great part at taxpayer expense by a system that mostly ignores the free market. Still, I have a couple of questions, not criticisms just questions, which your expertise in the field might help.
How do you square the taxpayer paid advances in medicine with the privately paid, free market advances made in computers and electronics? It seems to me that those advances have been every bit as great as those in medicine, in the same time frame, yet without the government or insurance companies getting involved.
Is there not some kind of answer to medical reform that opens medicine up to the free market? Would that opening up cause medical research to flounder?
First, I agree with you regarding the above. The idea that others should pay for one’s health care is and will be a major political problem in any health care reform efforts.
As to how much credit to give to government vs private actors in the incredible medical advances since the middle of the twentieth century, I don’t know. However, it seems to me you are overstating the role of the government. For example, there have been many advances in pharmaceuticals in that time frame, and it’s my understanding that most of the research and development costs in pharmaceuticals have been and are borne by that industry. Also, many medical advances in the recent decades have been the result of applying electronic and computer technology (in which most of the improvement has been privately financed) to medical problems.
I edited a great book about the MIT Media Lab: The Sorcerers and Their Apprentices by Frank Moss. It is full of private-sector exciting research. One advance the book talks about is how the Internet is being used to create groups of people with similar afflictions from all over the world. They share information with each other, and the researchers and doctors have a big group of patients to work with.
What I wish the government would do is use its vast medical care reimbursement database to create an even bigger program that would enable the government to identify causes of diseases by geography or common causes. How many times are we going to pay for encephalitis care before we send out the planes to spray our swampy areas with Malathion to the kill off the mosquitoes that carry that disease?
@Pilli,
Advances in consumer technology, I would argue, are actually more impressive than advances in medical research, at least over the past 20 years. But they are advances of a different nature. In consumer goods, experimentation can take place in the marketplace, where good products win the consumer, and bad products fall away. This market-based competition encourages risk-taking.
In healthcare, all the experimentation has to take place before a new product ever reaches the marketplace, since if it’s not proven safe and effective to a certain p value it can’t be sold. It is extraordinarily more expensive and time consuming to bring a medical product from conception to market, and clinical trials are never even started unless the risk of failure is deemed low. Without the guaranteed payments provided by our current system when products finally do reach the market, research would grind to a halt.
I we were to change the way healthcare is paid for, the present research infrastructure would have to change drastically. Successful companies have devised the systems and processes to flourish under our present restrictive environment. They have a wide competitive moat, and do not want to change.
If we change the payment system we will significantly disrupt our current research infrastructure. Research would fall off noticeably for a time, and when it came back it would look very different. Conservatives had better be ready with a (how-do-you-say?) “narrative” to explain all this to the pissed.
I am of the opinion that most of the technological advances have been driven by governmental funding. Computers for example were too powerful for business needs – nobody needed a UNIVAC, except artillery ballistic computers and electronic miniaturization driven by space use. The Federal government has all sorts of agencies funding advanced (and basic) research, e.g., NASA, NFS, DARPA AFOSR, ONR, NIH, etc, etc. Although there were many applications of this research that showed up in consumer’s hands, the ideas and intial research came from “govermental” research.
I have not made myself clear. Sorry. The government has very little “role” in advancing medical research, at least applied research. All the government did was to set up a collectivized payment system. This collectivized payment established a certain kind of incentive. The private sector then responded predictably and logically to the incentives thus provided, producing the lion’s share of the medical advances.
No argument here. To solve the really big technology problems, of the kind required by the space program and the department of defense, you have to have somebody with bottomless pockets to fund it. What you get, if you’re lucky, are basic technological breakthroughs that can then be applied to other stuff.
If the US were to commit to a manned mission to Mars, for instance, the fundamental medical problems that would have to be solved to make the trip feasible would create amazing opportunities for patients.
I’ve really been enjoying your writings on the state of medicine. This article brings up the biggest unfunded mandate on the planet and solving the problem is paramount.
You state this as if it is a fact of the the market and not of government interference. If the FDA were abolished then healthcare experimentation could take place at much lower cost.
If the US collectivized healthcare payments system has been an incentive for innovation, wouldn’t the European systems have caused an even greater incentive? Would Europe be the hub of medical innovation?
No, I’m just stating it as a fact. If you read the rest of the comment, you will see that I acknowledge the restrictive environment in which our medical innovators have had to adapt, and further, that while it has yielded a lot of progress, the type of progress we have gotten is of a different nature than it would have been under another kind of environment.
This is an interesting observation. The difference is that in Europe they are very open about refusing to pay for stuff they think is too expensive. Outright rationing stifles innovation quite nicely.
In the US, where healthcare is a “right,” the payers cannot openly ration healthcare. (They do it covertly.) Until recently it has been much more difficult to refuse to pay for innovations, and hence, progress occurs.
Great post.
You note how many advances have come about under our system of collective payments, and I whole-heartedly agree. But we should also think about the opportunity costs: what advances might have been funded and developed under a different payment scheme?
One thing to keep in mind is that, at least in the US, the brunt of “collectivized” payments go toward treating the elderly, specifically in the form of Medicare spending. Doctors, hospitals, pharmaceutical and medical device companies follow this incentive, and as a result the advances in healthcare have been heavily weighted toward problems of old age – especially cancer and heart disease – and away from disorders less frequently found in Medicare patients.
Of course some of this is due to the fact that older people tend to need more treatment than younger, healthier specimens. But talk to anyone involved in long-term R&D strategy at a pharmaceutical company, and they are only all too aware of which patients have Uncle Sam as their sugar daddy. If we liberalized our payment system, we might see an equivalent pace of advancement, just in different directions.
Having worked in biomedical research in both the academic and private sectors, I can say unequivocally that development of EVERY drug to appear in the last 40 years was completely reliant on academic (i.e. government-funded) research. Every single one.
Indeed, that’s how new drug projects get started: everyone goes to academic conferences and reads the literature to figure out a promising approach.
Whether or not we would have seen such amazing advances without the foundation of academic research is a counterfactual nobody can answer. And in any case, it’s moot: we now have such a breadth of insight in the public domain that the streak of new discoveries could likely proceed at apace even if we abolished all federal funding of research tomorrow.
This bears repeating.
Compared to the US, European systems are generous when it comes to how MANY people they cover, but are very stingy when it comes to HOW MUCH they are willing to cover/pay/provide.
This provides a much different incentive – in the US, the government throws a ton of money at healthcare for the elderly but much less for anyone else. Meanwhile, most European countries are constantly trying to cut spending on the elderly (because the cost:benefit ratio looks worse on paper) but are much looser with spending on younger citizens than we are.
You raise a very good point. I agree that the direction of medical research has certainly been distorted by the incentives provided by a collectivized payment system, and that with a more market-driven system the emphasis would have been different, and perhaps even more useful.
However, I cannot believe that the sheer volume of research we have seen would have been maintained under another system. For most of this period of time there was no check whatsoever on healthcare spending, as there would be naturally with a normal market. Not only were the costs of an individual’s medical care “shared” among all citizens, but also they were shared (via the growth of our national debt) by generations of Americans yet unborn. The result was a bottomless incentive to develop new products, that would not otherwise have existed.
There’s nothing quite as satisfying as taking a 95 year old demented man with a new hip fracture out of the nursing home and in to the hospital. They get a full cardiac work up, a pacemaker, and implantable defibrillator, all before the new hip. All devices top of the line, very expensive and all covered. Then it’s to the SNF for rehab and finally back to an available nursing home after 300-400K worth of bills for someone who didn’t recognize his kids before the fall.
C’mon, DocJay, if I don’t implant an ICD in this guy now, I’ll prob’ly never get another chance ta.
My father got a 2nd hip replacement just after he turned 94. He had one 18 years earlier, which was the then expected lifespan of those. He then got put in a nursing home where the mentality was that people come here not to rehab but to die, and we had to have a family watch almost 24 hrs a day to keep the staff from overmedicating him, which did make us think he was headed for dementia before we realized what was going on. He lost his hearing from the overmedication, but it came back, though not fully enough that he didn’t need to get hearing aids. If he hadn’t had a lot of kids to keep watch, he would have died there in that nursing home, and probably would have been deemed to have dementia, too.
We got him back home where he remained pretty sharp, mentally, until he passed not quite at age 97.
This is a great article with great comments, btw. I just presented that anecdote to emphasize that there is a great variety in the courses things take, except for the dying part which seems to happen to a lot of people. Sometime before the end Dad had said No more ambulances, No more hospitals.
@drrich
First of all, you have to deal with the fact that health care is an imminent matter of survival for people. You can’t shop around for it in many cases. Going without can kill you. So for the patient facing a potentially fatal illness, there is no limit on its value. It doesn’t work well in the normal ideas of the marketplace.
It’s also ingrained in our culture that medical care is a right. I’m not sure I want to change that. I don’t want democrat doctors deciding I should be left to die because I am conservative, or some millionaire with a splinter being a higher priority than me with a heart attack. I’ve heard about medical practices in Africa, where the doctors shake families down for money mid surgery. I do not want that here. If that is statist, I don’t care.
The biggest problem is that the current cost structure makes this an absolute nightmare. Even routine visits are charged at an insane rate. I looked into a high-deductible, low-fee health plan with an HSA, and I would have been losing money if I got anything more than an annual physical!
But in many cases where it can kill you, you CAN shop around. There is a huge medical tourism industry. Indian competes very well for your heart bypass dollar. And even when faced with death, people can and do make rational cost-benefit choices. Another name for the process of making such decisions is “life”. Some people might decide the greater inconvenience and slightly greater risk of complications due to having their surgery in a faraway place is better than selling their children into slavery so they can have the very, very, very best treatment here in the U.S. Some people might even decide it’s better than selling their neighbor’s children into slavery (aka nationalized medicine).
This isn’t the difficult problem in health care reform. There are other issues that are harder to deal with.
Did you miss the mention of imminent death in my post? We aren’t talking about a case where you can review multiple resumes / CVs and choose the best doctor, I was referring to emergency care or similar cases demanding rapid action. I am well aware that people can choose when and where to have scheduled procedures, just like choosing food / water
I never said people make irrational decisions. It is perfectly rational to pay top dollar for medical care, because your corpse can’t spend money. Your boring attempt at snark aside, most decisions in life do not involve a non-trivial perceived risk of imminent death.
I understand your sentiments, and I agree with much of what you say. For anyone who gets really sick, the costs of today’s healthcare can easily lead to bankruptcy. I further believe that US citizens, having paid for everyone else’s healthcare for the last 50+ years (through their taxes, their share of the national debt, and the opportunity cost of having done so) are owed substantial support when they need healthcare themselves.
But a contractual obligation to financial support is very different from a right to healthcare. We conservatives should not buy in to this toxic formulation, because it leads us where we must not go.
I agree. It gets pretty crazy. What is “healthcare”? Anything and everything.
Nope. In fact, those are the words I was responding to. I may do a separate post about this.
I genuinely can’t tell if this is sarcastic or not. I know this sounds really mean but I don’t think it’s worth spending 300k-400k to keep a person alive for a couple of unproductive and not very pleasant years. My own Grandmother was a personal example of this. Hundreds of thousands of dollars in medical bills for a few more months of being confined to a bed and being miserable.
In the main Ricochet podcast a guest mentioned that Switzerland still has medical innovation. Switzerland has the most free market version of European healthcare. I think that in places like in Britain or France, companies can’t make money because the governments won’t let them.
What about vision corrective eye surgery? This is new and exciting technology is changing peoples’ lives. And its astonishingly affordable. And you have to pay for it out of pocket.
My feeling is that there has been too much ‘noise’ the market for us to really know what a market based system would really provide.
This was our experience with my mother as well. In addition to the confinement to her bed was the bewilderment and fear that accompanied her dementia and her grinding loneliness (as we couldn’t be with her every day and my frail father could not care for her in their home). These are the aspects of her last months on earth that I still can’t shake. The Mom I knew became diminished in every capacity. My thought is that the pacemaker that was implanted in her at an advanced age kept her alive long after her mind and physical endurance were gone. Her journey to her death was devastating for our extended family.
I reject the assertion that the surge medical innovation required government funding. It simply needed buyers with $$, which the United States is quite blessed to have. That those expensive, experimental treatments were covered by private insurers hired by private companies, was a “happy” product of our wealth and loosely-defined limits of coverage. Limits which companies adopted when the there simply wasn’t any expensive healthcare to spend on, and which set the baseline for consumer expectations as medical innovation proceeded. Medicare and Medicaid simply followed practices established by private companies’ benefit programs.
Corporations that have to produce for shareholders naturally started trimmed their offerings, but government bureaucracies don’t know how to do that, and certainly have no political incentive to do so. The trimming will happen, dictated by fairly simple math. It doesn’t matter how outraged we may be when someone is denied care at an E.R. with an imminently life-threatening condition. Life-extending treatments will be rationed, even if the trend towards enslavement of medical professionals continues, as the demand for such treatments is effectively infinite.