Sullivan repeats the usual conservative refrain when it comes to healthcare reform:

On healthcare, I’m not so sure. It’s hard to oppose the upgrade in information technology as a cost-saver. I can see the merits of getting more people insured. As long as any reform is careful to prevent the private sector being squeezed out of business, I’m open to persuasion. But I’m more cautious on this than most, I guess. I value the private healthcare system in the US, that, for all its faults, has innovated medicines that have saved my life.

This is one thing that I’ve never really understood or had explained to me.  I don’t understand how removing primary healthcare from the private sector stifles medical innovation.  The way I think about it, most medical innovation comes from new drugs, new equipment, and/or new procedures.  Which of these are performed/funded by insurance companies?  Am I wrong to say none?  I’m not a healthcare expert, but I don’t see where this comes into play.  It seems to me that Pfizer will still develop prescription drugs whether or not a private insurance company or the government is buying its pills, and the same goes for GE in developing a new MRI machine.  Switching to a public health care system would not stifle innovations in these fields any more than innovation in military weapons technology is stifled by the monopoly of the US Military.

As for new procedures, again I’m no health care expert, but isn’t the research for this mostly done at universities, funded by a mix of private foundations/corporations and government money?  So I still don’t see where insurance companies come in for any of this.  The only real argument you could make, in my opinion, for innovation by private insurance companies would be innovations for cost savings, but we know that this is definitely not happening.

The fact of the matter is that the only real innovations that private insurance companies make is finding new ways to screw people out of their coverage, which is why we need reform.

[Update]

It appears Yglesias is on the same page:

The point that I think receives too little attention in the debate is the one about innovation rather than risk segmentation. At the moment, insurance companies primarily compete by getting better at risk segmentation—at avoiding the riskiest cases, and doing various kinds of price discrimination. We can and should regulate much of this away. But if that’s all we do, we’ll still have a situation in which the companies are trying to find new and more creative ways of doing risk segmentation. We’ll end up “overly dependent on government enforcement to achieve the goals of health reform,” playing an endless game of cat-and-mouse to see whether or not we’re actually achieving our policy objective of promoting health in a reasonably fair and cost-effective manner. Inserting a publicly managed enterprise into the framework lets us rely more on competition and less on regulatory mandates.

The way this works is that if the private plans can’t or won’t compete by offering innovation, value, and quality then the bureaucrats at the public plan should be able to beat them. That, in turn, creates incentives for the private sector to unleash its own imaginative powers on beating the bureaucrats. Otherwise, it’s just bureaucrats drawing up rules and then the private sector dully complying with the rules while working creatively to find loopholes.

Tags: healthcare

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