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October 31, 2013 / JayMan

Would Universal Healthcare in America Stifle Innovation? No, It Wouldn’t.

http://app.cotunity.com/challenge/144Last week, Ross Douthat wrote an article (Why Not Medicaid For All?) claiming Obamacare – and socialized medicine in general – would, if adopted in the U.S., have the deleterious effect of discouraging medical innovation, an area where the United States currently leads.

This was brought to my attention by a tweet by Kay Hymowitz. The theme of Douthat’s piece was that the more capitalist health care system of the U.S. generates medical innovations from which other countries benefit.

The broad idea is that since profit-driven companies perform medical research, that our current healthcare system is what drives these people to produce. “Socialist” healthcare systems (i.e., the rest of the developed world) only perform so well because of American innovation. Douthad is arguing that socialized medicine would remove the incentive for innovation, leaving medical technology stagnant. In short, he is trying to counter liberal arguments for universal healthcare that appeal to the universal healthcare systems of the other developed nations, which liberals claim (in good part, correctly) are superior to our own in terms of cost and performance.

To reinforce this point Hymowitz also tweeted another article that talks about the prescription drug development process. The article illustrates that drug developers try to reap their profits in the American market, since the lowered prices mandated by foreign governments limits the profitability of sales overseas.

Hence, if we in the States were to also become socialized, innovation would collapse, so the story goes.

Indeed, the U.S. does produce a disproportionate share of medical innovation. Here’s a quote from Tyler Cowen on the matter (emphasis mine):

But the American health care system may be performing better than it seems at first glance. When it comes to medical innovation, the United States is the world leader. In the last 10 years, for instance, 12 Nobel Prizes in medicine have gone to American-born scientists working in the United States, 3 have gone to foreign-born scientists working in the United States, and just 7 have gone to researchers outside the country.

The six most important medical innovations of the last 25 years, according to a 2001 poll of physicians, were magnetic resonance imaging and computed tomography (CT scan); ACE inhibitors, used in the treatment of hypertension and congestive heart failure; balloon angioplasty; statins to lower cholesterol levels; mammography; and coronary artery bypass grafts. Balloon angioplasty came from Europe, four innovations on the list were developed in American hospitals or by American companies (although statins were based on earlier Japanese research), and mammography was first developed in Germany and then improved in the United States. Even when the initial research is done overseas, the American system leads in converting new ideas into workable commercial technologies.

So case closed right? We need to maintain our quasi-capitalist healthcare system so we can continue to generate innovation from which the rest of the world – and their socialist healthcare systems – will benefit.

Of course, this is nonsense. Hopefully, reading the above passage should give a strong clue why this is so.

Sure, the U.S. is highly innovative. But is it unusually so? The U.S. is a big country – does it generate more innovations per capita? I decided to find out.

I found one very comprehensive source on the matter. In 2011, PricewaterhouseCoopers (PwC) released their “Medical Technology Innovation Scorecard“, which ranks an assortment of developed countries on a variety of measures related to their state of their medical care, technology, and innovative ability. I strongly recommend reading the report yourself, but I will cite a selection of the very interesting charts from the report:

Health1

Health2Health5

Health3Health4As we can see, according to these data, out of the countries sampled, the United States is not exceptional when it comes to healthcare technology, research activity, or system capacity on a per capita basis. Indeed, as with so many other things, the U.S. is very close to its progenitor nation, Great Britain (and secondarily, Germany), despite the latter having fully socialized medicine.

Interestingly, according to this report, for its size, Israel appears to be exceptionally innovative. Indeed, the Israeli healthcare system is apparently one of the best in the world, and is fully universal.

This should come as a surprise to no one. The reason that Israel’s performance shouldn’t be surprising is due high average IQ of its Ashkenazi population. In fact, the whole reason the U.S. leads the world in medical innovation is not because of something special about American for-profit system; it’s simply due to its sheer size. The U.S., as the most populous high-IQ country (at least, with a fully market economy) simply has the largest number of high-IQ individuals; it has the largest “smart fraction“, in terms of absolute numbers. In short, it’s the same reason the U.S. leads the world in science overall:

205(From Zones of Thought | West Hunter)

That all these nations with socialist medicine perform so well indicates that medical innovation would continue just fine if the U.S. joined the rest of the developed world and offered universal healthcare to its citizens.

Of course, that may take a long time to happen – if it happens at all. As we saw in my previous post on the matter, the ethnonational divisions that exist in the U.S. complicate such an expansion of healthcare coverage. Particularly, the Deep South and Greater Appalachia oppose such an expansion. A big part of this is racial/tribalist in nature. As I noted previously:

The clannish elements of British American society, the descendants of the Cavaliers and the Ulster Scots, are indifferent to contributing a common pot, and they are certainly uncomfortable about anything they contribute to the common pot going to non-kin, especially people who aren’t even of the same race.

The denizens of the Deep South/Tidewater live in states with large Black minorities. Deep Southern Whites correctly see their funds being redistributed from themselves to non-Whites, particularly Blacks. Hence, they oppose it.

Conservatives – such as Douthat and the individuals he cites – will continue to cook up one reasonable-sounding explanation after another about why we can’t or shouldn’t have universal healthcare. Among them is the cost issue – conservatives often claim (perhaps correctly) that our current system enables incredibly inflated cost of American healthcare. However, their solution to curtail such costs is a move to an even more market-based system (i.e., catastrophic insurance and “health saving accounts”). All of these arguments against universal healthcare are nonsense. No country in the developed world does this, and they all control costs just fine. This is in good part because of government price controls that force costs down. Conservatives might have it backwards on this one. As as we see here, the need to maintain such a system so that American innovation can continue to spill over to the world is unfounded.

This brings us back to tribalism and visceral conservative opposition to “socialism”. That is the real barrier. And, thanks to American racial diversity, it may be, at least for some time, an insurmountable one. Hopefully I have done proud to my liberal stripes with this post. Conservatives need to have their nonsense squashed just like liberals do, and I am only all too happy to do it.

Clearly the fitting song for this post:

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55 Comments

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  1. Ben Nader / Oct 31 2013 12:03 PM

    I agree that a universal system is probably better than the US status quo and probably wouldn’t reduce innovation much. But health savings accounts and catastrophic insurance make a lot of sense and they happen to be (more or less) policy in one very successful country http://en.wikipedia.org/wiki/Healthcare_in_Singapore. The Singaporean method is imperfect but widely seen as one of the best in the world—it certainly outperforms the UK’s NHS, and bear in mind France and Germany both have hybrid, non-universal systems as well, and both tend to outperform the NHS.

    As a separate point, I wonder how much you’ve studied the literature on healthcare economics and the double asymmetry model? One of the conclusions the economists tend to come to is that some element of individual economising is desirable. Of course none of this goes against the general point that NHS-style universal > Obamacare > previous status quo.

    • JayMan / Oct 31 2013 12:15 PM

      @Ben Nader:

      I was aware of Singapore when I made the post. I knew someone would bring it up, and man you didn’t waste much time! :) Nonetheless, it too is universal.

      It’s very hard to compare the “effectiveness” of one country’s healthcare system to another’s, especially in terms of outcomes, because there is a key variable going in: the intrinsic health of the country’s citizens.

      Likely, the best metrics are those featured in the post, things that relate to innovation and relative cost.

      France and Germany actually have fully universal systems; they just aren’t single-payer.

      But indeed, yes the broad point that some form of fully universal healthcare system, modeled on any of these countries’ systems, would be superior to the status quo and superior to the Obamacare that we got. If only…

  2. Amber / Oct 31 2013 12:45 PM

    If anything, the US’s deeply flawed patent system is stifling innovation, and the insurance system is skimming off profits primarily for… the insurers, not the drug and other treatment-developers. And regardless of the innovations, the actual results, in quality of life, lifespan, mortality, etc., are better in many other countries.

    • Eliezer Ben-Yehuda / Nov 6 2013 11:35 PM

      Insurers are the ones who carry risk. They ==do deserve== the lion’s share of the money.

  3. Sam Dangremond / Oct 31 2013 12:57 PM

    As the other comment points out, your dichotomy between “universal” and “market-based” really isn’t how it works.

    The vast majority of “universal” systems are in fact MORE “market-based” than the U.S. system, as measured by the percentage of total medical spending done out of pocket.

    http://nationalreview.com/article/362443/obamacare-worst-case-scenario-kevin-d-williamson

    “No country in the developed world does this.”

    Well, depends on which “this” you mean – Singapore has a universal catastrophic insurance system, with health savings accounts.

    • JayMan / Oct 31 2013 1:24 PM

      @Sam Dangremond:

      “No country in the developed world does this.”

      Well, depends on which “this” you mean – Singapore has a universal catastrophic insurance system, with health savings accounts.

      See my comment to Ben Nader above. I am aware of Singapore.

      The vast majority of “universal” systems are in fact MORE “market-based” than the U.S. system, as measured by the percentage of total medical spending done out of pocket.

      As per the article, that’s questionable; that depends on how you slice it.

      In general, in response to that article, again see my comment to Ben Nader.

  4. Maximo Macaroni / Oct 31 2013 1:35 PM

    As to innovation, the argument, which you did not address, is that, if a researcher is able to get rich from making medical discoveries, he will create more. If shutting down the last bastion of a free market for innovations causes the number of innovations to collapse, all will suffer. After all, even innovators in socialized-medicine countries may be able to get rich using the US market. No more US market? (Again, arguably) No more innovations.

    • JayMan / Oct 31 2013 1:37 PM

      @Maximo Macaroni:

      Does innovation only occur in the U.S.? Answer that question and you’ll see the absurdity of your comment…

    • Sprechen Zatoichi / Oct 31 2013 7:10 PM

      You are applying a pure neoclassical model to science and technology: the notion that scientific discovery and radical leaps forward in technology are meaningfully driven by clear market signals, and that there is some definable, quantifiable, and predictable relationship between performance of R&D and future financial benefits. Not sure this is actually how revolutionary (not evolutionary) innovation has ever really worked. Besides, a fairly high proportion of these discoveries are driven by public research funding. It’s about capabilities as much as expected profits.

      JayMan, by the way – started reading your blog rather recently, really enjoy it.

  5. chrisdavies09 / Oct 31 2013 1:37 PM

    I think you made the case very well in support of your theory, it certainly doesn’t look as if healthcare innovation in the US should suffer.

    In regards to different models of healthcare system:
    The UK’s NHS is chronically inefficient and badly managed, and probably not the model to emulate. This table from Bloomberg gives a good assessment of different countries’ systems (and there is one from World Health Organisation somewhere too): http://www.bloomberg.com/visual-data/best-and-worst/most-efficient-health-care-countries

    • JayMan / Oct 31 2013 1:42 PM

      @chrisdavies09:

      I wonder how they determine “efficiency”. Most of these measures (especially life expectancy, which is primarily determined by intrinsic heritable factors) aren’t very good metrics. Cost of care as GDP per capita has the problem of it all being a matter how big your GDP is. If your country doesn’t have a lot going on in it economically, healthcare is going to be a bigger slice of the pie, all else being equal. Healthcare cost per capita is probably the most interesting measure here.

  6. Luke Lea / Nov 1 2013 12:16 AM

    A nice piece of work. Thanks for the info!

  7. georgesdelatour / Nov 1 2013 6:11 AM

    Some thoughts on the UK system.

    The National Health Service has replaced the Church of England as the totemic national institution. This is not surprising. Most Brits are born in an NHS hospital. Most die there too. People massively love the idea of the NHS: hence Danny Boyle’s paean to it at the last Olympic ceremony. No prospective UK government, even the most right-wing Tory government, will try to replace it with an insurance-based system. The voters won’t stand for it.

    On the other hand, people have become markedly less willing to pay the extra taxes needed to fund the service properly. No prospective UK government, even the most left-wing Labour government, will raise taxes to the level actually needed.

    So all governments can do is try to make the same money go further; with endless administrative reorganisations, and more and more cheaper staff hired from poorer countries. They also try more “nanny state” campaigns to make people improve their health by eating better, drinking less, and exercising (i.e. shifting their time preference), so they won’t need the NHS as much. There’s a “fat tax” on unhealthy foods in prospect.

    Increasingly, the wealthy take out private insurance. Not for urgent, life-threatening conditions. But with private insurance, if you see your local doctor and she approves it, you can pretty much get to see any specialist and have any kind of test or even surgery done immediately, and to a high quality. With the NHS, unless the doctor thinks there’s a very serious underlying condition, you’re going to have to wait some time to see a specialist.

    If you don’t have insurance but you’re smart, you can game the system. Google your symptoms and exaggerate them to the doctor in the medically correct way; she’ll then put you at the front of the queue for scans and tests. Also, different NHS hospitals have very different survival rates. If you need a serious operation, get yourself admitted to one of the more prestigious teaching hospitals. They have extra money from the higher education budget, so they can attract more renowned surgeons than your local hospital down the road.

    Overall the problems of the NHS simply replicate the general problems of the UK economy and society. If UK society was becoming more skilled, economically productive, affluent and middle class in attitude, the service would automatically have more money from the taxes on higher wages; and the lower time preference of middle class life would reduce the bills for treating morbidity-related conditions. But that’s not the direction we’re headed.

    Unless those social/economic/demographic conditions are reversed, the NHS will become merely a safety-net of last resort, for the poorest members of society; and the dream of the 1945 Labour government will die.

  8. jamesd127 / Nov 1 2013 4:39 PM

    The US is not a capitalist health care system. Many of the countries listed are not socialist health care systems.

    Many socialist health care systems that are pretty aggressive at killing off expensive and inconvenient patients get high marks in the sources you quote.

    If there are no prices, not a capitalist system.

    If pulling out your credit card is not a basic party of receiving medical care, not a capitalist system.

    By this standard, the most capitalist health care system in the world is Singapore, which is also arguably the best health care system in the world.

    • georgesdelatour / Nov 2 2013 2:30 PM

      The Singapore population may be one of the best populations a health system could be charged with looking after.

      Though I often joust with Jayman on his blog, there is one point he returns to again and again which is absolutely vital. Namely: you can’t compare economic or political dispensations (capitalist or socialist) and just assume the human populations they’re attempting to manage are essentially invariant.

      First, there is the specific technical-medical question of how far different populations have different propensities for illness.

      Second, there is the question of how far geographical location affects health (eg Seasonal Affective Disorder in the Arctic Circle, skin cancer in Australia, potentially more rapid transmission of bacterial and viral infections in densely populated cities like Hong Kong). Interestingly, Singapore is in a location where it ought to be vulnerable to malaria. But ruthless government vigilance has eradicated malaria from Singapore.

      Third there is the time preference of the population. This affects how well people look after the health nature has bequeathed them.

      Personally I like socialised medicine. But I suspect it works best where the population you apply it to have strong pre-existing society-wide solidarity. I don’t think the reverse works. That is, I don’t think socialising the medical system can create that solidarity. It will simply lead to people gaming the system, with varying degrees of success.

    • jamesd127 / Nov 2 2013 3:28 PM

      The Singapore population may be one of the best populations a health system could be charged with looking after.

      Why? There is a lot of racial and political tension in Singapore. Lee’s policies were largely motivated by avoiding civil war and repressing racial and political violence.

      His solution to such tensions was capitalism and markets:

      In Singapore, unlike the US, medical treatments have well known prices, prices to some considerable extent set by the state, but which are largely set by the market, and generally do not differ all that much from market prices. But however great or little the government intervention in pricing, a system with prices is a lot less socialist than a system without prices, a lot less socialist than our system.

      In Singapore, unlike the US, most people, most of the time, actually have to pay those prices, or a very large part of them.

      Thus no one believes that members of that other race or other sexual preference are ripping them off.

      Whereas, long before Obama care, when I went to hospital it was full of short fat indio women and their numerous bastard spawn, who everyone knows are not likely to pay.

      And everyone knows that the reason their premiums are soaring under obamacare is that they have been placed in the same risk pool as homosexuals who have sex with numerous anonymous partners in the public toilets, women who continually get pregnant by random thugs, men who believe they are women and so on and so forth.

    • JayMan / Nov 2 2013 5:00 PM

      @jamesd127:

      In Singapore, unlike the US, medical treatments have well known prices, prices to some considerable extent set by the state, but which are largely set by the market, and generally do not differ all that much from market prices. But however great or little the government intervention in pricing, a system with prices is a lot less socialist than a system without prices, a lot less socialist than our system

      I think you’re completely missing the point of georgesdelatour’s comment.

      And everyone knows that the reason their premiums are soaring under obamacare is that they have been placed in the same risk pool as homosexuals who have sex with numerous anonymous partners in the public toilets

      It amazes me how lost right-wingers get in their own nonsense. How common do you think gay men are? (Hint: 3% of all males.) They are inconsequential to your costs.

      men who believe they are women and so on and so forth.

      Even less common.

      Actually, in reality, the bulk of healthcare dollars are spent on cancer patients and keeping grandma alive past her time (yes, your grandma). As usual, whenever someone starts with “everyone knows”, serious BS follows…

    • jamesd127 / Nov 2 2013 7:34 PM

      Actually, in reality, the bulk of healthcare dollars are spent on cancer patients and keeping grandma alive past her time (yes, your grandma)

      Possibly, but when I walk into an emergency room, looks mighty like the bulk of my healthcare dollars are spent on short fat Indio women and their horde of revolting bastard spawn.

      Which perception is what Singaporean health care was set up to avoid, arguably the primary reason why Singaporean health care is the way that it is – to avoid exacerbating the already grave racial tensions. Similarly, the reason Singapore is so harsh on crime is largely to avoid racial crime, to avoid situations were certain groups benefit, and certain other groups suffer, from interracial crime, by reducing crime to levels indistinguishable from zero.

      The argument that the expensive person is grandma with cancer assumes that health care is primarily provided to sick people. What I observe is that healthcare is primarily provided to those that feel like consuming it, are guaranteed entirely free health care and enjoy gaming the system. Of course that is a casual and unscientific observation, not statistics, but it is also what I would expect to observe given that health care is free for the vast majority of people I see consuming it.

      Seems to me that any system where they don’t hit you up for for your credit card on the way in if you are capable of walking in under your own power, is not going to be a system dominated by the expense of the sickest people, but is going to be a system dominated by the expense of frivolous consumption of health care.

      And that is the system we have, and have had since Reagan – a system that, on the face of it, given the incentives in place, seems likely to be dominated by the frivolous and irresponsible misuse of health care, and, in practice, to casual, unscientific, and doubtless racist eyes, looks mighty like it is dominated by the frivolous and irresponsible misuse of health care.

    • JayMan / Nov 2 2013 9:05 PM

      @jamesd127:

      The argument that the expensive person is grandma with cancer assumes that health care is primarily provided to sick people. What I observe is that healthcare is primarily provided to those that feel like consuming it, are guaranteed entirely free health care and enjoy gaming the system.

      What you “observe” is interesting, but how about we consult actual data (indeed, how about we do this from now on)? This source has a great break down of health care expenditures. The top 5% of consumers of health care consume 50% of the healthcare dollars (the top 1% consuming 22%). Of that top 5%, 61% are age 55 or over.

      Many of the sickest have chronic conditions that require ongoing care (those are mental disorders, diabetes, heart disease, and asthma).

      The key point is that, in general, in any insurance system, the healthiest individuals end up paying for the sickest. That said, spending is far more even – over time – among seniors.

      Or, to put it really briefly and simply: In Britain, the NHS murders your grandmother to save money, but gives the man who thinks he is a woman a free sex change. In Singapore, they will not murder your grandmother, and will not provide a free sex change. Which place is more successful at reducing health care expenses?

      There is little point in extolling the glories of the Singaporean system, because there are certain limitations in country to country comparisons, for the reasons georgesdelatour pointed out.

    • jamesd127 / Nov 2 2013 10:41 PM

      On 2013-11-03 11:06, JayMan’s Blog wrote:

      Of that top 5%, 61% are age 55 or over.

      People age 55 or over are not Grandma with cancer.

      If Grandma with cancer was who was sending up our medical bills, they would break it down by people age 65 or over, or, better still, by end of life care, by people’s final few stays in hospital.

      What pisses people off is the breakdown by race, class, sexual preference, and illegitimacy, which breakdown is concealed, because embarrassing.

      Many of the sickest have chronic conditions that require ongoing care (those are mental disorders, diabetes, heart disease, and asthma).

      I know two people who have been taken care of most of their lives because of mental disorders. I am confident that both of them could have been swiftly cured by Singaporean style whipping.

    • JayMan / Nov 2 2013 11:36 PM

      @jamesd127:

      You are free to look at the report yourself and free to do a little math.

      People age 55 or over are not Grandma with cancer.

      If Grandma with cancer was who was sending up our medical bills, they would break it down by people age 65 or over, or, better still, by end of life care, by people’s final few stays in hospital.

      Of the top 5% of consumers of medical spending, those 65 and older consume 43% of the money spent.

      This is, by the way, “non-institutional” spending. It doesn’t include old people in nursing homes or others in long-term care settings.

      I know two people who have been taken care of most of their lives because of mental disorders. I am confident that both of them could have been swiftly cured by Singaporean style whipping.

      I’m confident you’re spewing nonsense.

      Look, my post already made clear that conservative opposition to universal healthcare is due to clannish/tribal feelings. You don’t need to keep illustrating that point.

    • jamesd127 / Nov 3 2013 12:35 AM

      You are free to look at the report yourself and free to do a little math.

      The report tells us that the majority of spending is not on the very old.

      It does not tell us what proportion of health expenditure is on someone’s white middle class grandma or grandpa who paid taxes, took out health insurance, and is now dying of the usual complications of old age, but, making a variety of reasonable guesses, the answer is, not a large enough proportion to care about or make a substantial difference to health expenditures.

      Murdering white middle class grandmas, NHS style, is not going to make big enough difference to our health care costs to notice.

      Look, my post already made clear that conservative opposition to universal healthcare is due to clannish/tribal feelings.

      Willingness to recklessly burn other people’s money is also due to clannish tribal feelings.

      The tribal problem is that by far the bulk of the paying is done by white middle class people, and by far the bulk of the spending is on people who are not white or not middle class.

      The economic problem however, the problem of health care efficiency, is that by far the bulk of the spending, is on stuff that no one would pay for if they had to pay for it with their own money, rather than the money of those hateful evil rich white racist sexist people, as proven by the profound disinclination of Singaporeans to spend their own money on health care

      Hate, sexism, and racism creates both reluctance to pay, and also enthusiastic willingness to spend..

      The solution to both the problems of economic efficiency and tribalism is to make people pay more, a lot more, out of their own pocket, and in particular and especially, make the beneficiary tribes, who cause by the greater part of the costs, pay something substantial out of their own pockets.

      Part of Obamacare that makes sense is to put everyone on insurance, and then hit them with deductibles and copayments, instead of them flooding emergency for free healthcare, but, for basically tribal reasons, or perhaps sheer incompetence, this aspect of obamacare does not seem to be happening.

      We are seeing tribalism at both ends, tribal unwillingness to pay for those outside one’s own tribe, and tribal willingness to blow other people’s money irresponsibly and recklessly on one’s own tribe.

    • jamesd127 / Nov 3 2013 1:00 AM

      Propensity to spend money on medical services increases with age, but the propensity is not all that great.

      Propensity to spend money on medical services increases with ability to spend other people’s money without consequences, which is strongly affected by race, sex, marital status, and social class.

      The problem is not the old, but the feckless.

    • jamesd127 / Nov 2 2013 8:07 PM

      In Singapore most people have catastrophic coverage, in effect everyone has catastrophic coverage. So grandma gets her cancer treatment free.

      Yet strangely, in Singapore, most health care is not free. Most healthcare gets paid out of the patients own pockets.

      In consequence, people in Singapore consume far less health care, as measured by cost, than people in the rest of the world, yet have better health outcomes.

      This really does not fit with the story that grandma is the big expensive health care problem and we need to put her on “prlonged deep sedation” or “The Liverpool Care Pathway” to save money. It fits with the story that healthy people gaming the system, the man who thinks he is a woman, the woman with nine kids by nine different fathers, are the big expensive health care problem.

    • jamesd127 / Nov 2 2013 8:13 PM

      To say the same thing again slightly different words.

      The Singaporean system is not designed to save money by murdering Grandma. It is designed to save money by preventing the kind of expenditures that piss off evil racist sexist patriarchal homophobes, because for a long time Singapore was trembling on the brink of race riots, Marxist revolution, and civil war.

      And lo and behold, when you prevent the kind of expenditures that piss off evil racist sexist patriarchal homophobes, you somehow strangely wind up saving a mighty big pile of money, and still have excellent health care outcomes, including pretty good outcomes for grandma.

    • JayMan / Nov 2 2013 4:51 PM

      @georgesdelatour:

      Wonderfully said!

  9. jamesd127 / Nov 2 2013 8:34 PM

    Or, to put it really briefly and simply: In Britain, the NHS murders your grandmother to save money, but gives the man who thinks he is a woman a free sex change. In Singapore, they will not murder your grandmother, and will not provide a free sex change. Which place is more successful at reducing health care expenses?

  10. viking / Nov 3 2013 1:46 PM

    Jay I wish all liberals were as logical, However while the per capita hold is a good point what incentive does the American market have on foreign innovation

  11. Maximo Macaroni / Nov 4 2013 11:14 AM

    @Maximo Macaroni:

    “Does innovation only occur in the U.S.? Answer that question and you’ll see the absurdity of your comment…”

    I am hypothesizing that innovation occurs other places, but only or largely because an opportunity to profit from it exists in the US market. That is not an absurd hypothesis. Do international drug companies make more or less money because they can look to sell newly developed drugs in the US? The implication of my hypothesis is that innovation would be harmed – not, perhaps, extinguished, but reduced – if the opportunities for profit in the US system were eliminated. The whole point is hardly absurd. Opportunities for profit may indeed stimulate innovation. The fact that innovations occur elsewhere is not refuted by this hypothesis, in fact it is assumed. The possiblity that at least some innovation occurs elsewhere because of the existence of the US market is not destroyed by the fact that innovation occurs elsewhere.

    Try again.

    • JayMan / Nov 4 2013 11:20 AM

      @Maximo Macaroni:

      “Does innovation only occur in the U.S.? Answer that question and you’ll see the absurdity of your comment…”

      I am hypothesizing that innovation occurs other places, but only or largely because an opportunity to profit from it exists in the US market.

      Great. Now present your evidence.

      The possiblity that at least some innovation occurs elsewhere because of the existence of the US market is not destroyed by the fact that innovation occurs elsewhere.

      The size of the European market alone is many times larger than the U.S. market.

      You have now introduced a new claim. It’s now on you to prove it.

  12. Dan / Nov 6 2013 7:52 AM

    Demographics are the big hurdle, Jayman, as you know. What works in Sweden can’t work in Brazil or India. In theory and by law, Brazil and India are socialist paradises, ruled by leftist voters and with government guaranteeing what people need.

    The reality is far different: democracies Brazil and India simply can’t fulfill their promises to their actually-available resources. Already Greece (which has likely had some IQ decline in the past two generations due to big dysgenic class differences in fertility) is seeing its generous safety net failing.

    So the question becomes, do you see the US becoming demographically more like Sweden or more like Brazil?

    • Dan / Nov 6 2013 7:54 AM

      typo… “The reality is far different: democracies Brazil and India simply can’t fulfill their promises based on their actually-available resources.”

  13. Erick Muller / Nov 6 2013 8:00 PM

    As other people had pointed out before, a full privatize or universal single payer system is better than what the current health-care system exist today in the USA.

    The problem with the USA is democracy in action, that is that the current system is trying to accomodate several diverging a various objectives that are at odds with themselves, that is not internaly consistant, is trying to function as a private system and operating like a universal one at the same time,thats a recipe for disaster.

    That being said, it is better that the USA doesn´t follow the path that europeans have taken regarding there healthcare systems because the immagration problem that they currently are experiencing, that is they currently hava one third of there population that is of non-europena descent, the great mayority of them of the mestizo race and this people are currently taking more out of the system than what are they putting in, they are parasites.

    Americans first have to solve there border and imigration problem then they can try to solve there healthcare problems.

  14. Eliezer Ben-Yehuda / Nov 6 2013 11:43 PM

    As an aside. Connosieurs of the Hebrew business press will know that a chattering point is… Israeli innovators display a repetitive pattern of selling off the (started-up) company to foreigners at about the third or fourth round of financing. The Israelis are content to walk away with a few tens of millions to hundreds of millions of dollars.

    There are no real Israeli conglomerates operating outside the domestic market.

  15. confluenceartist / Nov 7 2013 12:16 AM

    The arguments against single-payer – and Obamacare – seem to stem from the tired notion of “if the rich have to spend/contribute more, there goes innovation.” It’s the same argument used when it comes to raising taxes or the minimum wage (except they’d claim such would stifle services provided or job creation).

    In my view, all those arguments are BS – yet many people (if the media stories are any indication) seem content in consuming it. I think your post does a good job in debunking some of that BS.

    Honestly, the U.S. should’ve gone the single-payer route…

  16. Steve Sailer / Nov 7 2013 2:21 AM

    Most of the world has monopsony buying of drugs to drive down prices paid, but the U.S. has less of that, which means pharmaceutical companies make a big fraction of their global profits in the U.S. market.

  17. James Weaver / Nov 7 2013 11:40 AM

    If socialized medicine is so good why to people come from all over the world to have medical procedures done that can only be done here? They are offered no place else, because doctors and medical facilities cannot make any money from them. The problem with socialized medicine, or any plan where the government is involved in what should be a simple transaction is how to you keep it from becoming a means of control. The NHS habit of killing Grandma, and other folks it doesn’t want to spend the time and the money on. This is well documented. Now with Obamacare I have to buy insurance or pay a fee to the government. I’ve suddenly lost control of a major part of my personal finances. If we go all the way to a single payer system the government will be taking my money, and I’ll have to use their system or travel to Costa Rica to get a second opinion. This is not freedom there is nothing in it for me. You may consider it tribalist, but as it was mentioned before being concerned that you money is being wasted on other people’s bad health decisions is not tribalist it is common sense. Socialized medicine will eventually go the way of the dodo bird. It can never work because it sets up the wrong incentives. The free riders will always over run the system.
    The 20th Century liberal welfare state is collapsing all over the world. The welfare state with its various schemes to provide “healthcare” has done nothing but bankrupt the countries trying to implement them. I don’t think I need to provide any references here, the perilous state of Western government’s balance sheets is pretty obvious. I imagine after the collapse of the liberal state we will return to a simpler system where people pay for the healthcare they use. Jayman, I have a lot of respect for your views and your blog. But if liberals like yourself would like to keep expanding the powers of the state you will have to find a way to make the liberal welfare state pay for itself. I don’t believe anyone liberal or otherwise has solved that problem.

    • JayMan / Nov 7 2013 11:51 AM

      @James Weaver:

      If socialized medicine is so good why to people come from all over the world to have medical procedures done that can only be done here?

      Do we have any hard numbers on that? How about on the number of Americans that go abroad for their own healthcare?

      They are offered no place else, because doctors and medical facilities cannot make any money from them.

      This is likely simply because of the size issue. America simply has the largest number of brains in one country.

      Now with Obamacare I have to buy insurance or pay a fee to the government. I’ve suddenly lost control of a major part of my personal finances.

      Just like you did when you had to pay taxes.

      You may consider it tribalist, but as it was mentioned before being concerned that you money is being wasted on other people’s bad health decisions is not tribalist it is common sense.

      Whatever else it may or may not be, it is definitely tribalism.

      Socialized medicine will eventually go the way of the dodo bird. It can never work because it sets up the wrong incentives. The free riders will always over run the system.

      Somehow I think the systems in the rest of the West would go on fine if it wasn’t for certain individuals they were admitting into the system…

      The 20th Century liberal welfare state is collapsing all over the world. The welfare state with its various schemes to provide “healthcare” has done nothing but bankrupt the countries trying to implement them.

      See above.

      But if liberals like yourself would like to keep expanding the powers of the state you will have to find a way to make the liberal welfare state pay for itself.

      Again, costs come primarily from low-IQ individuals. The countries that are in the most trouble are the ones that have large numbers of them, either their own (as in Southern Europe) or foreign ones (in the rest of the West).

  18. Patrick Boyle / Nov 9 2013 12:51 PM

    I have seen the private market work toward fostering medical innovation with my own eyes. There is no question that capitalistic greed and the search for profits works. My original background out of grad school was evaluating government programs. So I have formally examined a lot of public entities. IMHO there are no incentives in government comparable to those that motivate those who work in private industry. There is therefore good reason to worry about private firms leaving the health industries.

    After I got out of the thankless job of evaluating government programs I went into information systems. BTW this was the common path. Every evaluator I knew ended up working with computers.

    That lead me to being an IT recruiter for awhile. As it happened, I and my partner somehow stumbled onto Syntex as a source of IT candidates. We interviewed many Syntex programmers and network people. We placed a few of them but they were a wormy bunch – poor skills and lots of experience with obsolete technologies.

    Syntex lived off of its patent for Naproxen – and that patent was running out. They had grown fat and complacent with their legal monopoly for this popular drug and they were searching desperately for another patentable drug. They had had decades in which they were comfortable. They never bothered to hire from outside. They promoted from within. That’s why they had such inferior people. They had a corporate culture of complacency. It reminded me of all those government organizations I had studied and worked in.

    But with the lapsing for the Naproxen patent they were highly motivated. The search was on. But alas they never found their next ‘wonder drug’ and got bought by La Roche.

    The profit motive is a very crude stimulant but it is real. One problem of course is that there were only a handful of researchers who mattered at Syntex. The vast majority of the workers were helpless passengers on a train heading off the tracks. Most of them probably will never again have such a comfortable job experience as they had on the Syntex campus and they knew it. You could see it in their eyes.

    So my experience says that with our present profit driven system we only have a handful of people really motivated for a couple years but government enterprises, in my experience, don’t have even that.

    • JayMan / Nov 9 2013 1:27 PM

      @Patrick Boyle:

      Syntex lived off of its patent for Naproxen – and that patent was running out. They had grown fat and complacent with their legal monopoly for this popular drug and they were searching desperately for another patentable drug. They had had decades in which they were comfortable. They never bothered to hire from outside. They promoted from within. That’s why they had such inferior people. They had a corporate culture of complacency. It reminded me of all those government organizations I had studied and worked in.

      But with the lapsing for the Naproxen patent they were highly motivated. The search was on. But alas they never found their next ‘wonder drug’ and got bought by La Roche.

      What you describe is one company stalling in their innovation and other more innovative companies eager to take their place. It’s not like Syntex represents all of science.

      Truth told medical innovation happens elsewhere in the world, outside the States. So even sans the American healthcare system, innovation happens. We have to keep our eyes on the big picture, your anecdotes notwithstanding.

  19. Asher / Nov 9 2013 1:21 PM

    I think what we need is an investigation on how innovating companies in places like France and Germany recoup their R&D. For example, let’s say that 80 percent of the gross of all drug sales from a new patent come from the US. That would indicate that access to the US market is driving innovation.

    I can think of a way of reducing that sort of free-riding if, indeed, it is taking place.

    • JayMan / Nov 9 2013 1:32 PM

      @Asher:

      Good point. Of course, there’s more to medical science than drugs, and many news ones aren’t all that hot any way, see Greg Cochran on it:

      I Want a New Drug | West Hunter

    • Asher / Nov 9 2013 1:48 PM

      Yeah, I wish I knew what to say about the decline in advances or what keeps companies investing in R&D, per Chocrane’s piece. One possible reason for continued advances is that outcomes are driven by government demand and that companies who make breakthroughs get sweetheart arrangements with government. That is a very bad thing, in the long run.

    • Asher / Nov 9 2013 1:53 PM

      JayMan, the way to solve the problem of the US market being the primary source of companies recouping costs is for the US government to control all exports and imports of pharmaceuticals and medical devices. US companies would be forced to export at US prices and foreign companies would be forced to export at the prices they sell in their own country.

  20. Jerry Chang / Nov 20 2013 10:42 PM

    I don’t think universal healthcare in America would stifle innovation. Universal healthcare is not something new and it has been implemented through out so many countries in the world like Japan which is celebrating its 50 year anniversary of implementing universal health care. I hope ObamaCare is going to be a great success even though it doesn’t have a good start. Let’s keep our fingers crossed because the bottom line is health care is a human right, NOT a privilege.

    • JayMan / Nov 20 2013 10:43 PM

      @Jerry Chang:

      I agree.

    • Erick Muller / Nov 21 2013 12:23 PM

      I disagree with the universal rights of human beigns, in the concrete reality, you dont have s right to anything, specially if it has to be provided by somebody else, that by definition is not a right in the historical and classical meaning of it, is a privilege that is only possible do to current circumstances.

      Obamacare is not universal healthcare, is and abomination of both the worst aspects of both socialize medicine and private medicine.

      The real problem with healthcare in the US is that the pricing mecanism has been utherly destroy by medical insurance, no body really knows what a Doctors consultarion really costs, the cost of examinationd and test, prescriptions, etc. Not even the Doctors themselves know this, nor the hospitals, even the insuranced companies know for sure, because everyone is using insurance to pay for even the modt mundane of things regarding healthcare, and is a problem that only the US has, not any other country in the world has this problem regarding health care, The UK and Canada may have death panels and that sort of thing, but they dont have the inmense cost of the Us regarding healthcare.

    • JayMan / Nov 21 2013 2:54 PM

      @Erick Muller:

      I disagree with the universal rights of human beigns, in the concrete reality, you dont have s right to anything, specially if it has to be provided by somebody else, that by definition is not a right in the historical and classical meaning of it, is a privilege that is only possible do to current circumstances.

      This however is a normative argument, that means it can’t be settled with facts, but rather depends on the sensibilities of people debating it.

      I happen to disagree.

      The real problem with healthcare in the US is that the pricing mecanism has been utherly destroy by medical insurance, no body really knows what a Doctors consultarion really costs, the cost of examinationd and test, prescriptions, etc. Not even the Doctors themselves know this, nor the hospitals, even the insuranced companies know for sure, because everyone is using insurance to pay for even the modt mundane of things regarding healthcare

      I’ve heard it said. But if so, how do you circumvent the problem while assuring that healthcare is available to all citizens (as this is my goal)?

    • Erick Muller / Nov 22 2013 3:31 PM

      You dont, giving healthcare to everyone is also a normative argument. If you care so much about the welfare of everyone, you can pay for it, I dont really care what you do with your time and money.

      Do I personaly care if someone, somewere dies because he couldnt afore a treatment?, no.

      What we do know about most of the health issues nowadays is that almost 3/4 of them are due to unhealthy lifestyles. If you got cirrosis because you are an alcoholic and die because you couldnt afore the proper healthcare because you drank it all, though shit.

    • JayMan / Nov 22 2013 4:36 PM

      @Erick Muller:

      You dont, giving healthcare to everyone is also a normative argument.

      I never claimed it wasn’t. I’m just making sure that you know your opinion on the matter is such as well.

      Do I personaly care if someone, somewere dies because he couldnt afore a treatment?, no.

      Well there you go. And that’s emblematic of that problem.

      What we do know about most of the health issues nowadays is that almost 3/4 of them are due to unhealthy lifestyles.

      Actually, we know no such thing.

    • clay / Nov 21 2013 5:08 PM

      “health care is a human right, NOT a privilege”

      This is merely rhetoric and not serious logic. The right to subsidized medical care to one person is the inverse of the right of another to have some say over his money and savings. I admire the people who pour money and effort into medical charities to help those in need, not people who vote or put political pressure on the coercion of other people’s money against their will.

    • JayMan / Nov 21 2013 7:11 PM

      @clay:

      It’s not a logically resolvable. Whether or not healthcare is a right is normative. Nevertheless, that is my opinion.

    • Erick Muller / Nov 22 2013 3:13 PM

      Like you said, is your opinion, and it is logically resolvable, who is paying for this universal healthcare and who gets it?

      Moreover, given the demografic situation in the US, it is not adviasiable to apply a nation wide universal healthcare system. Maybe in scandinavian contries it makes sense because they are smaller nation and more homogeneuos than the US currently is.

  21. Anonymous / Nov 24 2013 8:42 PM

    Wait…are you insane? Do you know how to read graphs? The US has the highest number of researchers, most patent applications, most amount of venture capital invested and highest R&D spending from your graphs. Most of those graphs are ratios, and because the US GDP is huge compared to most countries, we are lower on the graphs. If you look at raw numbers, we lead in every category (I don’t look at the number of hospital bed because this doesn’t pertain to our current discussion).

    Most of those graphs support the original claim that we fund more medical innovations than other countries. The results speak for themselves in your statistic regarding the nobel prizes and patent applications. If you look at academic publications and etc, it is probably still up there.

    The ability to scale R&D funding and etc changes as company size or economy gets larger, and hence it isn’t feasible for us to put 4-5% of our GDP into research.

    • JayMan / Nov 24 2013 10:39 PM

      @Anonymous:

      You want to look at those graphs again. And while you’re at it, you may want to reread the post.

      My point is that the U.S. leads in terms of absolute numbers, but it doesn’t necessarily lead in terms of innovation per capita. Indeed, the results don’t even suggest that innovation capacity scales non-linearly, i.e., the U.S. gets no extra benefit from its size other than sheer numbers.

Comments are welcome and encouraged. Comments DO NOT require name or email. Your very first comment must be approved by me. Be civil and respectful. NO personal attacks against myself or another commenter. Also, NO sock puppetry. If you assert a claim, please be prepared to support it with evidence upon request. Thank you!

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