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