Tyler Cowen and Healthcare Innovation

In today’s NYT, Tyler Cowen identifies the key point about healthcare reform (my emphasis added):

It’s time to consider which forms of managed care — relabeled, if necessary — are likely to maintain the flow of innovation while keeping costs under control.

I would go further.  Civilization has moved forward because of innovations that cut costs and extended capabilities simultaneously.  The current structure of healthcare seems to be producing ‘innovations’ that raise costs and don’t actually increase life expectancy.  I think that the main goal of healthcare reform should be to extend coverage and give more incentives for innovations that actually cut costs while producing better results.


  1. Your two “goals” are contradictory: the only way to cut costs is to get rid of insurance “coverage” and go to medical savings accounts, where you actually make purchasing decisions with your money, with catastrophic coverage only.

  2. mike shupp says:

    Mumble mumble … When did you last have a heart transplant?

    These “innovations” DO extend life expectancy for some folks with mediumly sizable results (several years say) and for all folks on average (say several minutes). The question is whether that on-average figure justifies the cost, borne by us all, for the several-years gained by a relative handful. And while it may be quite clear in the year 1970 that this sort of “experimental” medicine is absolutely unjustified, in the year 2010 or 2070, the actual costs — or our view of acceptible costs — may have changed considerably. Heart transplants and their costs now seem reasonable to most of us in 2010, even if the cost is still obscene viewed from a 1970 perspective.

    Even appendectomies and ceasarian section births, monstrously expensive and socially unnecessary from an 1850’s perspective, seem justifable in the 2010’s .
    Vaccination against childhood diseases, purification of water supplies, addition of vitamins to common food stuffs, and other implausibly expensive measures have become commonplace. Paramedics (socialized medicine!) are taken for granted even in rural areas of the USA. Even installing heart defibulators for easy access in public buildings is becoming an affordable Good Idea.

    Our notion of What Is Afforable expands each year, and looking back, it probably ought to.

  3. I’m using an insurance plan that operates mostly like an HSA, and I’ve found that for some things, like chiropractors, it’s cheaper and easier to pay out of pocket because the cost the outfits charge to deal with all the paperwork of health insurance is so high. I think for allergy shots, similar math applies.

    If I could book 40 minutes of a physician’s time, if I could get performed the tests I think are interesting at a reasonable price, things would be easier. Going through underpaid (and therefore often under-qualified) primary care physicians for several steps of triage creates slow, poor, and inefficient care.

    I can’t think of another industry that could benefit more from a freer market than health-care. I think we’ll find many of these new procedures are worth it, and many are not. But I don’t think insurance companies are the best arbiter of the difference or the price that should be paid. The whole idea of health insurance should be rethought.

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