How Health Care Innovation Works - Reason Magazine

by Peter Suderman

Source: Reason Magazine

John Goodman of The National Center for Policy Analysis makes an important point about innovation in health care:

Wherever there is third-party payment, the goal of innovation is to produce more products that qualify for reimbursement, even if the effects on patient outcomes are only marginal. Wherever there is no third-party reimbursement, innovators are focused on ways to lower costs and raise quality.

For a long time, there has been a serious case to be made that the problem with health care in the U.S. is not too little insurance, but too much. Because so many people-including employers and, in some cases, health care providers-view health insurance as a form of medical prepayment rather than as a hedge against significant financial risk, we've developed a health care system in which innovations are designed primarily to satisfy payers. But the problem is that, in all but a few cases, the payers are not the patients. Yet as Goodman points out, in those few cases in which the patients pay for themselves-walk-in clinics, cosmetic surgeries, Wal-Mart's drug pricing-we've seen exactly the sort of quality-and-cost-focused innovation that liberal health reform advocates are constantly trying to impose from above. As I've said before, America's health policy debates occur primarily between centralizers and decentralizers. Somewhat unfortunately, I think, the centralizers are winning most of the big public policy battles. But in their own small worlds, the decentralizers are the ones showing results.


View in PDF