November 13, 2007

In an article in The New Republic, Jonathan Cohn argues that a system of universal (government) health-care coverage would not necessarily yield reductions in the investments yielding innovation in disease treatments and the like. After all, insurance companies paying the bills have weak incentives to pay for treatments yielding long-term benefits, because people change insurers constantly, while "the government, by contrast, has plenty of incentive to prioritize these sorts of investments."

Really? Insurers do not have incentives to respond to the preferences of their customers? And policymakers faced with budget pressures in the here and now have long time horizons? Please. Cohn repeats the me-tooism canard with respect to drug innovation---the Nexium/Prilosec episode rears its anecdotal head---and more generally confuses inefficiencies inherent in market forces with those engendered by such government policies as the tax subsidy for employer-provided health insurance.

Cohn fails to distinguish reported European health-care spending from the value of real resource use, two concepts very different because of the European implementation of broad price controls. He fails to distinguish very clearly between basic scientific research that is not patentable---the specialty of the NIH---and the development of actual products that treat medical conditions, an enormously expensive and time-consuming process that government institutionally is ill-positioned to perform. He invokes the "administrative waste" argument, demonstrated as incorrect in recent Manhattan Institute research. He ignores the certainty that government research investgment inexorably would become politicized. Much, much more could be said, but the central point is that the Cohn article is deeply flawed, and at best is the beginning rather than the end of debate.

Posted by Benjamin Zycher at November 13, 2007 10:48 AM

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