Health of health care depends on innovation

Raymond Keating
Raymond Keating

Innovation is the act of bringing new and improved goods, services, technologies and methods — that is, new ideas — to the marketplace. Innovation is vital to economic growth and improved quality of life. That’s certainly the case for health care, from pharmaceuticals to medical devices to the variety of ways for delivering services.

Unfortunately, the health care debate in this country often takes innovation for granted. No matter how health care is funded or what regulations are imposed, it’s assumed, wrongly, innovation will just happen. Such assumptions are not only ridiculous, but also can turn out to be deadly.

A new report from the Foundation for Research on Equal Opportunity directly challenges mistaken thinking regarding innovation in health care. The index ranks health care systems in 31 nations based on quality, choice, science and technology and fiscal sustainability.

The foundation makes an important point: “These goals — sustainable costs, best-in-class therapies, personalized care — can best be achieved through innovation: innovation in the development of cures and vaccines, innovation in the delivery of health care service  and innovation that leads to the economic growth that can fund health care expenditures. While universal health insurance is important, it is just as important to measure the role that innovation plays in improving health outcomes for all people.”

The index ranks countries not only by such traditional measures as affordability and health outcomes, but also the degree to which patients choose doctors and insurers, health care-related patents, access to new treatments and health digitization. The index also measures fiscal sustainability — the ability of a nation  to sustain public health care spending without punitive taxes or a debt crisis.

So, where does the U.S. rank on the index and on each of the four major subcategories — quality, choice, science and technology and fiscal responsibility?

Overall, the U.S. health care system ranked fourth. In terms of quality, the U.S. came in 14th. That part of the index is based on measures of preventable disease, patient-centered care and infrastructure. On choice, the U.S. ranked first based on affordability of health insurance, freedom to choose services and access to new therapies. As for science and technology, the U.S. not only ranked best, but also did so by a wide margin. That score is based on medical advances, scientific discoveries and health digitization. In terms of fiscal responsibility, however, the U.S. came in next to last. The fiscal responsibility measure is based on national solvency, debt-to-GDP ratio, public health care spending and growth in health care spending.

The focus, scope and reasoning behind the index makes it a superior ranking of health care systems compared to most of what I’ve seen over the years. The main point is innovation matters to the delivery of health care today and to the improvement of treatments and services in the years to come.

Innovation is not driven by government funding and political controls. To the contrary, a system in which government sets prices and allocates resources smothers innovation. Innovation springs from freedom — specifically, a free enterprise system in which entrepreneurs and investors experiment, investigate, invest, take on risks and innovate in service of the consumer. That’s why a patient-centered system that features choice, competition, voluntary cooperation and incentives for entrepreneurs and investors to pursue new and improved treatments makes the most sense.

Imagine the dearth in innovation if creative individuals had to seek permission from the government to pursue new ideas and innovation. The results, as economics and history teach, are grim and in health care turn out to be deadly. A government-centered or controlled system would be drenched in rent seeking, special interest influences and protections. Our system has too much of that right now.

Thankfully, the U.S. still offers one of the best health care systems on the planet. That’s because innovation is encouraged through strong private property rights, a lack of price controls, a private system of health care services delivery and a central role played by consumers and private insurance.

Is there room for improvement? Always.

Does it make sense, though, to go down the path of weak intellectual property rights, price controls and single-payer government control? Never.

If we want to get serious about the goals of sustainable costs, best-in-class therapies and personalized care, the policy debate must focus on enhancing consumer sovereignty and incentivizing the entrepreneurship and private investment that drive innovation.