Must Fixing U.S. Health Care Come at a Cost to Innovation?

In Healthcare, The Upshot On

Even with those undeniable improvements, there are questions about the nature of American innovation. Work by Mr. Garthwaite, along with David Dranove and Manuel Hermosilla, showed that although Medicare’s drug benefit spurred drug innovation, there was little evidence that it led to “breakthrough” treatments.

And although high prices do serve as incentive for innovation, other work by Mr. Garthwaite and colleagues suggests that under certain circumstances drug makers can charge more than the value of the innovation.

The high cost of health care, an enormous burden on American consumers, isn’t necessarily a unique feature of our mix of private health insurance and public programs. In principle, we could spend just as much, or more, under any other configuration of health care coverage, including a single-payer program. We spend a great deal right now through the Medicare program — often held out as a model for universal single-payer.

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