Monday, September 14, 2009

Do We Want Better Medical Technology--Or Not? Do We Want Better Health--Or Not?

"If you tax something, you get less of it. If you subsidize something, you get more of it." That's wisdom from Milton Friedman, although, of course, grandmothers know the same thing.

So this story in Politico, "Medical-device makers launch a lobbying blitz," caught my eye. In the piece, reporters Chris Frates and Carrie Budoff Brown report that the Senate Finance Committee is eyeing various new taxes on medical equipment. Needless to say, the medical equipment makers are mobilizing to combat this tax threat.

A caveat here: The world of health care financing is murkier than murky. Uncle Sam is more than capable of taxing with one hand and subsidizing with the other, and so I am hesitant to draw any final conclusions about this controversy until I can learn more about what's all at stake.

But at first blush, what's at stake seems very important--much more important, in fact, than the fate of this or that health-insurance provision within Obamacare.

Why so? Because the long term future of health care--and medicine, and cures, and the quality of our lives--is going to be driven by the use of new technology. Such technology (including pharmaceuticals) will not make us healthier, but will save money in the long run, because people will stay healthy/get back to work sooner, and because improving productivity makes costs fall over time. Want proof? Take the polio vaccine. Poof! The disease has all but disappeared in the half-century since Jonas Salk introduced the vaccine.

Yet it would appear that the federal government is seeking to achieve cost-control goals on a much narrower time horizon, and according to a much more limited vision of the American commonweal. The feds seem to be following on the ideas that OMB director Peter Orszag laid out in testimony to the very same Senate Finance Committee last year, when he was still director of the Congressional Budget Office: not only raising revenue through an equipment tax, but also slowing the rate of healthcare spending growth by slowing the growth and utilization of technology.

Here's the exact quote from Orszag:

Future increases in spending could be moderated if costly new medical services were adopted more selectively in the future than they have been in the past and if the diffusion of existing costly services was slowed. Although that approach would mean fewer medical services, evidence suggests that savings are possible without a substantial loss of clinical value. Currently, the added clinical bene- fits of new medical services are not always weighed against added costs before those services enter common clinical practice. And newer, more expensive services are sometimes used in cases in which older, cheaper alternatives could offer comparable outcomes for patients.

Once again, one must be careful about leaping to unfair conclusions, based on fragmentary reports. But it's seems reasonable to conclude that healthcare hierarchs in Washington DC are following through on the Orszag idea: slow costs by slowing technological development.

Their plan won't be expressed that way, of course, by the Obama administration. Orszag had a lot more latitude to say what he really thinks at CBO than he does now at OMB. Instead, any determination to whittle away at healthcare technology will be expressed in benign-sounding language about combating inefficiency, and waste, fraud, and abuse--just the President said in his Congressional speech last week.

But in the meantime, here's a much more critical takeon the new tax initiative.

SMS has a certain bias against new taxes, but SMS really has a bias in favor of new health- and life-giving technology, which will help Americans combat the diseases and afflictions that incapacitating and killing them. And I am confident that the vast majority of Americans--no matter what their view on this tax or that tax--share that pro-living proclivity.

When we think about it, we all realize that such new technology will a) improve the lives of Americans, and b) such technology will grow cheaper over time--that's the natural course of the industrial revolution over the past three centuries, and nothing has changed, or will change. Absent a return to the Dark Ages, the basic rules of economies of scale will always tend to make technology both cheaper and better.

In addition to a) and b) we can add c): The new technology that we generate can then be sold to the world--a world which increasingly has our health profile. That is, heavier on lifestyle-related diseases, and, well, heavier. Result: better health, and more economic activity. A win-win!

This can all happen, unless, of course, we strangle the promise of new technology, in short-sighted pursuit of the shortest of short-term cost-savings.


  1. This is another example of throwing Granny under the bus in the name of economic efficiency. Granny could have gotten that fancy new drug or medical device to make her healthier and more productive. Instead the wise bureaucrats in Washington are going to set out to make it impossible for her to get that new treatment. The Grannies of the world and anyone who hopes to get to that age should get up on their hind legs and tell their servants in government to just say no.

    This quote needs more circulation!


  2. Another odd thing just occurred to me about this perverse attitude about taxing the thing that the government is providing for. So they are going to tax us for providing medical care for us, then they are going to tax the services that they are paying for. What happens to that money? Isn't that a bit of sleight of hand that allows the government to raise extra taxes in the name of medical care and then use the money on other things?

    The perversity also extends to the current discussions about taxing private insurance policies. This is all supposed to be in the name of making insurance cheaper and more accessible right? How does taxing it accomplish that end? The answer is that it doesn't, it just raises the price of private insurance even higher so that people will eventually have no choice but to depend on the government to "solve all of their problems". How could the evil be any more transparent?