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Innovation Across Health Care is Vital

By at 7 July, 2020, 5:26 pm

by Raymond J. 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 most certainly is the case across health care, from pharmaceuticals to medical devices to the variety of ways for delivering health care services.

Unfortunately, the health care debate in this country often seems to take innovation for granted, that is, for example, no matter how health care is funded and/or no matter what regulations are imposed, it is assumed, wrongly, that innovation will just happen. Such assumptions not only are ridiculous, but can turn out to be deadly.

Interestingly, a new report from the Foundation for Research on Equal Opportunity (FREOPP) directly challenges mistaken thinking regarding innovation in health care. Indeed, the title of the report makes this quite clear – the “World Index of Healthcare Innovation.”

The index ranks 31 nations’ health care systems based on “quality, choice, science & technology, and fiscal sustainability.” FREOPP 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 services, 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 is based on the following:

“The Index ranks countries not only by traditional measures such as universal affordability and health outcomes, but also by features such as: the degree to which patients have the ability to choose their doctor and their insurer; health care-related patents; scientific impact and Nobel Prizes in Chemistry and Physiology or Medicine; access to new treatments; and health digitization. The Index also measures the fiscal sustainability of countries’ health care systems: that is, how much ability a given nation has to sustain its public health care spending without punitive taxes or a debt crisis.”

The U.S. Rankings

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

Overall, the U.S. health care system ranks as “excellent,” coming in fourth among the 31 nations ranked.

In terms of quality, the U.S. came in 14th. This part of the index is based on measures of preventable disease, patient-centered care, and infrastructure (both personnel and physical resources).

On choice, the U.S. ranked best among all of 31 nations. The choice score is based on affordability of health insurance, freedom to choose health care services, and access to new therapies.

As for science and technology, the U.S. not only ranked best, but did so by a wide margin. This score is based on medical advances, scientific discoveries, and health digitization.

And in terms of fiscal responsibility, 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 spending.

Innovation Matters

The focus, scope and reasoning behind this index makes it a far superior ranking of health care systems compared to most of what we’ve seen over the years. Why? For a variety of reasons, but the main point is that innovation matters to the delivery of health care today, and to the improvement in treatments and services in the years to come.

Innovation is not driven by government funding and political controls. To the contrary, a system whereby government, for example, sets prices and makes major resource allocation decisions is destined to smother innovation in health care. Innovation springs from freedom, specifically, a free enterprise system in which entrepreneurs and investors are able to experiment, investigate, invest, take on risks and uncertainties, and innovate in service of, ultimately, the consumer (i.e., the health care consumer or patient). 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 across the system makes the most sense.

Imagine the dearth in innovation if creative individuals had to effectively seek permission from 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, and special interest influences and protections. Indeed, our system already has too much of that right now.

But thankfully, the U.S. remains as one of the best health care systems on the planet, and that’s because innovation is encouraged through, for example, strong private property rights, the lack of price controls, and a still strong, private system of health care services delivery, with a central role played by consumers and private insurance.

Is there room for improvement? Always.

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

If we want to get serious about the goals of, as FREOPP puts it, “sustainable costs, best-in-class therapies, personalized care,” then the policy debate must be focused on enhancing consumer sovereignty, and incentivizing the entrepreneurship and private investment that will drive forward vital innovation.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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