Friday, September 04, 2009

A NATO for health care

One of the few valid criticisms I've heard for health care reform and trying to control the costs of health care delivery goes something like this: Medical companies spend billions creating new medical innovations--drugs, machines, devices, etc. The only reason they invest these billions is they know, when successful, the US market will pay just about any price for these innovations, allowing them to earn their money back. They can also sell to other nations, but because of the cost controls in those nations, they won't be able to make nearly as much money. So, the argument goes, if the US implemented cost containments practices similar to other nations, medical companies would lose a powerful incentive to innovate and the US and the whole world would see a dramatic decrease in new medical innovations.

I don't entirely buy the argument. Plenty of medical innovations come from countries with strict cost controls, and some of these innovations have not (yet, anyway) made it to the US market. I've read about very wealthy Americans travelling to certain European nations for the superior treatment for certain types of cancer, for example. Even with cost controls, there is still plenty of money to be made in the health care field. Plus, there are doctors and researchers who actually care about helping people, and would do so even without the carrot of billions of dollars being dangled before them.

But I agree there is a grain of truth to that argument. I think the massive pool of money available in America, particularly Medicare, the largest buyer of health services in the world, is a powerful incentive for medical innovation. And I think the US does tend to bear a disproportionate share of the costs of medical innovation, giving the rest of the world...well, not quite a "free ride", but certainly a cheaper ride, in enjoying the benefits of these innovations without bearing nearly as much of the cost.

So suppose the rich nations of the world created a sort of medical NATO. In NATO, all the members have to spend a minimum amount on defense (I believe it's 2% of GDP), and they are sworn to defend each other if attacked. With the medical NATO (MNATO), all rich nations that agree to it would put up a given amount of money, say 1% of GDP. This money would go to reward medical companies that come up with new treatments that are proven effective. The remaining budgets for health care in these countries could focus on delivering proven, established services and treatments at costs that are tightly-controlled. It seems like this would allow the US to achieve some level of control over our health-care costs, while still providing tremendous incentive for medical innovation. And in this solution, the cost of that innovation would be shared equally among many nations, rather than shouldered disproportionately by the US.

Obviously, not all rich nations would be interested in joining, but that could easily be addressed by requiring all medical companies who want access to the money for their new products to then offer those products to member-nations at a specified discount to member-nations below what they offer the products to non-member-nations. Sure, the details could get ugly at times, but the same is true of NATO, and that seems to have worked out pretty well for many decades now.


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