Supply Side Health Care Reform
We fight over health care policy because we focus on demand and redistribution. We could reach greater agreement if we focused on supply and innovation. What are the key areas where agreement is likely?
1) Cancer kills both Republicans and Democrats so more spending on medical research is likely to reach broad agreement. As I said in Launching:
Looking at the future, if medical research could reduce cancer mortality by just 10 percent, that would be worth $5 trillion to U.S. citizens (and even more taking into account the rest of the world). The net gain would be especially large if we could reduce cancer mortality with new drugs, which are typically cheap to make once discovered. A reduction in cancer mortality of this size does not seem beyond reach, and the value of such a reduction in mortality far exceeds that of spending more on medical care today. Yet because the innovation vision is not central to our thinking, we overlook potentially huge improvements in human welfare.
By greater spending on medical research, I mean not only greater spending through the NIH but also a commitment to innovation policy more broadly. We know, for example, that price controls kill medical research so no price controls. We can also improve the FDA. I would favor less regulation but there are other methods to speed up the approval process which could command bipartisan support such as greater funding of the FDA. The FDA is also not monolithic, some departments are better than others, so we can reform the FDA by making it more like the better parts of itself.
In thinking about pharmaceutical regulation we also need to remember that 80-90% of prescriptions are for generic drugs and due to intense competition, generic drug prices are low and falling–so lets build on the parts of the US health care system that work well by keeping the entry barriers to entry in the generics market low.
2) Increase the supply of physicians. Despite an aging population and greater demand, the number of MDs per person has been trending downwards! Increasing physician supply could involve a combination of increased immigration of foreign physicians (skilled immigration is really a non-brainer that receives widespread support), increased slots at medical schools and in residency programs (via Medicaid), increased support for allowing nurse practitioners, dental hygienists and so forth and making occupational licenses portable across states. (In addition to making it easier for foreign physicians to come to US patients we should also make it easier for US patients to travel to foreign physicians–patients without borders). None of these things are easy to do, of course, but neither are they riven by ideological differences.
3) Demand price transparency from hospitals and other health care providers. In real markets, a price is a signal wrapped up in an incentive. With few exceptions, we don’t have real markets in health care and so “prices” neither signal nor incentivize. Thus, I don’t expect miracles from “price” transparency and this is a policy that could go wrong but transparency would still allow for some standardization, comparison, and computation of tradeoffs. Price transparency would also limit some of the worst forms of bill abuse. Even the Soviets found prices to be useful for these purposes.
Other supply side reforms that could find bipartisan support?