Megan McArdle Has It Wrong On Medicine and Innovation

August 1st, 2009 by Scott Bannon

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Megan McArdle made a lengthy posting on the Atlantic a few days ago where she laid out her opposition to national health care. After reading through it twice now, and forcing myself to ignore that her opposition appears to be more against government involvement in people’s lives than it actually is on health care itself–it appears that the crux of her opposition to national health care can be boiled down to [paraphrasing] “it will reduce profits for medical professionals, which will reduce their incentive for medical innovation going forward”.

While that sounds like a solid theory on the surface, I would argue that the exact opposite is true; and history helps to support my position.

Medical professionals and researchers have been enjoying huge profit margins for decades now, and McArdle’s position seems to be that innovation is spawned by those high profits, so let me ask this, what was the last major disease or ailment that they cured thanks to being motivated by those high profits to innovate?

By my account, it was Polio in the mid 1950’s. With all of the technological advances we’ve seen over the last 50 years, how is it possible that we haven’t been able to find a single major curing treatment in all that time–especially when medical professionals and researchers have been receiving so much motivation by way of profits?

Could it be because there’s more money (even higher profit margins) in treating the sick than there is in curing them? And there’s more money in ongoing pharmaceutical treatments than there is in any single dose curing?

Think about that for a moment, if they treat you for something over a long period, that’s tons of medicines and office visits they and the pharmaceutical companies can bill you or your insurance agent for. If they cure you with a single shot, that’s a much smaller payday for all of them.

If, as Megan McArdle would suggest, medical professionals and researchers are “in it for the money” to such a large degree, then it only makes sense that higher profit margins have stunted the innovation of researching cures; not spawned it.

However, in a reformed health care system where medical professionals and researchers were rewarded for quality of care, curing treatments and preventative practices, then the financial incentive would be to keep–or make–patients healthier, rather than to keep them coming back for more as it is today. In other words, the better medical professionals and researchers who were innovative could still enjoy higher profit margins, and we would all be a lot healthier for it.

So, the entire notion that reduced profits for the status quo of ongoing treatment of the sick would lessen the incentive to innovate and research is actually absurd once you give it a proper review. Human and corporate greed is a fact of life, and when coupled with the current system that pays out the highest rewards for continuing treatments rather than cures and preventive practices it leads to 50+ year dry-spells of no new major cures, as we’ve already seen.