Jonathan Cohn's article on why universal health care won't kill medical innovation is getting widespread praise and deservedly so. Here's Tyler Cowen for the opposition. May I note that I don't entirely understand this controversy? It often seems to me to take place in a hypothetical world in which we not only have a universal health care system, but we've also banned out-of-pocket medical expenditures, which I don't think anyone is proposing we do. Insofar as there might be some projects that aren't worth doing at the price the UHC system is prepared to pay, you could just try to get people to pay out of pocket for it. If the innovation's so great, why won't those with money be willing to pay for it? Obviously, the poor won't be able to afford it, but they're no worse off than they are today as un- or under-insured patients.
And of course if a significant quantity of medical innovations are coming onto the market that are inducing the rich and upper-middle class patients to pay out of pocket for these innovative treatments (thus signaling that the UHC system's budget has been set at a level that's too low to afford many newish useful technologies) then that'll create the political momentum for boosting the system's funding.
The arguments from innovation don't seem to me to be arguments properly directed at the universal health care proposals that are actually being put on the table. Instead, they seem to be arguments against hard price controls and bans on private insurance or out-of-pocket medical spending. Whether or not you buy those arguments (ask your local pharmaceutical company executive what he's done that competes with penicillin) it's worth asking what they're really targeted at. A lot of this stuff has a "because command-and-control athletic shoe design failed so miserably in the Soviet Union we shouldn't try to stop Nike from using child labor in its factories" quality about it.