Riffing off a post by Thoreau, Ezra Klein questions the motives of the medical innovation hawks:
For a long time, I took questions about stifling innovation very seriously. So did a lot of liberals. But then I realized that the people making those arguments wanted to do things like means-test Medicare, or increase cost-sharing across the system, and generally reduce costs in this or that way, which would cut innovation in exactly the same way that single-payer would hypothetically cut innovation: by reducing profits.
I also found that I couldn't get an answer to a very simple question: What level of spending on health care was optimal for innovation? Should we double spending? Triple it? Cut it by 10 percent? Simply give a larger portion of it to drug and device manufacturers? I'd be interested in a proposal meant to maximize medical innovation. I've not yet seen one.
Megan counters:
I like new pharmaceuticals in the context of a market where supply is matched to consumer demand through a price mechanism. If people, in their role as consumers, decide that the new pharmaceuticals coming out aren't worth their price, and decline to buy them, I like that too.
What I don't like is the government stepping in and deciding what drugs are worth how much money. The government does not do a good job at setting prices. How do we know this? Generations of attempts at wage and price controls. Price controlled markets don't work well, whether the price controls are a ceiling or a floor.
Yglesias jumps in:
[If] what were happening was that right now health care spending was driven by market forces, and liberals were proposing to change that by involving the government, then I would see why the “but sky-high health sector spending is a good thing!” argument reflects a coherent free market position. In fact, however, about half of US medical spending is directly driven by the government. And the “private” spending is heavily shaped by a very substantial tax subsidy. So the argument that we shouldn’t try to restrain health cost growth because high levels of health care spending is good is basically an argument in favor of large government subsidies for health care.