Megan and Ezra are fighting over drugs. Here's Klein:
If health-care reform increases total health-care spending -- which is McArdle's first contention -- then it should also increase profits for pharmaceutical companies, thus juicing innovation. This is what research by MIT's Amy Finkelstein suggested happened after Medicare was formed. In that world, McArdle's concerns that lost profits will lead to less innovation are moot. Profits are going to go up because spending is going to go up. The mechanism here -- increased coverage leads to increased usage of health care by people who otherwise would be priced out of the system -- assures it.
McArdle isn't so sure:
While it is certainly possible that higher health care spending will end up as more money for innovation, it's hardly a necessary corollary of the higher spending. My worry is that as costs rise, the sectors that aren't full of frontline health care workers become the easiest to squeeze--which is why you've heard a lot of bashing of Pharma and the insurance industry, and virtually nothing about hospitals, doctors, or powerful health care unions that have squeezed about a squintillion dollars from places like New York State. If that's the case, then higher profitability in the broader health care sector is the opposite of good news for pharma and medical device manufacturers--because they're the folks who will have their margins squeezed in order to pay for nurses and hospital beds.