Obamacare's impact on health innovation is still unclear

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  • Will Obamacare improve or inhibit healthcare innovation?

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  • .@stanveuger: ACA impact on healthcare innovation still unclear

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  • Overlooked so far in health debates: ACA impact on healthcare innovation

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The Affordable Care Act has been the subject of a wide variety of sometimes heated debates on death panels, plan cancellations, presidential lies, government overreach, network depth and the question of whether members of Congress should read bills before voting on them, or just pass them to discover what's in them.

A topic that has not received much attention so far is the impact of the law on innovation in the health care sector, but new research by Professor Jeffrey Clemens of the University of California at San Diego may help us understand what the future will hold. The good professor has studied previous expansions of health insurance – let us assume for a moment that the ACA will actually increase the number of insured Americans despite the president's broken promises about plans you could keep and plans you liked – and finds that they drove quite a bit of medical-equipment innovation. He claims that around a quarter of recent worldwide medical-device innovation has been driven by the increased markets created by Medicaid and Medicare, a big number, and that these insurance expansions drove up the number of new medical equipment patents by about 50 percent, which is also a big number.

So far, so good. While valuable, all of this innovation has driven up the cost growth of health care by about 18 percent over the past 50 years. That is a big number as well, and a bill that has been picked up to a significant extent by taxpayers, mostly thanks to precisely these public insurance programs.

Will the ACA do the same? That, unfortunately, we do not know yet, Clemens explains. First of all, the ACA introduced a new tax on medical devices, which makes inventing new ones a lot less attractive.

But even beyond that, the impact of the law is ambiguous. How many people will be newly insured? Not entirely clear. But just as importantly, how comprehensive will their coverage be? A recent research paper by Seth Freedman, Haizhen Lin and Kosali Simon of Indiana University finds that technology adoption can be slowed by expansions of public insurance programs when the newly insured used to be enrolled in plans that offered more generous payments to doctors and hospitals. And that is precisely what the ACA may end up doing if its cost controls work as intended.

So we'll have to wait and see. Innovation and costs may rise, or they may not. And then, one day, we will find out what is in it, away from the fog of the controversy.

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About the Author

 

Stan
Veuger

  • Stan Veuger is a resident scholar at AEI.  His academic research focuses on political economy, and has been published in The Quarterly Journal of Economics. He writes frequently for popular audiences on a variety of topics, including health and tax policy. He is a regular contributor to The Hill, The National Interest, U.S. News & World Report, and AEIdeas, AEI’s policy blog. Before joining AEI, Dr. Veuger was a teaching fellow at Harvard University and Universitat Pompeu Fabra. He is a board member of the Netherland-American Foundation in Washington and at The Bulwark, a quarterly public policy journal, and was a National Review Institute Washington Fellow. He is a graduate of Utrecht University and Erasmus University Rotterdam, and holds an M.Sc. in Economics from Universitat Pompeu Fabra, as well as A.M. and Ph.D. degrees, also in Economics, from Harvard University. His academic research website can be found here.


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