ChristianKl comments on Rationality Quotes October 2013 - Less Wrong
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Megan McArdle
In what way does expanding coverage reduces innovation? If anything more coverage means a bigger market for innovations.
By lowering prices for drugs, for example, more people can afford them but pharmaceutical firms have lower profit incentives to find new drugs. The medical device tax, furthermore, will help fund Obama care but also reduce incentives to develop new medical devices.
Depends on the price elasticity of demand. If you widen the access to the thing by lowering the price, it's possible that you might make more profit than someone who has fewer customers who they make a lot more profit per customer off of.
In situations where this is the case, the company in question doesn't need to be ordered by the government to do this.
Setting a price isn't necessarily a decision made with respects to the interests of one company. Not knowing precisely how the marketing groups for medical goods in the US are set up, beyond that they're pretty abusive, I don't care to argue that one way or the other though.
Expanding coverage and lowering prices are two different issues.
You can be in favor of one and not the other.
Big Pharma was in favor of Obamacare. The made a deal. Obama didn't choose to implement effective price cutting policies such as allowing reimportation of drugs. Then Big Pharma spend millions for advertisements to promote Obamacare.
Two possible reasons:
(1) Blackmail--Obamacare harmed them, but big Pharma was told by Democrats that if they didn't support it the Democrats would pass something that harmed them even more. The medical device industry didn't support Obamacare and as a result they got hit with a special tax in the final bill.
(2) Reduced competition--Obamacare makes it harder for other firms to enter the pharmaceutical industry.
As far as the medical device tax goes, I agree that it's worth repealing it.
In total it's however zero sum for spending on healthcare. The tax pays for tax rabates for health insurance. Money payed into the health insurance system gets spend on medicial expenditures.
I suspect innovation gets shifted more than it gets reduced, and there are forces pushing innovation up.
To the extent Obamacare subsidizes medicine more than it is already subsidized, and if it has a net cost > 0, then it does, it should encourage innovation. Some of the shift and/or additional innovation will be how to game the system more effectively, which is presumably a low-value outcome for society. But some of it will be how to provide care that this system will pay for, perhaps more innovation towards the afflictions of those who will gain access to medical care that did not previously have as much access, and so on.
If it shifts money away from drug makers, but it puts in more money on net, then there is lower innovation on the drug side and higher innovation where the new profits are to be made.
This will only happen if being innovative is favored by the subsidies and the people deciding who gets subsidies can tell improvements apart from change for the sake of change.