World Taking Free Ride On America's Healthcare Innovations

Last Updated Nov 19, 2009 11:16 PM EST

If you've been following the healthcare debate, then you've probably heard of this WHO finding, which forms the basis of so many arguments for reform: "The U.S. health system spends a higher portion of its gross domestic product than any other country but ranks 37 out of 191 countries according to its performance."

But scholars at the CATO Institute counter that those stats do not provide an accurate diagnosis of the health of America's healthcare system. When one factors in innovation (basic science, diagnostics and therapeutics), they argue, then the American system does not look so bad. America has fewer people than the EU but we've recently won more Nobel Prizes in medicine and physiology and produced more pharmaceutical wonder drugs over the last few decades.

If an ambitious doctor is looking for fertile ground to find a better cure, America looks like it's the best place to set up shop. It follows then, that attempts to exert government control over the healthcare system could thwart innovation and also weaken one of the American economy's strongest sectors.

However, the report's authors mention an odd side effect of our system which I think weakens, rather than helps, their case:

Consider, for example, the frequent claim that European health systems achieve similar health outcomes to those of the United States at a much lower cost. That claim fails to consider that higher U.S. spending levels could be generating innovations that improve health outcomes in Europe and around the world.
As the CATO scholars go on to point out, the rest of the world is essentially getting a free ride off of our investments in medical innovations. When these innovations can be controlled and patented, as is often the case with new drugs, then American companies and our broader economy both benefit overall. But many investments in innovation, such as long-term health studies, end up as global public goods. We pay the price to figure out a new procedure and everyone else gets to adopt it, free of charge.

Perhaps there is a better way for the world to share the costs of all these healthcare advances since the benefits don't necessarily trickle down to Americans who can't afford insurance.

  • Stefan Deeran

    Stefan Deeran helps environmental nonprofits and green businesses develop and execute their new media campaigns. He also publishes The Exception magazine, a nonpartisan news platform serving his home state of Maine. You can follow him on Twitter @RStefanDeeran or via Facebook.