Monday, March 22, 2010

U. S. Health Care Bill: Killing the Messenger

Last night I watched a tiny video image on my laptop that showed the floor of the U. S. House of Representatives. Superimposed on the image was a set of numbers tallying the votes for and against the famous (or infamous) health-care bill that has obsessed Washington for the last year or so. When the "yea" vote got to 216, I turned it off, knowing that the die had been cast. Whatever happens after this, the federal government has now taken to itself massive new powers over the one-sixth of the U. S. economy that is health care.

Part of the reason that health care costs so much more than it did decades ago, both proportionally and absolutely, is that owing largely to engineered products and services, doctors can do a lot more about disease more effectively than they used to. And medical technology is one of the shrinking number of areas in which U. S. manufacturing still leads the world. Our peculiar cobbled-together third-party way of paying for health care, which largely insulates the consumer against the real cost of medical technology, may be one reason that the U. S. is a favorable environment for developing such technology. Another may be the fruitful interaction between our research universities and medical companies, both of which benefit from federal and state research support as well as private research funding. Whatever the reasons, the healthy and innovative state of the medical technology industry is a bright spot in the otherwise murky health-care scene.

But that is not the way it is viewed in the philosophy embodied in the new health-care bill that just passed Congress. In this view, medical technology companies are unfairly profiting from the misery of the patients they serve, and should be penalized with a 2.3-percent excise tax on their products. Although the final form of this tax is not clear as of this writing, an earlier press account of it in December estimated it would cost the medical-device industry some $2 billion annually, rising to $3 billion in 2018.

It is not clear whether it was ever an ancient practice to kill the runner who brought bad news to the king. Even old-time despots probably understood the sheer wastefulness of such a move, let alone the difficulties it would cause in recruiting new messengers. But the vengeful, short-sighted, political-grandstanding attitude that leads to taxes such as the one on medical device companies is about as counterproductive as you can get, and shows a basic misunderstanding of the nature of business and private enterprise.

I am personally tone-deaf when it comes to entrepreneurship, but even I understand enough about it to see that medical-device companies, and health-insurance companies too for that matter, typically do the best they can within the regulatory and economic environment they work in. If MRI machines cost X hundred thousand dollars, and the MRI-machine market is doing well with several companies competing for good business, as I understand to be the case, then those who have the money to buy them (namely hospitals and clinics) must think the price is about right compared to the money they can make by using them. The rules and restrictions that people chafe about concerning health insurance arise largely from the way we have historically tied such insurance to employers, who "own" the policies rather than the individuals insured. Such third-party situations always lead to higher prices, and in my view this is the single most significant reason why health-care costs have risen faster than otherwise. If individuals owned their own health-care plans and decided in advance how much they wanted to spend, maybe there wouldn't be so many "Cadillac" plans out there and medical technology might be cheaper. But it would still be innovative, because the market would be free enough to reward innovation and competition.

The health-care bill that the president is so eager to sign moves things in the exact wrong direction: toward more bureucratic control, less freedom to do business in a way that makes economic sense, and more third-party interference between the consumer of health care and the provider. Yes, some more people will have insurance than before, and that is a worthwhile goal and almost the only good thing about the legislation. But there were far less intrusive, and probably more effective, ways of increasing the number of people who could afford health insurance. Only now, we may never know whether they might have worked. Instead, we have embarked on a huge, complex social experiment that will probably take decades to implement, and whose consequences we will all have to live with regardless of the outcome.

Besides the specific policy problems, the year-long debate over health care has further frayed the already worn fabric of our democracy. Congress has passed legislation that was clearly unpopular, and led to party-line divisions that may be very difficult to heal. Plus which, it may have contributed to an unhealthy cynicism about government in general. Last Friday I took the trouble to visit my congressman's office in downtown Austin to hand-deliver a note about the health-care vote. I had never done this before. It was rather depressing to see how the federal building is surrounded by a high black steel fence and guarded by cops who make you pass through a metal detector and run your personal items through an X-ray machine, just like at the airport. I understand the reasons for these precautions, but all the same, it seems like if the government had not expanded to be such a big target, we wouldn't have to go to so much trouble to protect it.

I will try to leave this topic alone in the future, since it is largely a done deal now and following it has not done my personal state of mind any good. But if anything comes up about it in the future that credibly concerns engineering ethics, I reserve the privilege to say something about it.

Sources: A description of last-minute changes to the medical-device tax was carried by the Huffington Post on Mar. 21 at The figures on total cost to the industry were from a Wall Street Journal article on Dec. 21, 2009 at


  1. The problem with the tax is that the medical-device industry is just going to pass the tax on once the tax is enacted. So the government has essentially has increased the cost of health insurance by $2-3 billion plus whatever the average profit rate of the industry is. Any competent business passes taxes onto the purchaser of goods and services.

  2. President Barack Obama was making his bid for the presidency, one of the things that he made clear was that he was going to prioritize fixing health care if he makes it to the White House. And that he did, formally taking the first step on the road towards health care reform in March of 2009.
    H.R. 3590: Health Care for Everyone