Innovation Is the Key to Health Care Reform

New ideas and new developments improve everything in our lives, and health is no exception.


For generations, the American health care debate has focused entirely on one question: "How many people have insurance cards in their wallets?" The drivers of the debate have proudly sported bumper stickers reading:


The opponents of this worldview (including typical Reason readers) probably don't have a bumper sticker, but if they did, it would look like this:

Like it or not, the UNIVERSAL COVERAGE side's stickers provide a compelling vision for many Americans. Their opposition's sticker is compelling for no one. It is reactive, lacking both in message and substance. One side long ago ceded the debate, so all discussion has veered toward the demand side of health care, neglecting the supply side. Fortunately, a Cambrian Explosion of new technologies is poised to radically reshape health care. These innovations offer a chance to shift the conversation from the Fortress of centralized control to the Frontier of innovation. Here's a four-step plan to do so:

Task 1: Answer the Pre-ex Question

The essential first step is to deal with the omnipresent question, "How can we handle people with pre-existing conditions?" The UNIVERSAL COVERAGE answer is clear, simple, and wrong: "Mail them insurance cards." The Affordable Care Act makes it worse: "Force insurers to mail them insurance cards." This is a recipe for adverse selection, insurance market death spiral, and health care rationing, but makes a heartwarming story until that happens.

John Cochrane of the University of Chicago identifies the greatest source of the pre-ex problem: we can't purchase long-term health insurance at a guaranteed future rate, as we do with life insurance and long-term care policies. Cochrane's remedy centers on "Health Status Insurance"—supplemental coverage that kicks in to cover higher premiums when a person becomes ill.

Cochrane's idea is one of a number of logical, credible answers, but all are technical and tedious to explain out loud. The task is to produce a concise, logical, persuasive written response. When someone asks about pre-ex, respond with, "Excellent question. The answer comes in two parts. Part One involves tedious insurance technicalities that are painful to say but easy to read about in five minutes." … (Hand the questioner a printed copy.) … "Part Two is far more important and exciting, and that's what I'll talk about today."

Any time you attempt to explain Part One, you will lose your audience, and that is a permanent problem. The segue to Part Two is where you excite the audience with adrenaline-stoking stories of innovation. It is where you demonstrate that the best thing for people with pre-existing conditions is to make their treatments better and less expensive so getting coverage and paying for treatment don't entail financial ruin. The message of innovation is clear, simple, and correct—and transcends ideological divisions.

Task 2: Learn the New Technologies

In 1964, only the most visionary technologists were beginning to sense the world that would lead to laptops, iPads, smartphones, Amazon, Street View, Facebook, Blendr, Grindr, OnStar, Kindle, Twitter, Siri, Wolfram|Alpha, and the Internet of Things. Everyone else was stuck on, "How can we improve access to room-size million-dollar mainframes.

We are at a similar juncture in health care. The possibilities can thrill audiences of varying ideologies: Drugs designed for a single individual's DNA; 3-D printed transplantable organs made from a recipient's own cells (no need for donors or rejection); nanobots to repair a patient's damaged genes; wearable telemetry to continuously monitor a patient's biometrics; vastly expanded capabilities for telemedicine; better detection, treatment, and prevention of illness via social media and state-of-the-art data mining; and—less sexy but no less important—lean production methods to squeeze more care and more health out of a given quantity of resources.

The promise of these technologies becomes far less abstract when one meets some of the innovators who are already changing the delivery of health. I've had the thrill of meeting quite a few lately, and here are just four of them:


Jon Schull, of the Rochester Institute of Technology, founded E-Nable—a web-based global consortium that enables amateurs with access to low-cost 3-D printers to produce functional prosthetic hands for somewhere below $50 apiece and to give them to recipients at no charge. In contrast, an FDA-approved prosthetic costs $25,000 to $80,000, with health insurance paying relatively little. (Mechanical printed hands given away for free are not currently subject to FDA approval.)

Ian Shakil is CEO of Augmedix, which revolutionizes medical examinations for doctors and patients. The doctor, wearing Google Glass, has a natural conversation with the patient. The Glass sends an audio-visual stream to Augmedix's back-end, which extracts structured data—filling an electronic health record in real time. The doctor can also make oral queries as one would with Siri or OnStar; such as, "What are the patient's last three blood pressure readings?" The doctor no longer has to fiddle with a computer during or after the exam, and this change frees up 30 percent to 40 percent of the doctor's day. Recent data suggest that a doctor using this technology can see twice as many patients a day or spend twice as much time with each patient (or gain a great deal of leisure time).

Pat Basu is Chief Medical Officer for Doctor on Demand, whose affiliated medical practice provides complete video visits to patients across the country immediately from the comfort of their homes, via smartphones, tablets and PCs. Doctor On Demand's board-certified physicians can treat and prescribe for most of the common conditions seen in ERs, clinics and urgent care centers. The app is free, and visits are just $40—comparable to the average copay. Patients receive immediate, convenient and cost-effective access to high quality care, and physicians get paid to focus on patient care. This sort of telemedicine can increase access to quality care at relatively low costs to the US health system, and is especially valuable for underserved populations, such as rural communities and Hispanics.

Jenna Tregarthen, CEO of Recovery Record, developed an app to help people with eating disorders manage their diet and health. Therapists and patients in her network are having remarkable success rates, and her company now has one of the world's premier data bases on eating disorders and therapeutic strategies.

To become conversant in the approaching world of health care, begin by reading four books: Peter Huber's The Cure in the Code, The Innovator's Prescription by Clayton M. Christensen, Jerome H. Grossman M.D., and Jason Hwang M.D., Catastrophic Care by David Goldhill, and Eric Topol's The Creative Destruction of Health Care.

Task 3: Search for Obstructions

The next task is to change the conversation from "How many insurance cards have we mailed out?" to "How can we provide better health to more people at lower cost on a continuous basis?"

John Cochrane (mentioned earlier in this piece) asked: "[W]hat's the biggest thing we could do to 'bend the cost curve,' as well as finally tackle the ridiculous inefficiency and consequent low quality of health?care delivery?" He answered: "Look for every limit on supply of health care services, especially entry by new companies, and get rid of it."

To take up Cochrane's challenge, start at the federal level: Procedure-by-procedure, replace Medicare's irrational reimbursement rates with real prices that reflect value to patients. Allow states to replace a Medicaid system that spends a fortune to herd poor people into substandard care. Reduce the FDA's capacity to slow or stop drug and device innovation.

At the state level: Eliminate big hospitals' virtual monopolies currently awarded through bans on specialty hospitals and through certificate of need requirements that force innovators to beg permission of state officials before they can open or expand a hospital—or even buy a CT scanner.

Eliminate the monopoly powers granted to physicians' by unnecessarily limiting what nurse practitioners and other non-physicians can do. Carve out safe harbors to protect innovators from excessive and arbitrary tort judgments. Free medical schools from the early 20th Century curriculum that discourages critical thinking and interdisciplinary collaboration. Eliminate protectionist restrictions that inhibit the development and improvement of telemedicine. (Notably, telemedicine restrictions are often at their worst in states that think of themselves as free-market.)

It's unlikely that a large, comprehensive piece of legislation can ever get the job done. The political obstacles are simply too great. A better approach is one that resembles WWII Pacific Theater warfare—go one island at a time. A military historian suggested to me that this offers the choice of island-hopping or leapfrogging or both—that is, taking adjacent islands of resistance one by one, or going around the tougher islands to pinpoint targets of opportunity. One island might be restrictions on telemedicine in Texas. Another might be Medicare's irrational pricing of a particular urological procedure. Still another might be the lack of a health economics elective at medical schools. The islands are numberless.

To start this task, watch Dallas Buyers Club, a riveting film—and a true story—about AIDS patients smuggling unapproved drugs to treat their disease in defiance of lethal federal laws. Read Permissionless Innovation by my colleague Adam Thierer, which calls for innovators to be allowed to continue to experiment without seeking the permission of government officials.

Task 4: Find Some Unconventional Allies

The final step is to gather some unconventional allies to help you remove some of these obstructions to innovation. You can't simply gather a bunch of Reason readers to get the job done. With an island-by-island approach to reform, you'll find different allies for different islands. Where might you look for unconventional allies?

First are the innovators themselves. Silicon Valley is filled with technologists who may differ strongly with Reason readers on campaign financing, federalism, and gun laws, but who would find a strong affinity on innovation and entrepreneurship issues. Regardless of their voting patterns, innovators are painfully aware that on a whim, legislators, bureaucrats, and protected insiders can destroy their endeavors in an instant.

Second are Millennials. Here's a story to get you started. Recently, a company called 23andMe offered a $99 home genetics test that allows people to understand their inherited vulnerabilities and manage their own health behaviors accordingly. The FDA ordered the company to stop offering its product because, in its view, individuals are not entitled to know their own genetic information—only doctors are. Tell that story to a left-leaning Millennial who is already irritated by the taxi lobby's assault on Uber and you'll likely find an ally for that island.

Third is a variety of communities that perceive themselves as underserved by the current medical system. Telemedicine is especially valuable, for example, to rural and Latino communities. Even some strongly left-leaning Hispanic groups are strongly pro-telemedicine, for example.


Summing it all up: Answer the pre-ex question. Learn the technologies. Identify the obstructions. Make some new friends, targeted precisely for specific islands of reform.

And finally, if you're looking for a replacement bumper sticker for your car, try this one:

The UNIVERSAL COVERAGE bumper sticker is a zero-sum message about insurance cards and bureaucracy. INNOVATE HEALTH is a positive promise of health and human well-being. That is a winning message.

See Reason TV's interview, below, with Bob Graboyes about expanding the supply of health care.