Policy Documents

Bending the Productivity Curve: Why America Leads the World in Medical Innovation

Glen Whitman and Raymond Raad –
January 18, 2009

In this Policy Anaysis published by CATO, the authors assert that health care issues—controlling costs and covering the uninsured— should be regarded as secondary to innovation. However, none of the most influential international comparisons have examined the contributions of various countries to the many advances that have improved the productivity of medicine over time. 

 In three of the four general categories of innovation examined here—basic science, diagnostics, and therapeutics—the United States has contributed more than any other country. In general, Americans tend to receive more new treatments and pay more for them—a fact that is usually regarded as a fault of the American system. That interpretation, if not entirely wrong, is at least incomplete. Rapid adoption and extensive use of new treatments and technologies create an incen- tive to develop those techniques in the first place. When the United States subsidizes medical innovation, the whole world benefits. That is a virtue of the American system that is not reflected in comparative life expectancy and mortality statistics. Policymakers should consider the impact of reform proposals on innovation.  

Glen Whitman is an associate professor of economics at California State University, Northridge. Raymond Raad, M.D., M.P.H., is a resident in psychiatry at New York Presbyterian Hospital / Weill Cornell Medical Center.