We tend to avoid making tough decisions when it comes to health care, especially when a costly new drug might extend a life, even if only for a week or month. The problem: if patients can’t foot the bill for those innovative drugs, insurers and the government end up paying. 

MIT economist Jon Gruber believes innovative drugs have helped and hurt health care in America. They save lives, but also contribute, in part, to the system’s rising costs. He says more than anything we need a rational way to approach innovations in health care and cut out expensive, ineffective drugs.

Three Takeaways:

• England has an organization that reviews a drug’s price and effectiveness: the National Institute for Health and Care Excellence, or NICE. According to Gruber, NICE looks at a new drug and determines if it is cost-effective enough to support. “That would go in the U.S. by the name death panel,” he says.
• One way to decrease the cost of health care, Gruber says, is to change the way we reimburse doctors. “We have a system where doctors are reimbursed by how much they do to you, not how healthy they make you,” he says. “We need to move toward something called value-based reimbursement.”
• We should also adjust how employer-sponsored health insurance works, Gruber says, as most people opt for generous plans because they will not have to bear the treatment costs. “We need to level the playing field, so people make that decision on a level-basis,” he explains. “Their health insurance spending should be treated the same as their wages.”

More Reading:

• MIT Technology Review looks at how two drugs illustrate the problem with health care innovation.
• It’s a challenge to innovate in health care. The Harvard Business Review explains why.
• The New York Times reports on the rise in digital medicine.