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This is the latest of several blogs on healthcare on ThickCulture.

While the healthcare reform debate rages, there much emphasis on the costs. Warren Buffett has decried US health care as a “tapeworm eating our economic body”. The interesting thing is that when you look at the numbers that Buffett cite, the US is spending plenty on healthcare and has quite a few healthcare practitioners per capita. This post on the Innovation and Growth blog states the problems aren’t about the costs, but the lack of results. People are paying more, but less aggregate care is being delivered, in terms of actual better health. The blogger, Mike Mandel, also has a post posing the question of whether the US is overweight on healthcare R&D expenditures. As Ron Burgundy would say, “Compelling and rich.”

Where’s the spending going? It’s going towards the current healthcare infrastructure, insurance companies, and the research-intensive pharmaceuticals. Healthcare reform needs to address the industrial organization of the interfirm networks of the US healthcare system, so policy needs to not only have an understanding of economics, but also of organizations, strategy, and marketing. This challenges an entrenched and embedded structure of doing business, with an emphasis on business.

Real Healthcare Reform

In order to truly reform healthcare, it’s important to look at the system. Here’s a dramatically simplified representation for working Americans::

• healthcare providers -> hospitals, medical groups, & insurers -> patients
• pharmaceuticals -> insurers & pharmacies -> patients

Currently, employers and employees both pay for healthcare, with indigent care programmes and Medicare taking up the slack. Health care reform threatens how things are currently done, albeit expensively and lacking in aggregate health benefits. At some point under reform, costs will need to be addressed, which will limit total expenditures to force efficiencies out of the system. Policy aimed at squeezing efficiencies out of the healthcare system will force the players in the healthcare economic ecosystem of firms to maintain their margins to satisfy shareholders, although it should be noted that there are non-profit players in the mix. How will this impact the system?

Hospitals and medical groups will be forced to cut costs, making general medicine much less attractive as a career, due to pressure to contain wages and working conditions focusing on cost efficiencies. Already, there is evidence of this, as health providing organizations feel pressure on both ends, revenues from insurers and the high costs of labour. Under National Health in the UK, there’s increased competition amongst hospitals [1]. I see this as fostering specialization and differentiation within a government-funded system, which sheds light on how hospitals in the future may position themselves, as they compete for patients. Rural health may suffer without proper incentives in some areas, although publicly funded health may create markets for health which are current underdeveloped in others.

There will be considerable pressure to reduce pharmaceutical expenditures, which, in turn will limit the amount of pharmaceutical R&D. The pharmaceutical industry will say that this will kill future innovation, as the high prices in the US are fueling R&D expenditures, given that most of the world has price controls on pharmaceuticals. But, for all of the investment in health R&D, as noted above, it’s not as if it’s having a profound impact on aggregate health. I’m of the mind that the problem is with the traditional approach to drug development that the pharmaceutical industry engages in. A rival paradigm is one driven by medical biotechnology in the areas of using genetics in the drug development process and bioinformatics. It would be naïve to expect technology to deliver solutions in the future, i.e., that the US will innovate itself out of this healthcare jam, but what’s clear is that the current pharmaceutical model isn’t working. More is spent per revenue dollar on marketing than on R&D, so the US research-intenvive pharmaceuticals are differentiating through branding, not theraputic benefits.

The above scenario is akin to the German public/private system of health care with 82M people versus 304M in the US, so there is the issue of scalability. Nevertheless, Germany has a system with 90% opting for a public option, but here are the key points [2]::

1. Both systems have providers employed in the private sector {not socialized medicine, as in the UK}
2. German healthcare is financed through payroll taxes at rates that are similar to the US’ {around 15% split by employer and employee}
3. German wages for physicians are half of that of US physicians at $80K, but there are wide variances in terms of hours worked and wages by specialization
4. The German government sets fixed reimbursement rates and obtains price concessions from pharmaceutical companies due to its market power
5. Fewer uninsured patients in Germany mean less incidence of expensive emergency care
6. German hospitals don’t splurge on the latest technology, such as MRIs
7. There are income barriers to enter private healthcare & older Germans cannot go back to the private system once they leave the public option
8. Unemployed in Germany who have never worked still may obtain care through a social fund, the sozialamt [3]

The German system isn’t perfect and there’s questions of what the future holds, given the rapid changes in medical technologies and who will gain access to them. I don’t see the US system in its current incarnation as viable in the long term.

What about the poor insurers under health reform, I’ve blogged about in the past? If I were an insurer, I would be shifting my business model towards being what is called a “value net integrator”, a variant of systems integrator. Such an entity would focus on facilitating the data and information flows between patients, physicians, pharmacists, etc., and mining the data to help medical and policy decisions. For example, a patient’s electronic record would be in a database that could be accessed by physicians. Additionally, the “insurance company” no longer makes decisions on care, but facilitates payments from the government to the providers.

Plenty is being spent on health per capita here in the US, but I see reform in some form or another to be inevitable. Why? The private actuarial model {risk-based} of healthcare in the US is expensive, not providing enough health benefits for those covered, and too many {more and more from the middle class} are finding it hard to obtain coverage. I don’t see this as politically tenable, particularly as the economy languishes. The costs are astronomical, but the more pressing issue is that the current system is bulky and dysfunctional to say the least. Policy needs to address the entire “ecosystem” of healthcare provision, including a look at rethinking the organizational sociology, innovation, and technology when it comes to the future of healthcare in America.

Twitterversion:: Healthcare reform in the US? Are costs the focal issue or is the system fundamentally broken? #ThickCulture

Song:: Jein-“Fettes Brot”

References::

[1] Timmins, N. {2010} “Competition in NHS makes hospitals better, study says”. Financial Times. {19 February} http://www.ft.com/cms/s/0/3099e87c-1cf6-11df-aef7-00144feab49a.html

[2] Raghavan, A. {2009} “Beyond Hysterics: The Health Care Model That Works”. Forbes. {1 September} http://www.forbes.com/forbes/2009/0921/health-obama-germany-health-care-model-that-works.html

[3] Green, D. Irvine, B., & Cackett, B. {2005} “Health Care in Germany”. Civitas. http://www.civitas.org.uk/pubs/bb3Germany.php

While I tend to agree with Paul Krugman that the Obama healthcare proposal is most akin to a Swiss-style healthcare programme {Hat Tip:: KM}, I think it’s useful to look at systems comparatively.  This clip is not from Sicko, but from CBS Sunday Morning::

While the French model is having its problems on the financing side and it is indeed embedded with French culture, I think it provides insights into thinking about healthcare as an institution.  I’m interested in how policy can shape innovation and if the federal government has monopsony power, it can create incentives for improvements in delivery.  The diagnostic approach and the housecalls are interesting approaches, but this would necessitate change.  Sociology predicts that there will be institutional resistance to change, but health care reform has the unique opportunity to shape new institutional logics.  I saw a presentation at ASA on compliance with a law limiting the hours of medical residents.  You would think it was a no-brainer.  It’s the law, hence there would be compliance.  Wrong.  The social construction of the medical establishment overrode this, shaping actual praxis.

Twitterversion:: Clip from #CBS Sunday Morn. on French healthcare. While not directly applicable, food 4 thought re: innov. & improvements.http://url.ie/28qf @Prof_K

Song:: La Mer

La Mer – Francoise Hardy

Anyone curious on how how pro-single payer physicians think about the issues, I encourage you to check out the Physicians for a National Healthcare Program {PNHP} FAQ.  Here’s a list of PNHP single-payer resources, as well.  As stated in an earlier post, I view health care as infrastructure that can spur innovation, creativity, and entrepreneurship and like many in the biotech. industry, I see a single-payer model {public finance of healthcare, as opposed to provision} as important for implementation of genomic medicine.

I won’t go into the healthcare debate and media circus, but will link to an article on a recent NBC poll.  Interestingly, 36% believe that Obama’s reform efforts are a good idea, but 53% support a paragraph describing his plans.  It’s a communication problem.  If you think all of the cacophony at the town halls is helping the GOP, you’re wrong.  The NBC poll reports 62% disapprove of their handling of health care.

The PNHP is highly critical of the administrative costs of healthcare and are no fans of the insurance industry.  Insurance also affects how healthcare providers do their jobs.  I have access to hospital data that’s used to “manage care” to maximize insurance reimbursement.  Moreover, there are powerful incentives in the insurance industry to maximize profits by denying claims.  The PNHP recognizes that a single-payer system will adversely affect insurance::

“The new system will still need some people to administer claims. Administration will shrink, however, eliminating the need for many insurance workers, as well as administrative staff in hospitals, clinics and nursing homes. More health care providers, especially in the fields of long-term care, home health care, and public health, will be needed, and many insurance clerks can be retrained to enter these fields. Many people now working in the insurance industry are, in fact, already health professionals (e.g. nurses) who will be able to find work in the health care field again. But many insurance and health administrative workers will need a job retraining and placement program. We anticipate that such a program would cost about $20 billion, a small fraction of the administrative savings from the transition to national health insurance.”

So, shouldn’t we be concerned about insurance ?  Are they getting a bad rap?  Are they really evil?  Isn’t it a part of financial intermediation, providing the critical function of polling resources and spreading risk?

Malcolm Gladwell in a 2005 New Yorker article did a good job of explaining two forms of insurance:: social and actuarial.  Social insurance pools money from many for a public good, regardless of usage, in order to sustain an infrastructure.  Actuarial insurance is quite different and has been the pathway that US healthcare has been going::

“How much you pay is in large part a function of your individual situation and history: someone who drives a sports car and has received twenty speeding tickets in the past two years pays a much higher annual premium than a soccer mom with a minivan.”

Think pre-existing conditions.  The actuarial model is why biotech. wants a single-payer system.  Genomics identify risks and will eventually match individuals, diseases, and therapies on the basis of genetic information.  Doctors see this on the horizon and Robin Cook, MD offered this NY Times op. ed. on how he had revised his views on universal health care.

But, if you were to craft a business model, which would you choose to invest in, if you wanted to make the most profit?::  {1} social insurance that pools equal premiums from all and allocates care to all or {2} actuarial insurance that charges more for people who have a higher likelihood of becoming ill and can deny care for pre-existing conditions or treatment deemed unwarranted.  The actuarial model can easily align with a set of values of individualism, as well as moral judgments about treating certain diseases {e.g., a smoker with lung cancer}.  I’ve seen people on discussion boards claim that “I can take care of my own” and perplexed why everyone else cannot.  How I see it, the current debates are really about using individualism to protect corporate interests.  I see plenty of incentives for the actuarial insurance industry and politicians to fan the argumentative flames about wild-eyed hypotheticals, as opposed to substantive debates about implementation. The devil is in the details.

Gladwell concluded his article with the following::

“In the rest of the industrialized world, it is assumed that the more equally and widely the burdens of illness are shared, the better off the population as a whole is likely to be. The reason the United States has forty-five million people without coverage is that its health-care policy is in the hands of people who disagree, and who regard health insurance not as the solution but as the problem.”

Twitterversion:: Who will weep 4 actuarial US health insur. indstry? Are they/backers obfuscating real debates on implmntatn w/histrionics?http://url.ie/28qa @Prof_K

Song:: Pay For It – Lloyd Cole

Bee Lavender has a poignant piece in guardian.co.uk on why she prefers the British health care system (NHS) to the American version.  Here’s the key passage in her essay.

In the US, the greatest restriction on personal freedom that I have ever encountered in my own life, or witnessed in the lives of friends, all comes down to health insurance. Creative, innovative, talented people are unable to change jobs because they need the insurance. Small companies collapse because they cannot afford employee insurance. People die because they do not have insurance.

This to me seems the critical issue we need to work through as we move forward in the U.S. health care debate. Has the U.S. system reached a ceiling in its desire to create the underlying conditions for a free society? We’ve always had a struggle with spending on public goods in this country, but have lurched towards funding basic services to create a just society (education, Medicare, Social Security, etc.). There are lots of ways to cover everyone and the NHS has its critics, but I’m not sure if we as a nation think that access to health services is a precondition for living in a free society. I fear we become too fragmented or skeptical of government’s ability to provide public goods? I’m not sure if we in the social sciences can do more to help drive the debate since the question of universal coverage is about value orientations.

Notes from north of 49ºN

Update 4 August:: Video on Jack Layton from MSNBC-below.

Jack Layton is the leader of the New Democratic Party of Canada whose riding is the next one over from me, Toronto-Danforth.  Over on the Huffington Post, Jack did a post on the realities of the Canadian health care system.

I have a lot of strong views on health care in the US based on my work in non-profit health and my research on the biotech industry.  It’s worth mentioning that today’s US health care system began as employer perquisites {benefits}, back when health care and pharmaceuticals were cheap.  The private insurance model starts to break down when costs escalate resulting in employers and employees getting squeezed and uninsured rates rising.  Some say a perfect storm of events {recession, rising costs, uninsured rate of 19%, and Obama} is leading to a tipping point in health care.  It should be noted that the US will not adopt a health care system like Canada’s, where the government {provinces} provide health care, but rather a system where the government finances health care delivered by private enterprise.

On the The Huffington Post, Jack makes some compelling points, whether you agree with his politics or not::

“Costs are under control in Canada. We spend similar amounts on public care – around 7% of GDP. For that price, Canada covers everyone, the U.S. just one third of the population. In case you’re worried Canada wastes money on bureaucracy, know that just 2.4% of our total costs go to administration compared to 7% of what your government spends. In end, Canadian care costs $2,500 less per capita – and covers everyone.”

He points out that the system isn’t perfect::

“Our system does have flaws. We need better prescription drug coverage, better remote access to care and better practices in hospitals and clinics. No honest advocate for our health care system would dismiss these things. But Canadian health care works — and works well.”

Does all this mean that the United States should adopt Canada’s health care system?…No. America can no more adopt our health care system than we can swap hockey for baseball as our national pastime. A good health care system reflects a country’s values, and each country’s values are different…But a system with 47 million uninsured, coverage denied due to pre-existing conditions and people thrown off plans when they become ill? That doesn’t reflect American values.”

Unfortunately, there are other competing values in play in the US, making healthcare a contentious issue.  It’s not a simple matter of costs and taxes, but one that also affects innovation and entrepreneurship.  Biotechnology is predicated upon using the human genome to better match diseases, patients, and therapies.  “Pre-existing conditions” and genetic skeletons in one’s closet can thwart innovation in biotech because it adds additional business risk.  If insurance refuses to pay, where are the revenues?

One question on my mind and one I pose to my students, is healthcare a public infrastructure or should it be treated strictly as a business?  The Canadian model is one where the state is the financier and provider, where the provinces oversee a large, integrated health infrastructure.  As stated above, a new US healthcare model is unlikely to be this comprehensive, instead focusing in financing.  The current US model uses market mechanisms heavily, where healthcare delivery, insurance, and pharmaceuticals all having a dog in the healthcare reform fight.  Altering the landscape through healthcare reform will alter business models and likely create windfall gains and losses.  On the other hand, we have that perfect storm of recession, rising costs, uninsured rate of 19%, and Obama.  Another implication of the current model, where healthcare is an employment benefit, is that it limits new business creation, i.e., creates “entrepreneurship lock.”  A recent working paper supports this reasoning::

“Overall we find some evidence that the U.S. emphasis on employer-provided health insurance may be limiting entrepreneurship.  The clearest evidence comes from the regression discontinuity results which create the most comparability in experimental and controls groups.  The finding of ‘entrepreneurship lock’ is important as it suggests that the bundling of health insurance and employment may create an inefficient allocation of which or when workers start businesses.”

Healthcare can also has an affect on the arts in the US in same fashion, necessitating that creatives take on dayjobs with health benefits.  One artist once told me that money {or lower costs} means the freedom to create.  The current system does precious little to create incentives for cash-strapped entrepreneurs and creatives to innovate and create.  Does this matter?  I think it does in terms of sustainable economic growth and treating healthcare as a publicly financed infrastructure, i.e., a social good, paid with {gasp} taxpayer dollars makes more sense than the current system, but the devil’s in the details and good implementation is critical in order for a new system to be successful.  That said, these challenges shouldn’t be reasons not to do it.
Video:: Jack Layton on MSNBC’s The Ed Show, NDP Blog via Twitter

Link

Twitterversion:: Jack Layton of #NDP clarifies healthcare in #Canada. Should healthcare be infrastructure? Implications for innovation & entrepreneurship. #ThickCulture @Prof_K

Song::  Planet Health – Chairlift {Brooklyn, NY of iPod Nano fame}

Why is the Affordable Care Act (ACA) more widely known as “Obamacare”? After all, we don’t call Medicare “Johnsoncare” or Social Security “Roosecurity.”

President Obama, who is currently on a traveling charm offensive to promote the ACA, offered a hypothesis yesterday: “Once it’s working really well, I guarantee you they will not call it ‘Obamacare.'” If we extrapolate a bit from his remark, the ACA is more widely known as “Obamacare” because his opponents want to associate the law with the President who is widely loathed on the Right and earns mixed reviews from the general public (though polls consistently show that the vast majority of Americans find Obama personally likable). Bad President, bad law, so the thinking goes. Or perhaps the term conjures the image of Obama crossing the country with a stethoscope and kicking down doors, forcing blood pressure readings on us. That is to say, “Obamacare” may generate fears of the worst kind of “nanny state.”

But here’s an alternative explanation for the persistence of the term. Consider that his own supporters use the term, no doubt creating love for the law on the Left. Unlike Social Security and Medicare (single-payer systems of direct entitlements), the ACA is actually a complex mixture of taxes and subsidies, public-private exchanges, and regulations on the private insurance industry. In other words, it’s no one thing.

As the time goes on, I suspect “Obamacare” will fall by the wayside and “ACA” is a bit too wonky to stick. But what the popular name will ultimately be depends on what the public (or the political claimsmakers who inform them) see as the marquee feature of the legislative package. I would guess the healthcare exchanges will come to be more important than most believe. So, I’ll lay my odds on “Health Exchange” as the thing currently known as “Obamacare.”

Yesterday’s SCOTUS ruling [full text] on Barack Obama’s Patient Protection and Affordable Care Act (PPACA or ACA) was an interesting one on several fronts. This post will go over political, legal, and health policy ramifications of the decision, focusing specifically on the individual mandate.

The Election

Earlier this year, I was of the opinion that regardless of the outcome of the case, Obama wins. Now, I’m not so sure that would have been the case. While a ruling against ACA would provide Barack and the Democrats election fodder by offering evidence of an activist conservative Court that is willing to override the will of Congress, I think a bigger danger would be tied to a divisive law that was a centerpiece to Obama’s first term that was deemed as unconstitutional. My opinion is that the electoral calculus favors Obama, but for him to be able to enact any change in his second term, he will need a mandate and enjoy Democratic control of the House and Senate. That might be a long shot. The trifecta of Presidency, House, and Senate is the real issue and precondition for an agenda of change—not the nationwide polling numbers, although perceptions of a close election are in the best interests of the media and could boost turnout, which would favor the Democrats.

Like Ike

While Romney and the Republicans may try to make hay out of repealing ACA, I’m not sure how much traction it will get. It could be part of anti-taxation rhetoric, given that’s what the Supreme Court based the ACA decision on, but that could be problematic given that Romney has already committed to tax cuts for the wealthy. While some of Mitt’s recent political rhetoric has a populist ring to it, the devil’s in the details. I think in the battle for swing state independents and moderates, I think Romney’s only shot is to go populist and appeal with a middle-class populism. While Obama’s track record, based on Voteview’s analysis of roll call votes {albeit an imperfect measure for the presidencies}, shows him as the least liberal Democrat since Johnson {who was a hawk during the Vietnam War}, Eisenhower was the least conservative Republican.

Perhaps rather than harken back to Reagan, Romney should go back to 1950s traditionalism and the political moderation of Ike. I feel that Romney is allowing himself to be heavily defined by others—be it Obama or the more socially conservative wing of the party. Maybe this is a reaction to McCain’s maverick, seat of the pants style that involved choosing a Sarah Palin, who wasn’t always rowing in the same direction as the campaign, and suspending his campaign during the fall 2008 financial crisis. Addressing ACA as a moderate populist makes more sense than taking potshots at Obama’s “bad law” that is now deemed as constitutional. Plus, Justice Ginsburg stated Romneycare was a reason she sided with the majority, which can be thrown in Romney’s face.

Taxation vs. The Commerce Clause

While Chief Justice John Roberts is being lauded for his genius, this DC Bar post from January of 2011 presages his take on the matter. Jack Balkin of the Yale Law School is quoted:

“Balkin believes the best argument for the constitutionality of the individual mandate is that it is a tax. ‘It is an amendment to the Internal Revenue Code. It is collected on your tax return. It is collected by the Internal Revenue Service (IRS). It’s computed based in part on your income. It’s a tax.’”

A commerce clause interpretation gets murky fast because it’s one thing for Congress to regulate commerce, but quite another to require it. Chief Justice Roberts [pdf] made this clear:

“Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Congress already possesses expansive power to regulate what people do. Upholding the Affordable Care Act under the Commerce Clause would give Congress the same license to regulate what people do not do. The Framers knew the difference between doing something and doing nothing. They gave Congress the power to regulate commerce, not to compel it. Ignoring that distinction would undermine the principle that the Federal Government is a government of limited and enumerated powers. The individual mandate thus cannot be sustained under Congress’s power to ‘regulate Commerce.’”

Tom Scocca in Slate argued that this could limit the ability of Congress to enact law through the use of the Commerce Clause. David Cole in The Nation isn’t so sure:

“When one adds the dissenting justices, there were five votes on the Court for this restrictive view of the Commerce Clause. But that is not binding because the law was upheld on other grounds. And while some have termed this a major restriction on Commerce Clause power, it is not clear that it will have significant impact going forward, as the individual mandate was the first and only time in over 200 years that Congress had in fact sought to compel people to engage in commerce. It’s just not a common way of regulating, so the fact that five Justices think it’s an unconstitutional way of regulating is not likely to have much real-world significance.”

The ultimate policy effect of the “tax” or “penalty” will probably work because of social psychology’s prospect theory—people don’t like losses and will avoid them. This will compel compliance with the program, allowing the pooling of the population to spread out the risk.

Health Policy

Is the ACA good health policy? Well, one view is that it’s flawed from a health economics point of view, as Larry Van Horn states. I think he conveniently omits the fact that there’s a difference between actuarial and social insurance, which I blogged about on ThickCulture back in 2009. The healthcare industry faces uncertainty, as the increased demand for services may not be offset by pressures on margins. The main question for patients will be whether access to high quality care will be available. As a documentary producer and researcher on the subject of primary healthcare, I’ve been following what’s been done in Massachusetts, i.e., Romneycare. Yes, there are issues with rural healthcare in the Commonwealth and CUNY-Hunter College Public Health professors, David U. Himmelstein and Steffie Woolhandler {former Massachusetts MDs} are advocating for a public health program that would further reform healthcare. I think they make some very valid points, but I tend towards viewing healthcare as social infrastructure. Specifically, they are advocating for:

1. Cutting out middlemen {costly insurance overhead}
2. Pay hospitals based on costs, not on a per-patient basis
3. Enforce real health planning
4. More primary care, less specialists
5. Price controls on pharmaceuticals
6. Cap salaries on health executives

My take is that the ACA will have a positive net effect on health outcomes by increasing demand and adding to the insurance pool, younger patients who tend to have lower incomes [see pdf from US Census]. I think the best to hope for in the current model is a minimal care floor that serves as a lower threshold. It won’t be perfect and it may eventually move the industry towards rationalizing prices, which can be quite exorbitant, as evidenced in a LATimes report:

“Of course, and it’s all part of a years-long game in which the charge for service, the true cost of the service, and the acceptable payment are in three different orbits. And that doesn’t even take into account how the charges are adjusted up or down depending on who’s paying them and whether they have worked out a deal. How can patients hope to make sense of such an indefensibly convoluted system?”

Why? The insurance companies won’t be able to cherrypick healthy patients and will actively seek ways to cut costs. Although, they will most likely try to continue the practice of finding ways to limit payouts to physicians, I can see the insurance industry scrambling to develop new models of healthcare with segmented markets and there may be innovations stemming from the policy. The industry will push hard for as little regulation as possible.

Finally, who will be the big winners in all of this? In my opinion, the lobbyists. Oh, and mea culpa…{h/t Kathleen Maloney}

There was a great read in the New York Times last Sunday on Barack Obama’s presidency given the debt ceiling events of the preceding week, “What Happened to Obama?” It was a piece by Drew Westen, professor and author of the acclaimed book “The Political Brain: The Role of Emotion in Deciding the Fate of the Nation.” The central point in the op-ed was the importance of storytelling in politics and how Obama, surprisingly, has failed in that regard.

When Barack Obama rose to the lectern on Inauguration Day, the nation was in tatters. Americans were scared and angry. The economy was spinning in reverse. Three-quarters of a million people lost their jobs that month. Many had lost their homes, and with them the only nest eggs they had. Even the usually impervious upper middle class had seen a decade of stagnant or declining investment, with the stock market dropping in value with no end in sight. Hope was as scarce as credit.

In that context, Americans needed their president to tell them a story that made sense of what they had just been through, what caused it, and how it was going to end. They needed to hear that he understood what they were feeling, that he would track down those responsible for their pain and suffering, and that he would restore order and safety. What they were waiting for, in broad strokes, was a story something like this:

“I know you’re scared and angry. Many of you have lost your jobs, your homes, your hope. This was a disaster, but it was not a natural disaster. It was made by Wall Street gamblers who speculated with your lives and futures. It was made by conservative extremists who told us that if we just eliminated regulations and rewarded greed and recklessness, it would all work out. But it didn’t work out. And it didn’t work out 80 years ago, when the same people sold our grandparents the same bill of goods, with the same results. But we learned something from our grandparents about how to fix it, and we will draw on their wisdom. We will restore business confidence the old-fashioned way: by putting money back in the pockets of working Americans by putting them back to work, and by restoring integrity to our financial markets and demanding it of those who want to run them. I can’t promise that we won’t make mistakes along the way. But I can promise you that they will be honest mistakes, and that your government has your back again.” A story isn’t a policy. But that simple narrative — and the policies that would naturally have flowed from it — would have inoculated against much of what was to come in the intervening two and a half years of failed government, idled factories and idled hands. That story would have made clear that the president understood that the American people had given Democrats the presidency and majorities in both houses of Congress to fix the mess the Republicans and Wall Street had made of the country, and that this would not be a power-sharing arrangement. It would have made clear that the problem wasn’t tax-and-spend liberalism or the deficit — a deficit that didn’t exist until George W. Bush gave nearly $2 trillion in tax breaks largely to the wealthiest Americans and squandered $1 trillion in two wars.

And perhaps most important, it would have offered a clear, compelling alternative to the dominant narrative of the right, that our problem is not due to spending on things like the pensions of firefighters, but to the fact that those who can afford to buy influence are rewriting the rules so they can cut themselves progressively larger slices of the American pie while paying less of their fair share for it.

But there was no story — and there has been none since.

The main point was the pitfall of not having a narrative, raising doubts about what you stand for and leaving yourself exposed to others who do have a story to tell. Additionally, there was some highly critical analysis of Obama’s character and background that jumped out as well, suggesting that he is perhaps incapable of meeting the moment, of meeting the challenge of these Republicans who are seemingly incapable of compromise. It was a very critical column but also one that really offered a rude awakening/opportunity to the White House.

As a Canadian political observer, I found the Westen piece interesting. On the liberal side of the political spectrum up north, we too could use some good storytelling and storytellers, for that matter, too. Let’s just say we’re in a bit of a deficit situation on that score at the moment and looking to dig our way out. In fact, three of the opposition parties are in interim leadership situations. Leaving our political narrative a little too tilted in a conservative direction at the moment and in need of a strong counter (our new Conservative majority government obtained just 39.62% of the vote in the May 2011 federal election yet still managed to obtain a majority of seats).

Not everyone agreed with Westen’s take on Obama’s failed narrative and the critique that it embodied. Speaking to the other side of the Obama coin was Andrew Sullivan who offered up one of his blog items “Who is Washington’s Most Effective Politician?” as a counter to Westen’s attention getting op-ed.

I think Obama is easily the winner and currently stupidly under-rated – and drowned out by all the noise in the conservative-media-industrial-complex.

Here are the political accomplishments: defeating the most heavily favored party machine in decades (the Clintons) while actually bringing his biggest rival into his cabinet, where she has performed extraordinarily well; helping to cement the GOP’s broad identity as extremists opposed to compromise; entrenching black and Hispanic loyalty to his party; retaining solid favorables and not-too-shabby approval ratings during the worst recession since the 1930s. 44 percent of the country still (rightly) blame Bush for this mess, only 15 percent blame Obama.

On policy: ending the US torture regime; prevention of a second Great Depression; enacting universal healthcare; taking the first serious steps toward reining in healthcare costs; two new female Supreme Court Justices; ending the gay ban in the military; ending the Iraq war; justifying his Afghan Surge by killing bin Laden and now disentangling with face saved; firming up alliances with India, Indonesia and Japan as counter-weights to China; bailing out the banks and auto companies without massive losses (and surging GM profits); advancing (slowly) balanced debt reduction without drastic cuts during the recession; and financial re-regulation.

Yes, there have been failures. The election of Scott Brown; the 2010 mid-terms; the surrender to Netanyahu and AIPAC; the botched and ill-conceived war in Libya; the failure to embrace Bowles Simpson up-front; the collapse of cap and trade (maybe not such a bad thing anyway). But notice what hasn’t happened. Where are all the scandals promised by Michelle Malkin? Where are his Katrinas and Monicas?

When I read commentaries expounding on the notion that this man is competely out of his depth, I just have to scratch my head. Given his inheritance, this has been the most substantive first term since Ronald Reagan’s. And given Obama’s long-game mentality, that is setting us up for a hell of a second one.

Now if only the guy can convince his nation that he is a winner…

The province of Ontario is increasing funding for 6,000 graduate students in high demand areas such as engineering, health, and environmental sciences. Dalton McGuinty’s Liberal government is set to increase funding for 60,000 total students by 2015-2016.

I think this is a step in the right direction for Ontario and Canada to address the innovation and productivity gaps that plague the economy. AnnaLee Saxenian, author of Regional Advantage, examined the innovation clusters of Silicon Valley and Route 128 in Massachusetts. Historically, both are areas with strong technical universities that were generously funded during the Cold War, but what emerged in California was a culture of innovation.

“In the 1970’s both the Route 128 complex of Boston and the Silicon Valley were centers of high technology industry, but by the 1980’s the Route 128 area was stagnating while the Silicon Valley, after experiencing economics shocks, was moving ahead to become the unchallenged global leader in high technology. The difference in the two areas was not in resources or location but in their commercial culture. Route 128 firms tended to be insular and proprietary, whereas the Silicon Valley firms were open and linked by social and economic networks which enabled them to adjust to the vissitudes of market shifts.”

In today’s Toronto Star, an article on a Toronto Board of Trade report cited a need for increased regional coöperation among the economic development entities in the Greater Toronto Area. The report cites the regional transportation planning of Metrolinx as an exemplar of regional planning. I think there’s a tremendous opportunity for the development of Toronto as an innovation cluster, but I think the big challenge won’t be in terms of funding, but in terms of creating an innovative localized culture that permeates the regional institutions, including government, higher education, hospitals {in medicine and healthcare}, and business. So, I can see the Ontario Liberals touting plans to integrate their higher education policy with one for regional innovation incubation. The MPP for Toronto Centre, Glen Murray, is the Minister for Research and Innovation, which runs the Ontario Network of Excellence (ONE). One on the ONE members is MaRS, an organization designed to bridge science, government, and business, which the Ontario Liberals have committed funding to::

“To continue to foster that environment, Murray announced a $2.25 million commitment over the next three years for MaRS so that it may continue its mandate to foster innovation in Toronto by harnessing expertise from across academic and business sectors to aid in launching and developing companies. MaRS will become one of 14 centres in the province-wide ‘Network of Excellence’ being built to foster innovation.”

Toronto is a confluence of different types of capital and global flows, with high levels of educational attainment, being a landing area for immigration, serving as a financial centre, and being a hub for the culture industries. What I’ve been reading is that much of Canada’s innovation occurs in extraverted industry clusters, which would tend to dilute regional advantages that take advantage of localized networks. The exception being the entertainment and culture industries. What I don’t know is what the business culture is like in innovative sectors in Ontario–is it more like California {informal, open, networked, greater mobility} or Massachusetts {formal, closed, hierarchical, and path dependent} in the 70s and 80s? The stakes are high, given the state of the economy and hopes pinned on innovation for future growth in GDP and jobs, which Murray is keenly aware of::

I was doing a post over on r h i z o m i c o n on innovation policy in Canada and also had a conversation with a future ThickCulture blogger on the future of biomedical innovation in the United States, which was the genesis of this post. I’ve been thinking about innovation policy, particularly in light of the Big Recession and the rise of global economies in places like China, India, and Brazil. Specifically, I’ve been thinking about the implications for biomedical innovation in the US, given how the pharmaceutical industry is likely to get squeezed on: {1} the demand-side {through universal healthcare being a monopsonist buyer} and {2} how public expenditures on basic science and technology are threatened, in that are deemed by some as unsustainable in the near term {due to the deficit} and the long term {due to concerns about efficiencies}.

Innovation in General

US policy has a somewhat favourable tax treatment for innovation, along with a high public expenditure contributing to business and enterprise research and development {BERD}::

While it’s fully understood the BERD is not the same as innovation, it nevertheless serves as a useful proxy measure. The sizes of the bubbles represent a measure for the productivity of BERD, with respect to value-added. The implication here is that the US government is spending a great deal on BERD and offering some tax incentives, while the outcomes aren’t that extraordinary.

As an aside, Canada’s government isn’t spending much, but offers a fairly generous tax treatment. Nevertheless, the R&D {and BERD levels} are disappointing and while some studies show some of this is due to industry effects [pdf], there are nevertheless structural issues that need to be addressed by policy, not the market alone.

Biomedical Research in the US

The US federal government is a big spender on health research, but these funds also go towards training and infrastructure. Historically, the funds for one of the big expenditures, the National institute for Health {NIH}, have been highly volatile::

and while the Obama administration wanted to boost funding, in order to avert a government shutdown, the great budget compromise of 2011 saw the NIH budget cut by $260M. The CDC was also cut to the tune of $730M from FY2010.

While the pharmaceutical industry invests more in R&D than the government, this represents a division of labour—the government spends on basic research, while the industry focuses on commercialization and expensive sets of clinical trials. The problem is that the governmental basic science subsidy is unlikely to be sustainable, particularly if the returns aren’t there. What I mean by returns are both in terms of value-added and health-beneffitting therapies. Under scrutiny, the lack of accountability of NIH funds and the grant practices are unlikely to show either. So, first off, reform of the NIH is in order. The current situation is leading to increased cynicism by stakeholders::

“Today, the primacy of biomedical research and technology development is being challenged. Patients, physicians, insurers, and policymakers are all questioning the slow pace of advance, escalating cost, dubious clinical value, inappropriate commercial exploitation, and lure of false hope for patients with serious diseases.”

On the pharmaceutical industry side, value-added is must likely to come from is…marketing, not biomedical science. The industry is dependent on this public subsidy, so the cutting of NIH funding isn’t in their best interests. In order to address the volatility of and cuts to NIH funding, some are advocating for more public-private partnerships and a greater reliance on non-profits and medical philanthropy. Given that the pharmaceutical industry is likely to get squeezed by universal healthcare and the possibility of less publicly-funded basic science, this sounds like a perfect solution to leverage scarce resources by both. While this sounds good, it’s a myth.

Public-Private Collaborations in the Current Biomedical Paradigm

A recent NEJM “sounding board” doesn’t show much promise for such collaborations::

“We reviewed the lessons from 70 such alliances from the mid-1960s through 2000. Although it is too soon to judge the success of the most recent models, in the main, earlier ones have not accelerated the pace of either discovery or clinical application. The sources of difficulty are idiosyncratic, but recurrent problems are a failure at inception to agree on intellectual-property provisions, excessive secrecy, and disagreements over research aims.”

This isn’t surprising at all from an organizational sociology point of view. It’s a problem of governance and intellectual property rights. The source of the failure? Good old organizational inertia, stemming from the characteristics of large, bureaucratic behemoths::

“In our view, the most salient reason for failure is the centralization of authority within large, inherently cautious bureaucracies in government, universities, foundations, and companies.”

While advances in areas such as biotechnology done by smaller innovative firms may seem like a possible avenue for collaborations and value-creation, there remains the thorny issue of financial capitalization. The pharmaceutical industry {Pharma} with its deep pockets has been buying up startup biotech firms, although it remains to be seen if there’s a pattern of imposing its innovation-killing bureaucratic baggage on them. The idea of the old paradigm {Pharma} seamlessly integrating the new {biotech} is a stretch, particularly for an industry that has had pricing carte blanche in the US, in a world of pharmaceutical price controls. Looming is the possibility of revenue declines, given that the government will be one huge buyer and will have the ability to dictate price. I’m not stating that public-private ventures are categorically bad, although I am wary of private enterprise tied to public purpose, and I can see a role for these arrangements within a rival model of innovation—one that’s open.

A More Open Innovation System

I would argue that early stage biomedical research has to be open and patents should be deferred to later in the discovery chain [See Moses III & Martin]. Locking down intellectual property rights creates knowledge silos that inhibit scientific creativity and a federal court has resisted allowing the patenting of genes for this reason [See Myriad case, on appeal with a decision pending this summer]. In the “discovery” of DNA, Watson and Crick had the theory, but Rosalind Franklin had the x-ray crystallography data that supported the idea of a double helix shape. If these knowledge silos were kept apart, discovery would have needlessly waited. Other examples abound. Within 3M, an innovation officer position was created to prevent managers from “hoarding” discoveries, allowing ideas to cross divisions, giving credit where credit was due. Open innovation embraces the Schumpeterian economics idea of “creative destruction” in innovation, where the old paradigms are destroyed to make way for the new. For example, if there was open scientific knowledge about oncology or neurology, the low barriers to information would allow for more rapid modes of discovery. The development of fruitful areas and elimination of dead ends could be facilitated.

The current mode has an unholy alignment of interests of government, industry, philanthropic nonprofits, and academe, where discovery has nothing to do with patient benefit, but with ancillary objectives of organizations and the individuals within them. More public-private ventures would merely formalize the alliances and the results will be along the lines of “innovations” that have the most profitable potential markets, “junk science” in journal articles promoting certain biomedical paradigms and building careers, and a philanthropic sector throwing money at both.

What also needs to happen with open information for innovation is a function of connecting the dots, be it public, private, or public-private. The open information needs to be scrutinized, not only to winnow the wheat from the chaff, but to make inferences about how knowledge in one area can be applied to another.