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The Deadly Tax on Medical Innovation

ObamaCare could dramatically slow the pace of medical progress, leading to millions of preventable deaths

by
Paul Hsieh

Bio

April 11, 2010 - 12:00 am
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Most technology aficionados are familiar with Moore’s Law, which states that computing power tends to double roughly every two years. The average American experiences this most clearly when purchasing personal computers. In 1998, Apple introduced its iMac computer with a 233 MHz processor, 32 MB RAM, and 4 GB hard drive, for a price of $1300. In 2010, Apple’s low-end iMac includes a 3.06 GHz processor, 4 GB RAM, and a 500 GB hard drive for $1200. This represents a greater than 10-fold increase in processor speed and over 100-fold increases in RAM and hard drive sizes for roughly the same nominal dollar amount (30% fewer real dollars after adjusting for inflation).

Similar but more quiet progress has also occurred with medical technology. During my medical career, MRI scanners have advanced from creating crude but workable images of brain tumors to generating high-resolution scans displaying not just their anatomic extent, but also their internal chemical composition and the extent of functional disruption caused to the rest of the brain architecture. These advances allow doctors to plan surgery and radiation treatments in an extremely precise fashion to remove the tumor while preserving as much normal brain function as possible. As Clayton Cramer has observed, modern American medicine is much closer to the Star Trek “Sickbay” than doctors could have imagined a mere 20 years ago.

Raymond Kurzweil has generalized Moore’s Law as “The Law of Accelerating Returns,” arguing that technological progress overall follows a roughly exponential curve. This exponential curve is a natural reflection of the fact that today’s progress forms the base of tomorrow’s innovation. This create a virtuous cycle in which innovators continually build on each other’s work, adding to an ever-increasing fund of knowledge, which in turn allows for future innovations. When people are left free to innovate, the exponential gains they create are therefore akin to the exponential growth we see in our bank balances when we allow compound interest to operate over time.

However, such exponential gains are not automatic. Moore’s Law (and Kurzweil’s generalization) are not laws of nature. Instead, they presuppose a system of government that leaves innovators free to create. Conversely, a government that penalizes innovation could dramatically slow the pace of medical progress, leading to millions of preventable deaths. And this may be one of the worst long-range consequences of the recently passed ObamaCare health legislation.

One of the many new taxes imposed by ObamaCare is a 2.3% excise tax on medical device manufacturers. Although this may not seem like much, it could be devastating to small companies working with thin profit margins.

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