Obamacare Hampers Health Care Innovation

From 10,000 business ideas, 1,000 firms are founded, 100 receive venture capital, 20 go on to raise capital in an initial public offering, and two become market leaders.

Edmund Phelps, professor and Nobel laureate, in “Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change (Princeton University Press)

President Obama puts a great deal of emphasis on government innovation.    In his January State of the Union address,  he proposed 15 new “innovation institutes.” In July in Chattanooga, he upped the ante to 45 innovation institutes where government, businesses, and communities would work together to develop high-tech industries, presumably with government backing. In his January 2011 State of the Union talk,  his theme as “Can-Do Collectivism,” in which government would lead, people would follow, and jobs would be created.

These pronouncements show President Obama doesn’t truly understand innovation, free market capitalism, or America’s entrepreneurial culture.  He fails to grasp that government is poor at innovation.

As I noted in my book The Health Reform Maze (Greenbranch Publishing, 2011), government fails at innovation because:

·         It cannot manage failure.

·         It cannot abandon a project.

·         It is not gambling with its own money.

·         Its success is measured in good intentions, not results.

·         It cannot go out of business; it prints money to keep on going, and it is propped up by taxpayer money.

Obamacare is top-heavy with good intentions -  the moral imperative of health  care as a “right,”  “protection”  against catastrophic costs,  and, of course,  providing “affordable care.”

But, in the process, it is also loaded with adverse consequences.  It stifles grassroots innovation, especially among entrepreneurs with bright ideas,  with 27,000 pages of a law written in ambiguous legalese,  20,000 pages of new regulations, $50 billion of higher  taxes on individuals  and medical device companies,   $2000 penalties for businesses who hire 50 workers or more not covered by government-approved plans, and a pervasive uncertainties of a hastily written poorly thought- through health law that seems to modified daily.

Government bureaucrats and panels of government-appointed experts, simply  do not understand or recognize real innovation(Robert  Schiller. Why Innovation Is Still Capitalism’s Star, “ New York Times, August 18, 2013).  True innovation still resides in the hands and minds of visionary entrepreneurs.  Direct government involvement,  no matter how noble or well-intended,  suppresses free market capitalism and entrepreneurs who make the market tick and he economy grow.

Tweet:   Grassroots innovation,  not government-sponsored innovation institutions,  will create jobs and cause the American economy to flourish.