Rethinking Healthcare

The medical-industrial complex in an age of reform

The medical-industrial complex in an age of reform

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The difference between the roughly 16% of GDP we pay for care and the 10% Canadians pay doesn't all go toward insurance company profits. Most of it runs through this medical-industrial complex.

Every great American city today is defined by its medical-industrial complex.

Take my own home in Atlanta.

During this decade my home doubled in value, and held that value, thanks to its proximity to Emory and the CDC (right). There are a lot of jobs there. It's a primary economic driver for the region.

Other great cities are similarly defined. Boston has the complex around Harvard and its medical school. Stanford is rapidly building its medical-industrial complex. UCLA drives Los Angeles. And so on.

The question for today is, will this continue to be the case in an era of health reform?

The innovation process works like this. A University (often private) does the basic research, helped by government, business and foundation grants. The hospital and medical education complex engineers this science into practical knowledge. Then the entrepreneurs swoop in, licensing the intellectual property and creating drugs or devices for the world market.

It's expensive, it's complex, and it's also unique. No other country combines a variety of public and private interests in quite this way.

It works in part because the entrepreneurs can quickly sell their wares throughout the U.S. market. We don't have centralized purchasing. Doctors, hospitals and the market are the gatekeepers. Practitioners are always looking for an edge against disease, and can justify even expensive treatments to insurance or government paymasters.

Other countries don't work that way. New treatments must prove themselves both medically and financially before they go into general use. This helps keep health care costs modest in those countries, as a percentage of their GDP.

The difference between the roughly 16% of GDP we pay for care and the 10% Canadians pay doesn't all go toward insurance company profits. Most of it runs through this medical-industrial complex.

So if the U.S. system becomes like those in other countries, under either government or insurance industry leadership, will this medical-industrial complex continue to thrive?

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Dana Blankenhorn

Contributing Editor

Contributing Editor Dana Blankenhorn has written for the Chicago Tribune, Advertising Age's "NetMarketing" supplement and founded the Interactive Age Daily for CMP Media. He holds degrees from Rice and Northwestern universities. He is based in Atlanta. Follow him on Twitter. Disclosure