The "Public Option" for Healthcare and Innovation

In yet another spot-on piece about potential huge mistakes in healthcare reform, Megan McArdle addresses one of the more salient arguments: what will be the impact on medical innovation?

Now, maybe government institutions could be made to produce innovations; I certainly think it's worth trying Dean Baker's suggestion that we should let the government try to set up an alternate scheme for drug discovery. Prizes also seem promising. But I want to see them work first, not after we've permanently broken the system. The one industry where the government is the sole buyer, defense, does not have an encouraging record of cost-effective, innovative procurement

...why don't you tell some person who has a terminal condition that sorry, we can't afford to find a cure for their disease? There are no particularly happy choices here. The way I look at it, one hundred percent of the population is going to die of something that we can't currently cure, but might in the future . . . plus the population of the rest of the world, plus every future generation. If you worry about global warming, you should worry at least as hard about medical innovation.

Putting the question in terms of the extreme case is still illustrative: being able to afford all healthcare now at the expense of stopping all healthcare improvements later is not a trade most Americans would make. And we're clearly not even able to afford all healthcare now.