About this Author
DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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July 30, 2009

Health Care Reform - Really?

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Posted by Derek

I haven't written about the various health care reform packages that are being hammered out and hammered through the various parts of Congress. That's partly because I began to think fairly early on in the process that we weren't actually going to see something happen as quickly as the administration wanted, which meant that there were still plenty of twists and turns left. I still think that's true - in fact, I have no idea when a final bill will ever get Frankensteined together for a vote, and no one else seems to have a good idea, either.

And since the main focus of this blog is pharmaceutical research, the first question I have to deal with is what effect such a bill will have on what I (and many of the readers here) do for a living. Absent a good idea of what the legislation will really look like, that's impossible to do in detail. But I can paint some broad strokes at this point, and they're probably not going to come as much of a surprise: I don't like what I see.

On the macro level, I don't like the administration's rhetoric on this issue. I do not believe that health care costs are crippling our economy, and the implication that they're tied to our current economic downturn seems specious. (And yes, that argument has been made, and more than once). Such an any-weapon-to-hand approach seems a bit different from what many people may have thought that they were voting for in the last election.

But I didn't vote for Obama, although I certainly wasn't crazy about the McCain-Palin ticket, either. My fears (expressed here) that he might turn out to be a zealous world-changing reformer have been amply confirmed. What do I have against zealous world-changing reformers, you ask? Why, I fear that the world is trickier than they are, for one thing. And too many of these people seem to come across as "If you people would just have enough sense to see that I'm doing this for your own good" types. At the rate we're going, that'll be the key phrase in a presidential speech right after Labor Day. (Mickey Kaus has been pointing out for some time now that this eat-your-peas-for-the-common-good approach is not doing the administration any favors).

The only big changes I'm in the mood for, generally speaking, are ones that give people more control over their own destiny, and if that's what we're seeing here, I've missed it. (I'm not alone). I guess that I just don't believe that systems this large and this complex are subject to wholesale intervention by the Wise and the Good. I worry that the Wise and Good will, in fact, decide that if they're truly going to control costs that they're going to ration health care in ways that people aren't necessarily expecting. Part of that rationing may well have to be either de facto (or flat-out de jure) price controls on pharmaceuticals and other parts of the system - and if applied thoroughly enough, these will be an excellent way of creating shortages of just the things that are being controlled, in the same way that price controls have always functioned. Some of those shortages will be silent ones: the things we don't discover.

Alternatively, we could end up with a Great Big Plan that doesn't really attempt to cut costs, or defers those cost savings into the glorious future. It's worth considering that, as far as I can see, every single attempt to run a large state-sponsored heath plan has ended up costing far, far more than even the most pessimistic initial estimates. And this time will be different. . . how, exactly?

And that leads us to the sort of bill that I think we're most likely to get: one that doesn't satisfy the biggest advocates of sweeping health care reform, since it's had to abandon the big proposals for the sake of political reality, but one that at the same time spends lots and lots more money, with no clear plan of how to raise these funds, all of that again for the sake of political reality. One, in short, that gives all the politicians involved a chance to pin "I Passed Health Care Reform!" buttons on their jackets while pissing off everyone who bothers to look at the thing closely, and one that commits us to spending oceans of money to accomplish not very much.

Perhaps I'm just in a bad mood. But that looks like what we're heading for.

Comments (72) + TrackBacks (0) | Category: Current Events | Drug Prices | Regulatory Affairs


1. Old Timer on July 30, 2009 9:29 AM writes...

I normally find myself thinking that your posts are right on the mark and incredibly insightful. This post, however, has me scratching my head. Although I am rather worried about a "sweeping reform" that simply bloats another government program, I wonder about the data you examine to conclude health care costs aren't out of control (although to be fair, you said "crippling our economy"). I am also in favor of giving people more control over their own destiny, but the current healthcare system is so far from that it's mind boggling. I don't understand why people don't discuss the conflict of interest inherent in having a for-profit insurance company dictate the healthcare for which you qualify. I had the misfortune of needing a minor surgery while in graduate school, and even with my wonderful University insurance program, I was wiped out for 1.5 years just for my 10% (or was it 20%?) copay. If my copay was any higher, I would have had to drop out of grad school to pay my medical bills - at 23 years old. Most people aren't so lucky.
I don't expect things to change overnight, but I see a system so overly bloated right now, it needs to be tied down and given gastric bypass surgery.

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2. RB Woodweird on July 30, 2009 9:43 AM writes...

This just in: Us upper-middle-class white people with company-paid health care whose salaries depend more-or-less on the current system are happy with the current system, see no need for change.

Turn a hose on the servers now, fellas - health care reform comments are incoming!

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3. metaphysician on July 30, 2009 10:20 AM writes...

Problem is, it ain't price controls the system needs. The worst offenders as far as high medical costs are: drug R&D; and malpractice lawsuits.

What the system really needs to save money, is extended patent life and tort reform. Which we aren't going to see anytime soon, certainly not under this administration.

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4. exAZ on July 30, 2009 10:22 AM writes...

For anything this big and complex the Law of Unintended Consequences always applies, but I don't share your concerns about rationing. The fact is, in the US, health care is already rationed, first by income and employment status, and second by the insurance companies that are required by their stockholders to maximize their profits.

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5. Palin by Comparison on July 30, 2009 10:29 AM writes...

I think you should stick to science- your biases are showing, and they aren't pretty.

Everyone that I know who is a health care provider feels that our current system is irretrievably wrecked- doing nothing is what got us to this point. Rather than simply say "I don't like the current plan" how about proposing an alternative? It's so easy to criticize, yet in the absence of a better idea (or ANY idea) it sounds to me that you're defending the status quo.

There are many better blogs engaged in this debate, and I think you've made a mistake in posting this entry.

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6. Sili on July 30, 2009 10:33 AM writes...

Well, I agree that what you'll get will be a dog's dinner of a solution.

As a furriner I'm overjoyed not to see McPalin anywhere near influence, but I'm not at all pleased with your Democrats for that reason. The least of two evils.

I'm just glad I don't have to suffer your system. Sweeping reform seems in order. I cannot for the life of me understand why anyone would accept a system where insurers can profit off sick people.

Of course there'll be a need for rationing, but as in any other situation these days, no├Âne will accept the blame. Risk-averse cowards, the lot of them - I have the exact same loathing response to the current manned spaceflight programme. (It's so easy to complain when one is not directly affected, of course.)

Good luck. You're screwed.

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7. Biobug on July 30, 2009 10:43 AM writes...

I agree completely with your sense that the administration is fabricating this healthcare crises. data shows that while the number of uninsured (45.7M) keeps going up over time, the proportion of the population remains fairly stable around 14-15%. If you exclude non-citizens (10M uninsured, or a 50% proportion) the rate drops to about 10-11%. This is about the poverty level as well.

So in other words, citizens in poverty don't have health insurance. Why isn't there a poverty crises instead of a healthcare one? Or a provide treatment for non-citzens, mostly hispanic people crises? Perhaps those two are less politically viable...

Furthermore, there are 9M uninsured who are 18 to 24. Many of these people chose to not have insurance because they don't go to the doctor, as I did for most of this period of my life. All the current bills being considered mandate these people purchase insurance or pay a penalty. Talk about decreasing liberty while giving more money to insurance companies, and (thankfully) our industry.

Obama's team should expand the phrase to "Never waste a good crises, and don't be afraid to create one."

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8. darwin` on July 30, 2009 10:43 AM writes...

C'mon everyone. Don't sweat the small stuff.

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9. goatleggedfellow on July 30, 2009 11:10 AM writes...

@ RB Woodweird- Our exorbitant health plans that we don't see and can't change and tie us to our employers are part of the problem. One of the aspects of the Wyden plan (the only part I know of, admittedly) gets rid of the employer plans and forces the companies to return the expenditure directly back to us so we can choose our own plans. I don't know about your experience in the industry, but I'm tired of losing my health care every time a company collapses.

@ Biobug- Please leave the illegal immigrant debate out of this. We pay for their health care and we always will. We can at least divert it to cheap, preventive care instead of the emergency room.

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10. eugene on July 30, 2009 11:12 AM writes...

Well, Switzerland had a similar system to the US, and changed to a public healthcare system a little while ago. It was a very narrow decision but almost everyone is happy with the outcome now. It doesn't seem to have affected the Swiss pharma giants, but you can always argue that they can make up most of the lost revenue in the US I suppose.

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11. Joel Blow on July 30, 2009 11:23 AM writes...

"every single attempt to run a large state-sponsored heath plan has ended up costing far, far more than even the most pessimistic initial estimates."

I agree, except for the "state-sponsored" part. The current approach must also be included as failed.

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12. eugene on July 30, 2009 11:25 AM writes...

A really big problem with the US healthcare is that a lot of people are afraid to lose their crappy job simply because they will lose the healthcare. But even with their company healthcare, many are screwed by the copay so badly, that it doesn't really matter anymore.

Get rid of that, and you could stimulate the economy in untold ways as more will be able to start their own business or demand a bigger wage since they are no longer afraid to change health plans where a pre-existing condition will not be covered. There is a lot of underestimation of this phenomenon. Many, many Americans that I've met are scared to death of losing their health coverage and it creates a serious depression to the economy and the entire society when that number gets into the higher 'tens of millions'.

Being afraid to take risks due to fear of going bankrupt from a simple broken leg is a terrible way to live. Strangely, when I didn't have any medical insurance, because I couldn't afford it anyways and I was in between jobs for a while, I wasn't really afraid anymore. The choice was out of my hands. Still, I never did break my leg (but I didn't ride my bike as often).

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13. Hap on July 30, 2009 11:25 AM writes...

1) The costs of every other state-sponsored health plan are substantially lower than ours (even Canada's, who was running second by a decent margin), and in most cases, they get better outcomes (longer average lifespan, lower infant mortality, etc.). Oh, and other places are likely a more comprehensive public health network as a side benefit - part of what made TB and AIDS problems in the first place was the lack of such.

2) Individual/family health care outside of work is effectively unaffordable - this would seem to imply that either they won't get care (until too late, at which point we lose either their economic production or the costs of fixing them, or both) or we'll pay for it anyway, and more (ER care isn't exactly the cheapest of all care after all). Employers who do have to pay the costs are trying to cut them, and are taking burdens from those unwilling to pay for health care - thus making them less competitive. That guarantees a race to the bottom, with employers dumping health care, and the federal and state governments bearing the costs, in the most expensive way possible, and with bad outcomes to boot (because care at that point is probably less likely to work than earlier care would have). This seems like a problem to me.

3) Health is something people can't live or produce much without, its outcomes are subject to chance, and (intentionally or not) providers' effectiveness is hard to measure - these all seem to unhinge the market mechanisms that would moderate prices, or even make the current system sustainable. In addition, the AMA effectively rations doctors (limitations on med school admissions), so the supply of care is guaranteed to be far less than the demand (which, as noted above, is unlikely to be self-limiting). If you can't comparatively price care (or evaluate its quality), can't live without what's being sold, and always have too little, how is the market going to solve any of those issues? (well, other than "You're poor. Sorry. You're going to die, soon.")

I don't like rationing (and more likely, the impositions on activities that seem to be in the offering), but as someone else put it, they already are (by income and job status) - the question would be can the government do it better and more fairly than the insurance companies? My lack of faith in insurance companies is still significantly greater than my lack of faith in government at this point. YMMV.

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14. John D. Froelich on July 30, 2009 11:36 AM writes...

All thru this, Obama has been like the high-pressure salesman of a shoddy product. He wanted more and more speed, DON'T BOTHER TO READ THE FINE PRINT1 Everything will be alright BECAUSE I SAY SO.!

This does not look like a good deal.

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15. John D. Froelich on July 30, 2009 11:36 AM writes...

All thru this, Obama has been like the high-pressure salesman of a shoddy product. He wanted more and more speed, DON'T BOTHER TO READ THE FINE PRINT1 Everything will be alright BECAUSE I SAY SO.!

This does not look like a good deal.

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16. Hap on July 30, 2009 11:51 AM writes...

That may be the best argument against Obama's plans - I mean that sales style worked out so well from 2001-2009...

I don't think that's what you meant, though.

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17. barry on July 30, 2009 11:53 AM writes...

Americans currently pay more for "healthcare" than anyone ever has, and the fraction of our GNP keeps growing. For this, we don't get the world's best longevity, or infant mortality, or standard of health. According to the AMA, we now spend 2/3 of our "healthcare" dollars on prolonging the last six weeks of dying, rather than on the health of the living. We need to put our money where our values are. It is unlikely that a system run for the profit of the Insurance companies and their shareholders will do this.

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18. pEvans on July 30, 2009 12:11 PM writes... and then skewering those fools who want to change things--thought I had the wrong blog. What's next? (Suggestion: I can haz adamantane)

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19. Belen on July 30, 2009 12:26 PM writes...

I really like the chemistry related posts on this blog, but this one is way off the mark. I don't understand how a system that denies people the care they need just to pay more money to executives and stockholders can ever work.

@ Biobug- My medical insurance lapsed while I was in college. Like you said I was 18-24. I ended up slipping on some ice and breaking my arm. Needless to say the bills for the emergency room visit alone were astronomical. I was in college! how was I supposed to pay them off? TA an extra class? Please don't talk about how young people never get sick and don't need coverage. You never think it will happen to you until it does.

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20. Biobug on July 30, 2009 12:33 PM writes...

@ Goatlegged... interesting jump assuming that non-citizens refers to illegal immigrants, when an estimated 60% of non-citzens living in the US are here legally on work / education visas. My point was how the administration is skewing the numbers, always talking about the number of uninsured growing, but never saying the percent has been stable for over 20 years. Talking about 45 million uninsured, which includes many people who don't want to be insured. Other things like that.

Also, look into the outcome measures that 'prove' we have worse care. The most commonly used are infant mortality and life span. You'll see this data is a very poor reflection of reality as well.

I agree entirely lets move people to preventative care. How about with a concentrated program for a group of people where HALF don't have any insurance? Crafting a program for 10 million people who need help is probably easier than one for 300 million many of whom don't want it.

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21. FormerMolecModeler on July 30, 2009 12:47 PM writes...

The most common reason for filing bankruptcy is medical bills. I can't think of any other country where that is even a vague possibility. Maybe you can enlighten us why that is a reasonable outcome Derek.

Your philosophy appears to be, and it is shared by many others, I got mine to hell with you.

Let's say you get fired in the next year, and are unable to find a position (they'll just replace you with a freshly minted PhD). Will you be able to pay your COBRA premiums? Suppose then you or someone in your family suffers a catastrophic illness. How will you pay your medical bills? Really, I am curious what you would do in such a situation.

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22. molecular architect on July 30, 2009 12:48 PM writes...

I share your concerns that the proposed reforms are too expensive but the current system truly is broken. If you have the unfortunate opportunity, as I did, to join the ranks of the uninsured you will learn just how bad the current system is.

I lost my job when my mid-sized pharma company folded. For 19 months, I applied for literally hundreds of chemistry and non-chemistry jobs. I learned just how unmarketable a science PhD is in the current economy. No matter that I had a good publication/patent record, had contributed to drugs in clinical testing, and had worked my way up to director.

I took advantage of my COBRA benefits to maintain my heath insurance. This was almost prohibitively expensive, consuming over one-third of my unemployment benefits. I looked for alternatives and was prepared to dig into my retirement savings to pay for it. To my dismay, I could not buy insurance. I was 47, in excellent health, with no preexisting conditions. I exercised regularly, walked over 50 miles each week, backpacked, kayaked, and other exercise on a regular basis. All of the insurance companies I checked with had the almost identical six questions on their application form. The "sin" that disqualified me from coverage - I had taken prescription medicine at least once during the previous 6 months. They didn't even ask what the prescription was, how long I took it, or anything else. The simple fact is insurance companies do not want to insure ANYONE over 45.

Incidently, the group "health insurance" plan offered by the American Chemical Society is a joke. You can't get it unless you're young and healthy.

I finally landed my current position and only had to go without any coverage for 6 weeks. Fortunately, I had no accident or other health problem which could have easily pushed me into bankruptcy.

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23. molecular architect on July 30, 2009 1:03 PM writes...

As to the claims that "government bureaucrats" will RATION health care - "corporate bureaucrats" ALREADY DO! Insurance companies employ medical and dental "experts" to review claims, not with the goal of providing the best care but with the goal of maximizing profits.

I received a personal introduction to this recently. I have crowns on my two front teeth due to an accident in my youth. Recently, one of these crowns developed a crack. In fact, a piece of the crown broke free and had to be glued back into place as a temporary repair. My dentist submitted the claim to the insurance company for pre-approval.

Should have been a slam-dunk, yes? The crown was severely and obviously damaged. Well, the experts at the insurance company refused saying that the tooth structure was not at risk. Two appeals from my dentist, with photos to document the poor shape of the crown resulted in REFUSED.

Finally, after I wrote a nasty letter questioning the dental knowledge of their "experts", it was approved. More than 7 months since the original application. Of course, there has been no letter with an explanation of why the claim was denied originally.

Ever wonder who employs the MDs and DDSs that graduate in the bottom 2% of their class?

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24. molecular architect on July 30, 2009 1:09 PM writes...

#6: That's a great link you posted. A well presented case for why we need reform and rationing of health care based on a cost/benefit analysis. Presented by a surgeon who stands to lose money if we maintain the status quo.

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25. Hap on July 30, 2009 1:16 PM writes...

1) I had the same experience - I would have figured that dental insurance company wouldn't have a preferred provider list with people who don't provide the care you are willing to pay for (metal fillings vs. plastic), right? I guess that was optimistic. Of course, the capper was that the filling broke a year later, requiring a root canal.

2) I think the problem with a limited plan covering only those who need it is not only doesn't it get politicians votes ("more money for welfare"), but there is the temptation for employers and insurance companies to push their undesirable and expensive employees/customers onto such a network. Limited systems will get only the most expensive patients, and the costs will probably be more unpredictable - even though a comprehensive system would be massively expensive, the costs would be spread out more evenly and could be estimated with greater confidence.

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26. Aspirin on July 30, 2009 1:30 PM writes...

If only you brought the same keen insight to politics that you bring to science (to be fair you do admit you don't like political blogging). Health care in the system is clearly messed up and while a completely federal healthcare program is not going to help, people must be able to get free or cheap healthcare for minor ailments without being insured. Companies cannot declare virtually non-existing trivial problems as pre-existing conditions; even die-hard conservatives agree with this. And insurance plans must be applicable to a broader range of doctors and clinics; one must not need to travel 40 miles to look for a doctor included in his or her plan.

Such goals are no socialist utopian dreams; they simply reflect what any modern civilized country should be able to do for its citizens.

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27. Anonymous on July 30, 2009 1:31 PM writes...

What's up Derek, I didnt see any such rants when Bush decided to start a war which will probably end up costing $3 trillion (after factoring in life time medical costs for returning veterans). Health care reform appears cheaper in comparisona nd doesnt involve killing tens of thousands of people.

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28. goatleggedfellow on July 30, 2009 1:32 PM writes...

@Biobug- Fair point on the non-citizens. I shouldn't have lumped you in with some of the other arguments I've been hearing.

My understanding of the uninsured-by-choice, though, is that we still help them when accidents happen. As we can't exactly let them die, I'd rather see a car insurance-style mandate. If we could easily shop around for our coverage, we'd see a lot of improvements and competition.

In the end, though, I think we're going to see a fundamentally flawed plan that won't get fixed for 8-12 years.

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29. molecular architect on July 30, 2009 1:40 PM writes...

I worked in the pharmceutical/biotech industry for 20+ years. . I've run drug discovery/development projects and seen first-hand the costs and unpredictable difficulties involved. I know that industry is better suited for drug development than either academia or government and I firmly believe that these companies have the right to a reasonable return on this investment.

All that being said, these efforts stand on the basic scientific discoveries made in academic labs and funded, for the most part, by the government with our tax dollars. All taxpayers help support this research enterprise and should therefore benefit from it, not just those who have good insurance or fat bank accounts.

This doesn't mean we should provide unlimited health care to everyone. It does mean that, as a society, we need to reach agreement on what constitutes reasonable access to basic care and make it happen.

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30. drcharles on July 30, 2009 1:41 PM writes...

This problem of health care delivery and reform is so massive and complex that it makes the financial system problems look easy in comparison. I've been fairly passive in following the proposals, and I share your overall sense of unease.
If i were in charge I would raze the whole thing and build another based on core principles such as evidence-based medicine, health care courts to reduce defensive medicine and reinforce universal standards of care, emphasis on covering everyone, emphasis on medical home models and preventative care, reestablishing incentives to practice primary care, reigning in consumerized medicine and the practitioners who profit from their own excessive procedures, rewarding patient compliance, and destroying systems that result in the CEO of United Health Care making in excess of $100,000,000 per year.

That would be a good start.

I would be impeached, though.

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31. molecular architect on July 30, 2009 2:34 PM writes...


Well said. I for one would vote against your impeachment!

There are too many players more interested in preserving their profits than in providing good healthcare and too many politicians (on both sides of the aisle) playing to their respective bases.

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32. Karen on July 30, 2009 2:36 PM writes...

Last year, I was laid off from my pharma job. Unfortunately, the timing was really bad - six weeks later I was diagnosed with cancer. I had never been sick before, so it came as a huge shock. But the bigger issue was how to pay for treatment. Thankfully I managed to keep my COBRA coverage, by running up my credit cards, but it was a constant struggle. Just in time, I managed to get another job, and I'm now covered by employer insurance.

I ended up leaving pharma and getting a government job, mostly because of the insurance issue. I'm too afraid to work for a biotech or take any kind of career risk, because I could lose my insurance, and with my health history, I'll never be able to qualify for it again. I know a lot of other people who feel "locked" into their jobs and aren't willing to take risks in starting a new company or working for a startup, just because they need employer health insurance. That has to be stifling innovation too.

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33. Bored on July 30, 2009 2:39 PM writes...

Our nation is under some kind of bizarre trance. It in no way resembles the country I knew even 5 years ago. We are all being told that green is blue, and believing it! Come on people, we are scientists! Any objective person can see that Obama is a perfect example of how "A little knowledge can be a dangerous thing." The guy spent 150 days in the Senate, and now he has the knowledge to fix every problem under the sun? Like Derek, I'm a libertarian. We are all giving up freedom for the sake of security, and we are on an extraordinarily dangerous path. This healthcare nonsense is just one more example. The lack of objectivity in our culture today is breathtaking.

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34. hsr0601 on July 30, 2009 3:06 PM writes...

According to the CBS/New York Times poll, survey respondents get nervous about the low quality after the reform.

In case you are a doctor, and your pay is dependent upon your patient's outcome, you will more likely strive to prescribe the best medicine for your patient, let alone avoiding unnecessary cares, and hope your patient will feel better as quickly as possible.

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35. hsr0601 on July 30, 2009 3:14 PM writes...

I share the opinion that only a strong public option will be capable of getting the premium inflation under control.

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