Saturday, December 17, 2011

Managed Competition with Subsidies is not a Free Market in Health Care

Paul Krugman summarizes the leftist argument for socialized medicine in today's New York Times. He also cites a longer article by Ezra Klein purporting to prove that competition doesn't lower the cost of health care. Krugman's summary.
Patients by and large don’t have the information to evaluate medical treatments; in any case, they mainly buy insurance rather than medical care directly; and insurers profit not by providing the most cost-effective care, but by trying to insure people who won’t need care.

And it’s not as if market competition hasn’t been given a try; in this country it has been tried over and over, by politicians who won’t take no for an answer.

Ezra Klein cites any number of examples such as Medicare Advantage and Medicare Part D to show that the competition within those programs has not lowered costs.

These are misleading arguments that need rebuttal.
  • In a free society, why is it a goal to spend less on health care? If we have rising levels of discretionary income, why wouldn't we choose to spend more on improving our quality of life?
  • We conflate total costs with unit costs. An aging population is going to consume more health care, there is nothing to be done about the demographic curve. However, competition can reduce unit costs.
  • Even if people have to make decisions about medical providers under emergency conditions, they do not make decisions about insurance plans that way. True competition between plans is stifled by Obamacare and so many other regulations.
  • Even under emergency conditions, people make informed decisions about health care treatment. They can often decide which emergency room to visit and have information about who is best when they do so. During my last few emergency room visits, I arrived by private vehicle, in full possession of my faculties, as did over 90% of the other patients I saw there.
  • If we had people paying significant out of pocket expenses, and they had better choices in health care providers, then an Angie's List for doctor's would spring up. Krugman thinks the average person as both ignorant and stupid, unable to learn for themselves. When the chips are on the line, I find people to be just the opposite, researching treatments and providers extensively.
  • Competition has been slowly squeezed out of the market place ever since the introduction of Medicare and the insurance industry following all of Medicare's practices. It is a lie to say that any free market solution has been tried in the last three decades. Klein makes the classic leftist argument that when a quasi-competitive managed system that also involves government subsidies and regulation doesn't deliver cost savings, this is proof of the failure of free markets. It is not.

Until we decouple insurance from work and free up the insurance industry to provide plans with high deductibles and relatively high catastrophic caps, we are not going to get unit cost containment. Until the baby boomers leave the stage, we are going to see increases in health care costs, period.

1 comment:

  1. If we had people paying significant out of pocket expenses, and they had better choices in health care providers, then an Angie's List for doctor's would spring up.

    It already exists, several times,, even google maps. The last several doctors I found I did so by going to who my insurance covered and searching for information on them-- people put up reviews all over the place.