Sometimes I Feel Like a Piece of Bologna

Monday, May 11, 2009

Why We Can’t Afford National Health Insurance

Jeffrey H. Anderson and Investors Business Daily published one of the best articles I’ve read on the problems with national health insurance or Medicare for all. They explain the simple economics of a public payer in any situation, and particularly in health care, where normal competition doesn’t work. According to the article:

Health insurers don't provide a service, per se. They are middlemen or financiers. They contract with others — doctors, nurses, hospitals — who provide the actual service. In such a context, genuine private-public competition is impossible. For no one can match government's ability to dictate the prices and availability of services rendered by others.

In discussing the “Medicare for all” option, the article says, “More often the choice will be made by employers, who will decide whether they want to keep offering private insurance to their employees. To save money, many will choose to offer only the government-run plan, which should be called the "employer option" or perhaps the "government option for employers." By any name, it's an option for employers to force employees into government-run care.”

Because government is such a large contractor, it already pays only 81 cents for every dollar of service provided. Doctors, nurses and hospitals go without the difference or pass along the costs to private insurers or individuals. So government can fix prices, at little or no cost to itself.

The article offers three reasons why it’s bad, even if government can lower health care costs in this way:
First, Medicare pays less per procedure, but it doesn't pay less. What Medicare gains per procedure, it loses in poorly coordinated care, wasteful procedures, fraudulent claims and bureaucratic waste.

Despite paying only 81 cents on the dollar, Medicare's costs since 1970 have risen more than twice as fast as the costs of all other health care in America combined. Per patient, Medicare costs have risen 27% more than all other nationwide health care costs — 41% if you include the prescription drug benefit.

Medicare is far more expensive than privately run care, and it's leading us toward financial disaster.

Second, a government-run system would kill any chance at real reform. The core problem with American health care is that the patients aren't the payers. So providers and insurers don't cater to patients, and patients don't shop for value. Each element caters to whoever pays it: Providers cater to insurers (and the government); insurers cater to employers. Nobody caters to consumers.

A vibrant free market would aggressively cater to consumers, who in turn would shop for value — thereby making health care more consumer friendly, affordable and better. We'll never get there if the government takes over the insurance business. That will cement in place the core problem with today's system. We need a change, not another coat of cement.

Third, once government has run private insurance out of business, providers will no longer be able to shift costs to them. This will result in higher costs to taxpayers and lower wages for medical professionals, which will attract fewer people to the profession. If anyone doubts this, do they also doubt that higher pay attracts teachers?

Lines will form, care will be rationed and a two-tiered system will emerge: The very rich will pay for the care they want — whether here or abroad — out of their own pockets. The rest of us will have plenty of time, while we stand in line, to reflect on how nice it would be to have private insurance and the personal freedom it affords.

I don’t know about you, but any further government involvement in health care scares me to death.

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