Hey, homo economicus, you looking for a good time? Then try a little bit of Mark Pauly’s Wussinomics: the state of competitive efficiency in private health insurance. I’m not kidding, this is a fun read. Some quotes:
- “I believe that, in theory, a competitive insurance market should lead to efficient levels of care and efficient rates of growth in medical spending for the great majority of Americans, who are not poor and not stupid.”
- “The contentious data on the rates of growth of private versus Medicare premiums shows at best equivalent growth for private premiums; private insurers have not been more successful than government in cost-containment.”
- “[C]ut the price, see what happens to quantity, and if it does not fall enough (or even does not fall), cut the price further.”
- “As an antidote to this kind of story of timidity in the face of the obvious, private insurers are always happy to recount their latest creative steps in redesigning insurance for cost containment. […] Without being a total wet blanket, as an honest observer I can say that more of these initiatives have failed than succeeded.”
- “What is even more troubling is that this history has not sunk in; instead new ideas (or retreads of old ideas) are offered as ‘evidence’ that a political goal of improving quality by controlling cost is within our grasp. Of course, the world needs cheerleaders, and it is hardly surprising that advocates pass by downsides and risks. But, since a new crop of politicians desperately wanting to avoid painful tradeoffs appears every few years, the attraction of magical thinking and doing the impossible continues not just to resonate but to distract policymakers from the hard choices.”
- “I think the failure so far to focus on cost reducing but slightly quality reducing innovation is a large share of the problem—at least as it applies to new technology.”
- “[A]part from varying the size of networks, plans have never systematically varied other dimensions of care, like the amount and form of new technology, and competed vigorously on that basis. Instead they waste their time trying to get people to exercise and eat less.”
- “Guaranteed renewability, group to individual conversion, and some decent high risk pools are all we need, plus the hope that exchanges if they happen will not make things worse.”
- “Given the general unpopularity and logical disconnect associated with measures that save on cost but irritate consumers, it may be no surprise that private insurers want Medicare to break trail—thus providing them a safe path as they follow along.”
- “I believe it is not outside the realm of human ingenuity to design a program with political and legal safe harbors, and (if things get bad enough) even get such a program into law. It will require a lot; politicians will have to say that it is all right for your insurer to mistreat you if that is what goes along with the low cost plan you voluntarily chose.”
- “We moderately well-off are still numerous enough that our preference drove the style of care, but the resulting cost increases, more or less uniform across the board, that took an affordable bite out of our income growth cut much more for lower income people and even caused some of them to drop out of the insurance system entirely and put their children on Medicaid or SCHIP. […] A fundamental solution, which I would favor if I knew how to bring it about, would be to alter the pattern of income growth going forward toward one with a more equal distribution of gains.”
For his forthrightness, I tip my hat to Pauly. Too few who favor more market solutions will admit that, to date, the private sector has disappointed as much or more than government. Too few of them will say that one of the reasons is that the private sector looks to government (Medicare) for CYA. Too few build into their reform proposals safe harbor for insurers to deny claims based on sanctioned evidence (in some way to be defined). And, clearly, it is not universally believed that we need a more equal distribution of the growth in incomes. Apart from the last point, do any political leaders say any of these things? If they do, it is both rare and obfuscated. Do you think Pauly speaks the truth here? Can you (we) handle the truth?
