The Incidental Economist

Thanks for an interesting an provocative discussion:

Primary Response:

My sense from listening to your conversation is that you were really asking which actor the government or private insurers administering third party payor mechanisms has the greatest latitude to ration care through a regime of price controls under the system of rules and incentives that prevails in the current market and political equilibrium.

Clearly the government wins that contest. Hands down. It’s not clear to me that this demonstrates anything other than the trivial proposition that the closer a given payor approaches monopoly/monopsony, the greater the capacity to cut payments to providers, care to patients, or both. Give a private operator the same pool of tax revenues, quasi-monopoly, and statutory power and it’s not clear that they wouldn’t be able to cut reimbursements as or more effectively than the government has.
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Quasi On-Topic Rambling:

It’s also worth pondering the more pertinent question what actual people would be willing to pay to extend their lives and mitigate their suffering under systems that minimized or eliminated the role of third party payors in determining what treatments to pursue and what to pay for them.

This isn’t terribly different than what we see in the drug pricing debate. Clearly governments wielding a given amount of market share and political power can drive drug prices lower than a fragmented array of private insurers ever could. Governments can clearly squeeze drug companies harder than private buyers. That’s one thing – claiming that you can take the lowest prices that state monopsonies can squeeze out of drug companies and globalize them without impacting the supply of new and existing drugs in the present and future in a way that will have no adverse impact on the supply of both new and existing drugs is quite another.

The same questions apply to claims that we can leave all of the existing variables that affect demand in place, or increase them, *and* universalize the lowest prices that governments have been able to impose on providers without there being any adverse effects on the supply of care available. It’s not at all clear to me that the longitudinal price-growth data can support such a claim.

If that’s not the point of such longitudinal comparisons, what is?