• Socialized medicine, here we come?

    David Dranove thinks so (h/t Avik Roy):

    There isn’t a public or private health insurer anywhere in the world that doesn’t directly intervene in the delivery of medical care. Socialized insurance necessarily leads to socialized medicine, and if the government controls well over half of the insurance sector through Medicare and Medicaid, and tightly regulates the rest, it is only inevitable that it will also seek to control how health care is bought and sold. And I don’t think it will make much difference whether it is Democrats or Republicans in control. The temptation to set the rules for 17 percent of the GDP is too great.

    Provided health care costs keep going up at high rates, I have little doubt Dranove is correct, in the long run. If private industry wants to maintain the the proportion of control it has over health insurance and health care it had better demonstrate it can do so without bankrupting families, businesses, and governments.

    In some sense, this is a matter of consumer preference. Health insurers were able to hold the line on health care prices, volume, and premiums in the mid-1990s via managed care. In time the restrictions they imposed were judged too onerous by consumers, as well as physicians. With the backlash, high health care inflation returned. Will consumer’s embrace what the private sector dishes up next: high-deductible plans coupled with health savings accounts? Perhaps, at least in the short run. But long term, I’m not sure higher and higher deductibles are going to be quietly accepted. There may be another private-sector idea after that. Time will tell what it is and whether it succeeds.

    Eventually, if private solutions seem to have failed, and failed again, the political pressure for an even fuller government solution may be great. If that’s what consumers want–if that’s what they essentially demonstrate by rejecting private-side alternatives–on what basis am I or is anyone to complain? I think private insurers and health care providers have at most two, maybe three, decades to be part of a solution. The clock is ticking.

    Later: The comments to this post are, so far, very good. If this subject interests you, please read them.

    • The 1970s was the period of “patient-driven” competition. Hospitals competed for patients and their physicians by offering high levels of (unnecessary) quality without regard to price. In response, along came “payer-driven” competition which worked well in harnessing costs as you mentioned until the bashlash. Now we are experimenting to various degrees with “consumer-driven” competition. If that doesn’t work, the only competition left may be “government-driven”.

    • If there is wisdom in markets, and surely there is, it must come from the large number of people involved in them. If there are too many variables for even a well meaning individual, or group of individuals, to sort through, the added up individual decisions of many people, a market, seem to come to the best possible decision.

      If you start with that as a (very) rough approximation of why markets work, shouldn’t we take heed when we see that every other first world health care system in the world has significant government intervention? From my POV, it looks as though the market of the world has looked at the problem of health care and decided that it needs pretty significant government input. Most seem to have rejected what I would consider true socialist, ie, directly government run health care. (Aside- Could we agree on what socialism means? Could we just make it a working definition and not some word used for pejorative purposes?)

      What I think I do see is that most countries have everyone in the same kind of system. They are all much, much more cost conscious than we are. The all have some method to control costs. I would think that people who reject technocratic interventions, would be amenable to the idea that all around the world, these appear to be the universal approach. There insistence upon trying to impose an untried system, based upon their own technocratic ideas, is concerning.


    • Steve,

      I always like this quote from Uwe Reinhardt ( “Health Care Woes of American Business: Reinhardt Responds.” Health Affairs, Spring 1990, 174-77). Hopefully I am not taking him totally out of context.

      “I have also learned after some twenty-five years in the United States that there are two things Americans just cannot seem to do, for reasons only an anthropologist can understand. First they cannot make a railroad run on time; second, they cannot legislate, let alone operate, a lean, streamlined, publicly financed human services system. They demonstrably cannot do it in education; they demonstrably cannot do it in jurisprudence; and they probably could not do it in health care either.”

    • Rex- Thx for that. I think there is some truth there. I sometimes need to stop and realize that just because the Germans or Swiss can do something does not mean we could. The point I sometimes make is that unions seem to function much better in most of Europe than they do here. Seems to be some cultural differences.


    • “and they probably could not do it in health care either.”

      Which is why both Medicare and the Veterans Administration are such miserable failures. Wait a minute…

    • I really like the point what Austin brought: “What explains health care spending? Health care costs certainly play a role. But we don’t pay costs. We pay prices. They’re different. Prices in health care can be very high, even when costs are (or could be) low.”
      Of course, the price is correlated with costs. The major ingredient of the costs is doctor’s compensation. In health care, consumer is getting service from doctor. Price for consumer is not the same as contractual price between doctor and insurer. The major part of doctor’s compensation comes from insurer. Don’t you think that more efficient model of providers’ compensation would be a very important tool to lower costs and price of health care?