I had high hopes when I began reading Isabel Sawhill of the Brooking Insitution’s proposal for a compromise on healthcare reform. They were soon to be dashed. She (and presumably the Brookings Institution) proposes a hybrid solution with both public and private components:
Democrats would have to accept some form of premium support for the elderly in return for Republicans accepting a public option for the non-elderly. Over time, individuals would then vote via their enrollment decisions on which option they liked better. The government would be forced to compete with the private sector on an equal footing. And the private sector would not be able to raise premiums without limit. Best of all, seniors and working-age Americans would be in the same system, leading to more fairness and greater efficiency for the system as a whole.
This strategy is hampered by a complete and utter lack of understanding of healthcare insurance and the sources of cost increases in the healthare system. First, healthcare insurance companies revenues rise as healthcare costs do. They have little or no incentive to control costs. Second, the majority of employer-provide healthcare insurance plans are in fact self-insurance. Insurance companies act only as administrators for these plans and in general receive a percentage of payouts as their compensation. No incentive there. Third, in every market healthcare insurance is an oligopoly. State regulations ensure that. There isn’t enough competition among the few providers to produce cost savings and precious little incentive to do so.
Why not cut to the chase and go directly single-payer? That’s where that train is heading.
Not that that would produce cost savings, either. A single-payer plan can control costs in the presence of the political will to do so. As evidence of the lack of such will I would submit the enactment of serial doc fixes. Time inconsistency, people.
If there’s one thing we should have learned from the last several years of furious thrashing over healthcare reform it is that not much will be done until the whole thing goes kablooey. That may be sooner than we think. Can the Fed continue to be the primary purchaser of Treasuries forever?