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Delivering Health
Insurance Companies Aren't the Ones Blocking Reforms

Some of Obamacare’s main defenders are starting to look in the right places for real health care reform. In a great column diagnosing what the single-payer pivot gets wrong about insurance, Ezra Klein notes that it’s not the diversity of insurers on its own that causes high costs in the United States. Most European countries with more nationalized health care systems, after all, don’t have just one payer. Rather, it’s that, relative to health care providers, insurance companies are too weak in the the U.S. system. The power of hospitals and providers allows those groups to block reforms that could help bring costs down, especially reforms to service delivery:

“Single payer isn’t a panacea,” said Uwe Reinhardt, a health economist at Princeton University. “The magic they have is setting rates. But neither Medicare nor Canada has done anything innovative on the delivery side. Taiwan is trying a little bit but not a whole lot. By and large they just pay bills.”

It’s health-care providers—not insurers—who have too much power in the U.S. system. As a result, they have the most to lose if health-care prices fall. But, as is often the case, political power flows in part from popularity.

We have no ideological objection to a single payer system. In an ideal world, where every technological development capable of making care cheaper and more efficient had been realized, single payer might make a lot of sense. But we don’t live in that world.

For the world we do live in, we need the kind of delivery-side innovations that, according to Reinhardt, single-payer systems have failed to create. The U.S. health care system fails on both access and cost, but trying to expand access without bringing down costs first is a self-defeating exercise.

Right now we need more than ever a determined focus on cost. As Ezra reminds us, this has more to do with innovating on delivery than with consolidating our payment mechanisms.

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  • qet

    Klein insists that “hundreds or even thousands” of private insurers can be the payors, but that the government must directly set rates. All that does is turn the insurers into quasi-state entities and is effectively single payor where the one payor has many branch offices across the country. The Left always thinks that a problem can be solved by fiscal fiat: raise the minimum wage, for instance, or cap prices, as in health care. Doctors and hospitals are for-profit enterprises who privilege their own financial interests, just like the rest of us. Attempting to grind them under the heel of State will eventually turn them into apathetic underperforming providers and we will have a situation just like what the UK has with the NHS. The “middle class” of health care will disappear just like the economic middle class is disappearing now.

  • Kavanna

    Health care costs need to be brought down. There are two ways to reduce the cost of anything: price controls, then putting up with all the side effects (irrational shortages and gluts, black markets, widespread contempt for the law); or free price competition, where the pressure to maximize welfare leads to everyone trying to keep their costs under control.

    Insurance companies are among the big winners of ObamaCare; that was by design, not an accident. The administration and Congressional staffers who worked on ObamaCare later left government to work for … the insurance industry.

    Ezra Klein is an idiot.

  • Anthony

    The selling of health care (pharmaceutical industry 19.9% ROR; medical products and equipment industry 16.3 ROR; hospitals and doctors $$$) remains public policy issue absent of focus.

  • free_agent

    You say that Canada hasn’t done anything to innovate on delivery, but it *has* cut prices by 50% relative to the US. Which means that costs *are* lower, mostly due to providers (that is, the actual people doing the work) getting paid less.

    I would like to think that a robust market for health care would bring down costs, as robust markets have for many things. But in all the cases where markets have worked, customers have been willing to walk away rather than pay the asked price. Once we decide that morally even poor people can get treatments that are expensive to provide, it’s difficult to rein in prices, because providers don’t have to be price-competitive.

  • SisyphusRolls

    Left unsaid here is how much the AMA and hospital associations, working with states, have blocked increases in supply in health care by preventing new medical schools, requiring certificates of need for new diagnostic or hospital facilities, etc. If we could get rid of that, along with stopping the AMA’s direct involvement in setting procedure pricing in Medicare (from which Medicaid and most insurers take their direction), we could actually have something approaching a real market in health care. Even with some form of ACA, that might be an improvement.

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