This post is the third in a series on the health care and health insurance markets; the first post dealt with the characteristics of the health care market(s), the second with the health insurance market(s). This post addresses government interventions in both.
When addressing the markets of health from a policy perspective, many on the left blithely assume greater government involvement will lead to healthier Americans. Most on the right take the opposite view. Even this argument, however, is limited by certain assumptions that, in truth, are at least deserving of serious question.
The first problem is that both sides tend to conflate and confuse the two markets. Partially that is due to observing Great Britain and Canada, which appeared nationalized both health care and health insurance in the 20th century. Much of the rest of the world chose to partially nationalize health insurance in some way (and indeed, even the aforementioned nations have private insurance in certain areas), but not health care. Moreover, the nations most inclined to government-monopoly systems (usually our Five Eyes Partners) also have federated political systems by which health policy (and funding) is set at the sub-national level. That is to say, the “single payer” system so desperately desired by many on the left does not actually exist. Of course, the health insurance delineation between government and the market that I prefer doesn’t exist anywhere either, but that’s for the concluding post.
For the most part, the arguments within health care are driven almost entirely by the concept of managing health care demand: how it can be curtailed (or whether it should be), how to reorient it toward “favorable outcomes,” etc. Far too little is discussed about health care supply. Sadly, the Keynesian influence on macroeconomics (where Aggregate Demand was considered the only factor of import for nearly 50 years) has spilled over into this microeconomic discussion. Moreover, because increasing health care supply would likely not reduce what the government currently spends on health care and health insurance, it is less interesting to policymakers that whatever can get those expenditures down.
This bias hides something about the health markets that many in the left would like to forget: namely, profit maximization doesn’t go away when the government is the maximizer. The pressures on health insurers I discussed in Part II is just as relevant to the government when it is a general insurer (as it is now with Medicaid and, to an extent, Medicare, and as many on the left would wish it to be under “single payer.” Contrary to what many might think, mandating a profit ceiling of zero does little to change this fact. Maximizing profits and minimizing losses are the same actions; only the circumstances around the actions gives them the aforementioned labels. Any elected official, therefore, who talks about how to “make health care more efficient” or “bending the cost curve” is just as focused on the “bottom line” as an insurance CEO.
That also means insurers don’t stop intervening in health care decisions simply because the government becomes the insurer. In places where near-government-monopoly insurance is de riguer (Canada and Great Britain) arguments about what the government should and shouldn’t cover continue to rage. Ironically enough, citizens appear to be much more worried about what insurance covers when they are the de facto shareholders for the insurer. Politically, that makes some sense, but from an economic perspective, it is painfully maddening.
As such, one could say the government(s) act in very much the same way a major private insurer would: focusing on how to get Americans to reduce health care demand while paying no attention to supply – or worse, at the state level, actually restricting health care supply to keep overall spending down (the state purpose of Certificate of Public Need regimes).
The problem with this should be obvious: American governments have more responsibilities than the health insurance roles they have carved out for themselves. In their zeal to minimize losses, they have either ignored or exacerbated health care supply problems, leading to higher prices and lower quality. Both of which are deeply damaging to the American people, yet neither of which show up in the government’s version of an Income Statement (the budget).
So how can our governments get out of the health insurer mentality while still addressing the anxieties of the American people on health care? I’ll have my answer in the next, and series-ending, post.