This in the final post 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), and the third with how government intervenes in both. This concluding post will address ways government can change its involvement, and thus its perspective, to the better for the governed.
As I discussed in Part 3, American governments (state and federal) and those governments to which they are most compared on health have broad-based intervention in both health care and health insurance (the former usually conflated with the latter). Contrary to what many think, the result has not been government eliminating the behaviors of health insurers, but actually adopting them. This and the resultant apathy for the state of health care supply have become America’s largest health care problems. As such, if governments are not willing (or not allowed by the electorate) to get out of the health insurance business, they need to change how they do it.
This brings me to my first recommendation: if the government must have a role in insurance provision, it should be as the insurer of last resort for risk, not income. At present, the criteria for government-provided insurance is age (Medicare) and income (Medicaid). One could argue that age is a decent proxy for risk; no such thing can be said for income. Indeed, it is the very confusion of risk and income in the politics of health insurance that makes it such a winner for Democrats politically, as wealthier but riskier Americans become more interested in a government backstop on this issue than they normally would. However, as both parties have voters who don’t use health risk as a partisan identifier, this issue ends up being highly problematic for everyone in terms of policy making reform of any kind more difficult. More importantly, the lack of a risk trigger gives the government the same incentives as private insurers – including the incentives that are less than desirable.
A risk-based government insurance trigger (perhaps as an expansion of Medicare and/or a replacement to Medicaid) would alleviate that by effectively stabilizing (albeit at a high level), the government’s costs, while at the same time stabilizing the private insurance market with less risky customers. As government would now know its “customers” are simply more likely to make claims, it can shift focus from attempting to reduce client claims to examining the health care market as a whole. In short, government can become government again (or at least what electorates have expected of government over the last century or so), providing a genuine safety net for health-risky Americans, while allowing the healthy poor the freedom of the private market (and, if they want them, usually better insurance policies).
Once government finally gives itself the chance to survey the health care market, it should notice very quickly that we need to address health care supply. Supply of doctors, nurses, and facilities should be in very discussion of economic regulations, immigration reform, education reform, etc. Of course (since this is my series), I would also scrap the restrictive Certificates of Need regimes that bottleneck providers in over two-thirds of our states (including the Commonwealth of Virginia).
By transforming the insurance safety net trigger to a risk-based criteria, governments can be more efficient in helping those who cannot help themselves, while at the same time stabilizing private health insurance. By addressing the increasing health care shortage (and in some cases, reversing their own mistakes), governments can ensure health care markets have lower prices, higher quality, and even greater incentives for innovation.
However, it would be best if government does not “insure everyone,” despite support for that inside the US and examples of it outside the US. For history as shown us that a government which insurers everyone acts like everyone’s insurer – and the 21st century mandates given to governments by their electorates is far, far broader than that…
…including in the markets of health.