Thursday, April 3, 2008

History at the Atlantic starts in the 1950s

From the Atlantic, blogger J. Goodrich asks: "Haven't we been injecting competition into the health insurance markets for a very long time?" From the tone of the question, one would presume that top-down government programs have been around since the dawn of time, and it's up to free market radicals ("conservatives" in her parlance, just in case you were under the mistaken impression that there was no Manichaeistic Democrat-Republican dichotomy to the world) to create markets through regulation. Goodrich seems to be under the impression that time started in the latter half of the 20th century with intensely regulated physicians and health insurance plans.

In the next sentence, she declares emphatically: "Even the establishment of the government Medicare and Medicaid programs in the 1960's had a pro-competitive edge, because it removed from the commercial markets the most expensive and the poorest paying cases, leaving them with the most lucrative consumers to insure." Um, no, not quite. Removing an entire class of patients from the market means that there is no incentive to innovate with the services that they provide to that quite-needy market, and thus that entire class of patients are left behind with regards to innovation. Those who don't have as serious of ailments also don't get the benefit of increased medical productivity that would come from serving those markets. As a result, if you have a serious condition, don't even think of trying to pay for it without some government-subsidized insurance, because it will likely cost you thousands per month. If the federal government took over the manufacture of servers and mainframe computers, would the market for PCs be more competitive?

She then says, "The Health Maintenance Organization movement of the 1970's was another injection of that competitive hormone into the insurance markets in the form of prepaid group plans which combined insurance with the provision of care." Again, not quite! HMOs are a reaction to government mandates which artificially limit the supply of doctors, and limit the type of care they are allowed to offer. We're stuck with insurance for something that insurance doesn't usually cover – it's not like people expect they'll never get sick! Insurance is usually there for catastrophic, but unlikely events. What are the chances that you'll never have to see a doctor? Do most people just presume that they'll die healthy at the age of 35?

"The truth is that not all competition is helpful to consumers." Well, definitely not pseudo-competition. From what I understand, about half of all healthcare dollars in the US are spent by government programs – someone remind me, can you have a competitive market with a state-imposed monopsony? Before the cartelization of medical services by the AMA and the like (which prompted federal and state governments to take over when that proved to be a not-so-commodious arrangement), health insurance was widely and cheaply available from mutual aid societies. While I agree with the author that McCain's pseudo-libertarian plan will not work, we disagree in that I think it's pseudo-libertarian, and she takes it as given that his plan is the best that laissez-faire can do. If Goodrich is looking for the golden area before state control in medicine, she would do well to turn the clock back to before the government took over the provision of medical services.

Edit: In reading J. Goodrich's own blog, I find out that I am correct, and that she believes that the world is orders of magnitude younger than do Young Earth Creationists: "Health care markets have never been allowed to operate without government intervention, by the way." Really? Never?!

No comments: