Government’s real role in healthcare

September 4, 2009

Some wise words from economist Andrew Samwick over at Capital Gains and Games:

1) The scenario I envision is that the public option does nothing to control costs.  Its payment system is set up to resemble Medicare, and it is the growth in real, age-adjusted Medicare expenditures per capita that has most people concerned about long-term deficits.  But with a public option, there will now be recourse for every citizen to petition the government to get a better deal on its health insurance premiums.  The pressure will be enormous to subsidize the public option, just as there has been enormous pressure to offer services in Medicare that increase its cost at (future) taxpayer expense.

2) There is no way to keep politics out of the operation of an entitlement program as complicated as Medicare.  Legislators simply cannot help themselves.  Staying with the follies of former Senator Stevens to whom Stan referred in his post, recall what he did for Medicare payments in Alaska on his way out the door.  I have argued that the government does have an important role to play in the regulation of health insurance markets (Community rating, Guaranteed issue, Ex post risk adjustment, and an individual mandate, with Medicaid for a fee as the backup option).  To the extent possible, it should stay out of the business of delivering health care.  Markets should determine the allocation of goods and services, not legislators and bureaucrats.
Me: The compromise is obvious, unless you want to basically phase out private health insurance. And this what many Dems really want to do. That is the problem.
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