Why The Dems Health Care Plan Is Doomed To Fail
Henry Neufeld’s post today touched on Health care and spurred me to write something I have been thinking about for several days. While it is true that so much of the Democratic health care plan is based on guesses, as serious a flaw as that is, that is not the biggest problem. The real problem is that it is doomed to fail regardless of the guesses about it.
This is not to say that it will not pass. It very well may. Democrats, not Republicans will determine this as Republicans do not even have enough votes for a filibuster. It is doomed to fail, because it cannot work. To be clear, it is not that it will not work, it cannot work.
The democrats are claiming that their plan will cover everyone while reducing costs and improving health care. Now those goals are achievable. And even the Democratic plan might, if they are lucky, achieve two out of the three. But it cannot achieve all three. To see why, let’s consider the goal of reducing costs.
Set aside what is meant by costs for the moment, there are only two ways to reduce costs. First, you could simply dictate lower costs. This can be done in a number of ways, such as reducing the amount paid for individual procedures, or by reducing the number of procedures preformed, or some combination of the two. While this would certainly reduce costs, it will also negatively affect health care. This method is how most countries who have government run health care work and is the reason such systems have such long waits.
The other way to reduce costs is to come up with new and innovative ways to deliver those services. Granted some of these innovative ways may also lead to a reduced level of health care. But they could also lead to an improved level of health care, and thereby achieve the goal of improved health care at a lower cost. If the savings were enough, you could also achieve the third goal of covering everyone. Since innovations can either improve or degrade health care, an additional component is needed to make innovation effective, and that is consumer choice.
The problem is that while politicians often speak of streamlining the process, of cutting out waste and abuse, or other things that could be consider innovations, governments rarely, if ever, innovates. In fact governments have a very difficult time of even keeping up with the innovations of market place. Instead of innovating, they regulate. Worse, regulations, by their very nature, stifle innovation. The more regulation you have the less innovation you will have. In addition, consumer choice is severely restricted as what consumers can choose is restricted to what the regulations will allow.
The health care and health insurance industry is the one of the most heavily regulated sectors in the country. While there are a thousand health insurance providers in the country, most consumers can at best choose from a handful. So it is not at all surprising that we are in the current predicament of increasing costs and declining service.
The democratic health care plan seeks to solve this by adding over 1000 pages of new laws, which will then be multiplied many times over in the form of implementing regulations. In short, they will stamp out any remaining vestiges of innovation.
Democrats counter that they will be supporting competition by including a government option that will increase competition. This is silly. For one, the increased regulation will limit innovation and thereby further reduce what little competition there is. As companies change their plans to conform to the new regulations the plans will look more and more alike and real effective choice will be reduced.
Even worse, to be an effective competitor would require the government option be responsive in the market place in a way that is just impossible for government. In the end, either the value of the government option to consumers will be so low as to have no effect on the market place, or and far more likely, the value of the government option will be so high as to draw (or have employers force) people into the government option. It will in effect be running the other providers out of business. So a government option cannot improve competition, it can only hurt it.
Thus the Democratic Health care bill will increase regulation and reduce effective choice even if it doesn’t end in single payer. While in theory it may be able to reduce cost and expand coverage, it cannot do this while improving health care. In short, it is doomed. And this is best case. Given the past record of government programs, the actual likelihood is that it will not even be able to control costs and we will be left with worse health-care and even higher costs and a system that is even more difficult to change.
The only real solution is to look to reform that will encourage both consumer choice and competition and thus will spur innovation. Not only can such an approach work, it has already worked even in the area of health care. This can be seen in that much of the innovation that has occurred over the last few decades has come from the area of plastic surgery, an area that insurance rarely covers and thus must compete in the market place to exist.
