So it is apparent that our current costs are known and this points out the flaws in our system. However, a fully socialized health care system can worry people, who think they will not get as good of care. But, wouldn't we paying in what we are now, or roughly the same to a socialized system? And if so and we eliminated the insurance shuffling and paperwork issues (because of this change) wouldn't more of the money we spend go to treating people? What am I missing?
Before I wade into this, let me state that I am not a health-care economist, and I don't know the answer to the question of "what should we do?" But I do know enough to at least see the costs and benefits of various courses of action. This reader is asking about the costs of a single-payer system, so I'll comment on that.
One issue with a socialized, single-payer system is that we're not using the power of competition to keep costs under control.
What happens to automakers who don't contain costs? Consumers stop buying their cars, and they'll be competed out of business (or, perhaps, competed into a massive government bailout... But you get my drift). The key notion is that market competition rewards those firms that figure out ways to keep costs down and still provide goods and services that consumers want.
We'd like the same thing to happen in health care. That is, we'd like someone to be shifting health-care business around to the providers who can offer care that consumers want in a cost minimizing way.
This sounds simple and obvious, but it doesn't work very well in this market. Why not?
One reason is that most of us don't pay the full cost of the health care we receive. Just a quick story about this: I was in Alta's Watson shelter last Friday and walked past the ski shop. The shop is selling helmets and their sign read "How large is your health insurance deductible? Buy a helmet!" They're saying to potential helmet-buyers: "You are on the hook for part of the cost if you hit a tree and have a head injury." Notably, however, you're not on the hook for the whole cost --- once your deductible is paid, any incremental costs are paid by the insurer.
Because consumers don't pay the full cost, they don't shop around aggressively for low-cost care. We don't haggle for medical care the way we do for a car. (And insurance isn't the only reason for this lack of haggling --- Health care is credence good, which means it's hard for consumers to even assess quality.)
So is there any haggling in this market? Any attempt to find low-cost providers? There is, and it happens between your employer (assuming you have employer-provided care) and some HMOs. Think of an employer negotiating with a bunch of insurers. The employer wants to get a good deal, and the HMOs compete by trying to buy low cost care from providers, packaging that care with insurance, and selling it to employers. One way the HMO can get a competitive edge is to negotiate lower rates from doctors --- this is a force that helps control health care costs.
Essentially, the current system uses the profit motive to contain costs in the following way: HMOs are allowed to keep any profits they earn by negotiating for lower-cost care with health-care providers. What keeps those profits from getting too big? Competition from other HMOs. What keeps HMOs from completely ignoring the quality of care? Again, competition from other HMOs. If employers look for the best quality care for employees at the lowest possible cost, then the current system at least has some competition-based mechanisms that pushes things in that direction.
Single-payer relies on the government, not markets, to find the balance between quality and cost.
Now, before you completely flame me for writing something nice about HMOs, note that I'm not saying that the current system is the best we can do, and I'm not saying socialized medicine would be worse than the current system. But I am saying that the big question mark for socialized health care is finding a means for appropriately matching up quality and cost. The current system isn't ideal by any means, but there is at least a profit-motive-based mechanism (an imperfect one, to be sure) to get health-care costs under control.
Read the last couple paragraphs of the Gruber article, for some hints on what the big drivers of health-care inflation have been.
All this is a bit moot anyway, since most Americans are happy with the insurance they have. Read Gruber's discussions of the overinsured and the underinsured in our country on this. As a result, it seems reform will be incremental, along the lines of the Massachusetts plan.
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