public plans, vouchers, and choice

“This, then, is the fundamental conservative problem: you can either have universal coverage or you can have a quasi-free market.  There’s no way to have both, but no one is willing to say publicly that it’s OK to leave millions of people without healthcare.  So instead conservatives hem and haw and nibble around the edges with things like HSAs and tax exclusions, even though these ideas don’t do anything to make healthcare coverage more widely and securely available.  No free market solution can do that.” ~ Kevin Drum

Well, the man’s got a point, doesn’t he?  Read the rest of the post to see exactly how any attempt to expand Medicare or start a new public plan with the intent of covering all the uninsured in America is almost sure to end up tightly regulated and far, far from a market solution.  Which is sort of obvious, I realize.  But it’s illustrative of the direction these things will go….

First of all, I can live without a purely market solution.  I’ve always supported safety nets, and so some government involvement, I believe, is necessary.  (Indeed, for markets to work well, I think safety nets simply must exist, otherwise when specific industries fail, or when downturns in the economy inevitably come about, the backlash and push toward more government intervention is much stronger.)

My goal is not so much to come up with the perfect market solution, free of all government tethers, as it is to avoid a system prone to massive cost inefficiencies, regulatory capture, and anti-competitive practices.  Granted, that is largely what we have now, so if the alternative is simply more of the same plus a few million more people covered, that’s a good thing.  But it’s hardly the best thing.  A government further bloated by big entitlements is going to be an expensive one to maintain (and so far nobody is proposing meaningful defense cuts as one potential redirection of revenue.)

So what if Americans were given a choice to opt into the public plan or take a voucher that could be used to buy into a co-op or purchase a private plan?  Money for vouchers would then be diverted out of the public plan’s budget.  This would help drive competition and would decrease to some degree the chance of capture within the public plan.

One thing I worry about is quality of care, both in our system now, and in the system we may have with a public option gradually siphoning off the consumers of private care.  Both systems leave people with very little choice.  Choice – and competition – can help drive cost and quality.  I realize there are other issues at play when it comes to healthcare, but that doesn’t mean these things won’t help.

On NPR the other day they had a story about a healthcare cooperative somewhere – I believe – in the Great Lakes area (Minnesota?  Wisconsin?)  In any case, the thing that struck me most about this story was the quality of the experience everyone seemed to have.  People were able to vote on what sort of coverage they would receive.   People took ownership of their own health issues.  They could appeal directly to the board if they were denied coverage – and sometimes the board was able to bend the rules to help people out.  You could vote out directors you didn’t like.  In many ways, it seemed like exactly what Americans ought to have in a healthcare provider: ownership, choice, representation, quality.

If I could choose between a public option or a voucher that I could use to help buy into a cooperative, I’d take the voucher.  Others might opt for the public plan.  But somewhere in this mix you get one extra layer of competition.  Now, obviously you run into some issues with pre-existing conditions and so forth.  But I think requiring private insurers that take vouchers to accept pre-existing conditions might still end up making it worth their while.  The extra business from all those voucher recipients could easily make up for the much smaller population that have expensive conditions.  That’s the nature of the business, really.

I’m going to beat the benefits tax drum again, also.  Without removing that massive subsidy for the Big Providers there is little hope that any meaningful reform will take place.  It is an extremely anti-competitive practice.

So – thinking out loud here – the steps to take would be to:

• Start taxing benefits.  It’s not just a way to raise revenue, it’s also a necessary step to break up the current heavily subsidized, anti-competitive healthcare market.  One reason healtchare co-ops have declined since the 1940’s is because of these anti-competitive subsidies in the form of tax breaks going to the private insurers.
• Set up a public plan with a voucher option.  Even if I think the public plan is the wrong move, at this point it has overwhelming public support.  So let’s give people some options, and see how things play out.  Vouchers add some element of choice into the mix, and can go a long ways toward making people aware of their healthcare decisions.  They can also play an important role in keeping costs down.
• Deregulate the industry, allowing insurers to operate across state lines.  Yes – I know – this has been horrible for the highly regulated, extremely complex credit card business.  But it hasn’t been so bad for lots of other industries, and healthcare and credit cards are hardly the same line of business.

Beyond that, people shouldn’t take “deregulate” to mean that the insurance providers can get away with murder.  For one thing, a lot of coverage-related issues have been and will continue to be determined in courts.  For another, we will obviously need some guidelines, just like every other insurance industry has some guidelines.  But just because All State can sell auto insurance across the country, doesn’t mean they can get away with treating their customers like dirt.  They have hordes of other industry players to compete against.  (If we provided public car insurance, of course, the industry as a whole would be far less competitive, but that’s neither here nor there…)

As you can see, this is all very much a thinking-out-loud process.  Your comments have all been very helpful – so keep ’em coming….