Incentives Matter

I don’t understand people who refuse to believe that basic economic incentives can be ignored or legislated away with nothing more than noble intentions. First, the premise:

As you know the United States is the only industrialized nation that does not have some form of universal health care. Over the past year or so several forms of “mandated” health care have been proposed: Massachusetts, Gov. Schwarznegger in CA, Wyden, Edwards. I will diary another week on why any “mandate” plan, tried no where else in the world, cannot work well. But for now let’s quickly look at all those other systems that really are in place elsewhere.

I don’t understand why mandate is in quotes there. Both states want to require specific actions and expenditures by its citizens. That sounds like a mandate. Perhaps the DailyKos diarist meant to put health care in quotes. Moving on.

Why do we need to really know how other countries do it?

Well, they all have better quality of care and outcomes than we do. And they control costs better.

Better quality of care? Better outcomes? Cheaper? Dubious, at best. Broader scope of who gets covered, perhaps, but that is not the same as quality of care and outcomes, and certainly not costs. The better strategy here would be to look at what’s preventing us from reaching that broader scope of who gets covered with superb health care without a pre-determined solution. Supporters of universal coverage appear to have analyzed the economics and found that economics is a right-wing conspiracy imperfect at meeting needs. I disagree:

The most highly-privatized system in Europe is probably Switzerland. Even there, private insurance companies are required by law to be nonprofit, their premiums, benefit structures and plans are set by the government, they are required to community-rate (i.e. they are not allowed to screen out the sick and deny them coverage, the fundamental way that U.S. insurance companies make money), and – get this – if one of them happens to enroll a healthier population and make more money, they have to give it away to the companies that made less.

I don’t understand how this is supposed to be privatized. If the context is just that it has the least government interference in Europe, okay, I guess it could pass such a claim. But “privatized” is not a word I’d use to describe that scenario. Forced non-profit status and revenue redistribution is hardly a free market solution.

To figure out the long-term flaw, start with the foundation: there’s no profit incentive. Socialism is a bad assumption because it reduces freedom when even one person is uninterested in participating, but let’s first fight the fight further along in the process. What’s the incentive? What motivates people to keep coming to their jobs? What motivates people, once there, to control costs? What motivates people to innovate within a system designed to first control cost? I’m at a loss. Someone please explain what I’m missing.

I’m not getting that answer from this diary, so I’ll excerpt what comes next.

Can you imagine U.S. health insurance companies being any more likely to go for that than for single-payer? They might as well go out of business! The idea that a system like that is going to make a proposal more “politically feasible” is totally ridiculous. That’s why I say in the talk that just as fundamental to the idea of “one-payer” is the notion that for-profit insurers must be eliminated. Also, the added cost of the Swiss multi-payer system makes it the most expensive. The reason we advocate single-payer for the U.S. is that it saves more money, AND it is also “ready to go out of the box” because we already have one single-payer system (Medicare!) and all the infrastructure and know-how ready to make it work.

Several questions arise from that. What about the investors in those for-profit insurers? I understand that many liberals view capitalism as bad, but retirees hold shares in those for-profit insurers. Pension funds, both private and government, rely on those companies to diversify portfolios. What do we do when we eliminate for-profit insurers? What about the blue-collar workers who’ve had promises made to them? Why hate them through this plan? Whatever the solution, I bet the answer includes Social Security.

The Swiss system is the most expensive. The only alarm bell to go off here is that the multi-payer aspect makes it expensive? How intentional and pre-ordained does the path to that conclusion have to be ignore the missing incentives in the Swiss system? Without the promise of profit, there is no incentive to control costs. Someone else will presumably cover whatever expenses arise. This is not the structure of a healthy system.

The end of that excerpt is the best. We already have one single-payer system that works. Forgive me for asking dense, obvious questions, but if Medicare works, why is there complaining that poor people can’t get insurance coverage? If it works, they’re getting the health care they need. Do we care about health care or health insurance? This seems like little more than misdirection to get more government control in more areas. It’s a feel-good solution being promoted only because it feels good to tell people what they should have, without incentives. Once again, count me out. I’m not interested.

Link via Balloon Juice because there’s only one DailyKos diary I read.