HEALTH CARE/ Moral Economy: Help the Sick and Reduce the Debt (2)

This essay is part of the Public Discourse symposium on “Liberty, Justice, and the Common Good: Political Principles for 2012 and Beyond.”

Second of two parts

Liberals tend to believe that our system is inefficient because it is chaotic and unfocused—there are too many players doing too many things in too many different ways, and none is moved by a concern for the public interest, so the system is a costly mess. It would be much more efficient if it were made more orderly—a system directed to the public good, governed by a single set of rules, managed by knowledgeable experts who understand what kinds of care are cost-effective, with just a few large providers of insurance (if not one huge provider) using their weight in the market to compel lower prices and more efficient delivery of services.

This vision is roughly what the health-care law enacted last year aims to make a reality: to restrain the growth of health-care costs by putting the health-care sector under tighter supervision and making the government a larger buyer and provider of coverage. It involves a vast expansion of Medicaid, more price controls in Medicare, and a system of highly regulated state insurance exchanges that will gradually transform the private insurance sector into a system of public utilities.

Conservatives tend to believe that our system is inefficient because it is too opaque and over-managed—that the fee-for-service structure of Medicare (which pays doctors by how much they do rather than how efficiently they work), the design of Medicaid (which allows state officials to increase spending at the federal government’s expense), and the powerful tax incentive for employer-provided insurance (which prevents consumers from making purchasing decisions and so prevents the emergence of a real market) all make for a badly broken health sector incapable of finding paths to efficiency in the ways that a market economy normally does. What is needed, they say, is a real market in which insurers compete for consumers and therefore have a reason to offer an attractive product at a low price, which would cause them to work with health-care providers to find more efficient, innovative ways of organizing their work.

That is roughly what most conservative health-care proposals aim to do: to restrain the growth of health-care costs by giving consumers real choices and making the health sector more competitive and therefore more innovative. This change involves turning today’s health-care entitlements (including the tax preference for employer-based coverage) into a system of premium-support subsidies to be used in a highly competitive private insurance market in which insurers and health-care providers have broad latitude to experiment with different avenues to efficiency and quality.