Uwe Reinhardt: A Medicare-Like Plan for the Non-Elderly - Economix Blog - NYTimes.com

A Medicare-Like Plan for the Non-Elderly - Economix Blog - NYTimes.com:

"A public health plan, however, strikes fear in the hearts of many interest groups. There are several reasons for this.

"First, it is only human that the politically powerful private health-insurance industry opposes competition from such a plan. The industry argues, not without justification, that a public plan might be advantaged by dictating to providers lower prices for health care services and products, and it might benefit from hidden subsidies. That unfair advantage could squish the private plans to the wall.

"But even if those comparative advantages could be eliminated through careful design of the public plan, the industry probably fears the inherent appeal that a public plan might have among the American people.

"The providers of health care and health care products, to whom “national health care spending” represents “national health care incomes,” fear the market power that a public health plan might bring to the demand (payment) side of the health sector.

"Greater market moxie on the demand side, they fear, might significantly bend down the lush, currently projected, long-run growth path of America’s health spending, which has national health spending rise from the current 16.6 percent of gross domestic product to 20.3 percent by 2018 and to 38 percent of G.D.P. by 2050. Once again, it is only human that the supply side of the United States health system prefers a continuance of the weaker, more fragmented demand (payment) side that for four decades now has allowed health spending to grow in excess of 2 percentage points faster than the rest of the G.D.P.

"The most powerful ordnance lobbed at the public health plan by its opponents is the dreaded “R” word, that is, the prediction that it will lead to the rationing of health care in America. In the debate on health policy, getting slapped with the R-word has always has been the kiss of death for any proposal.

"Evidently, many Americans do sincerely believe that when a public health plan refuses to pay for a procedure it is “rationing,” while denial of health care to an uninsured, low-income individual who cannot afford to pay for that care is not. But as textbooks in economics explicitly teach, the role of prices in a market economy is precisely to ration scarce resources among unlimited demands.

"The American health system has rationed health care by price and ability to pay all along for a sizeable segment of the United States population. In its report “ Hidden Cost, Value Lost,” for example, a distinguished panel of experts convened by the Institute of Medicine of the National Academy of Sciences estimated that some 18,000 Americans die prematurely for want of health insurance and timely medical care. That is rationing life years."

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