[Guest post by DRJ]
Turning the theory of capitalism on its head, this AP article highlights ObamaCare supporters who claim subsidized government care will promote more competition:
“Proponents of a government plan say it could restore a competitive balance and lead to lower costs. For one thing, it wouldn’t have to turn a profit.
A study by the Urban Institute public policy center estimated that a public plan could save taxpayers from $224 billion to $400 billion over 10 years by lowering the cost of proposed subsidies for the uninsured, while preserving private coverage for most people.
“Right now, there’s no incentive for insurers or big hospital groups to negotiate with each other, because they can pass higher payments on through premiums,” said economist Linda Blumberg, co-author of the report. “A public plan would have the leverage to set lower payment rates and get providers to participate at those rates.”
“The private plans would come back to the providers and say, ‘If you don’t negotiate with me, you’re going to be left with only the public plan.'” Blumberg continued. “Suddenly, you have a very strong economic incentive for them to negotiate.”
Targeting insurance companies because they earn profits? Health care profit margins are far down the list — #86 according to University of Michigan Professor Mark Perry — which means 85 other industries should be targeted first. (Of course, Obama is targeting some of them, too.)
But if we assume the AP article is right that health care providers will agree to reduce costs, this is government forcing health care providers to accept lower payments. In my experience, that will leave providers with three choices:
Keep providing the same service for lower rates and wages;
Cut back on services in response to lower payments; or
Leave the market.
Of course, some altruistic people will provide more services for reduced rates but most won’t, which will leave society with fewer caregivers and less care. And, as Prof. Perry mentions, another approach would be to reduce regulations that prevent or make it harder for insurance companies to compete:
“And isn’t one reason for a lack of competition that competition for health insurance across state lines is prohibited, creating in effect 50 state health insurance “cartels.”
That sounds too much like a conservative solution so there’s no hope that will happen.