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Ezra Klein Says Government Health Programs Work, So Why Not Expand Medicare?

I’m a little confused by Erza Klein’s mostly helpful post showing, once again, the US paying much higher public and private costs than OECD countries for health care. Congress and the Administration should be reminded of that every day.

Klein is surely correct in noting that other developed nations rely much more on government-sponsored plans than purely private systems. As a result, they achieve not only lower total health care costs, as a percentage of GDP, but more universal coverage (and equal or better care) than does the US. The lesson to draw is fairly obvious: we need to move towards Medicare for all or some variation of a government-sponsored single-buyer model. But curiously, it’s not clear that’s what Ezra means.

I think Klein inadvertently muddles the point when he compares Paul Ryan’s plan to replace Medicare with its increasingly inadequate voucher system to buy private insurance with the Democrat’s plan — in the Affordable Care Act — to preserve Medicare in its present form but make it more cost effective. The comparison is valid, and I share the condemnation of what Ryan is proposing. But what Klein has done is to switch in mid-post from talking about universal coverage/care systems to talking only about what we do for the elderly.

What I’d like to have seen is Klein dealing with the alternative proposals for how to provide affordable, quality care for everyone else. Because here I think he’s lost his own point.

To get back to the original comparison made by OECD, we need to talk about the Democrats’ plan for the non-Medicare group versus . . . what? There is no Tea-GOP alternative other than let the current private system remain. The European approach is typically universal and relies on substantial government involvement. What works for the elderly — government-sponsored insurance or government-sponsored care — works for the non-elderly. That’s the missing part of the conversation.

When we get to the non-elderly, The Affordable Care Act, or ObamaCare, relies on exchanges with only private insurers and premium subsidies for the poor. That may be better than what some have now, but it’s not the successful model the OECD chart is using. The ACA’s exchanges are little different from RyanCare with a promise of more premium support but no mechanism to get costs down to levels by which government premium support can keep up with rising health care costs. Most of the cost-control stuff is in the Medicare portion covered by the budget, because that’s what Peter Orszag cared about.

So when we talk about those outside Medicare, the proposed solution in the ACA exchanges is about the same as RyanCare’s prescription for Medicare: Cross your fingers and assume individuals with zero market power will control costs of oligopoly private insurers and private care providers through “market competition.”

This is gibberish. As Krugman has often reminded us (citing Ken Arrow), it has zero economic foundation in theory or experience. Indeed, Klein tells us this approach has already failed in Medicare Advantage and Medicare Part D.

Yet that’s what Klein supports for the non-elderly. Indeed, Klein only recently wrote this (my bold):

That’s the explicit intent of the excise tax, which eats away at the tax break for employer-provided insurance. “Let people be active consumers”? That’s exactly what the exchanges are meant to accomplish. The major difference is that the Affordable Care Act doesn’t roll Medicare and Medicaid into the exchanges, though that’s something that many of the law’s advocates — myself included — would eventually like to see happen.

Huh? I thought the point of the OECD comparison was to show that nations that get government more directly involved in using its market power to control health care costs do much better at controlling costs. It’s about market power in the context of non-competitive industries.

When you throw individuals into dysfunctional and highly concentrated private insurance markets, individuals have zero market power. Government-sponsored systems can provide the necessary market power, and so save enough to provide universal coverage. The competitive market model doesn’t work in health care, can’t achieve universal coverage, and is a myth in actual insurance markets. If competition won’t/can’t control costs, then throwing people into the exchanges won’t save them; it will doom them or deplete the Treasury trying to keep up.

This is the problem Ezra and others need to confront in their advocacy of the exchanges in the ACA. At least when people are covered at work, their employer can pool their limited market power in hopes of getting a better deal from insurers. The ACA weakens that via the excise tax. By pushing people out of these employer-based pools and into the individual markets, we are further diminishing their market power, not helping them.

It’s time for the economists who supported ACA to address this and admit part of their critique of Ryan’s voucher plan applies equally to the ACA exchanges. OECD has the right information, but so far, they’ve drawn the wrong conclusion.

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John has been writing for Firedoglake since 2006 or so, on whatever interests him. He has a law degree, worked as legal counsel and energy policy adviser for a state energy agency for 20 years and then as a consultant on electricity systems and markets. He's now retired, living in Massachusetts.

You can follow John on twitter: @JohnChandley

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