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Friday, December 16, 2011

"Competition Hasn’t Worked in Health Care"

Ezra Klein:

Competition hasn’t worked in health care, by Ezra Klein: Republicans and Democrats have the same problem with the Congressional Budget Office: it refuses to score competition between health-care plans as a surefire way to lower the cost of health care.

This annoyed Democrats during the health-care reform debate... It’s annoying Republicans now, as it means their Medicare-reform plans need to impose blunt spending caps if the CBO to certify them as deficit reducing.

But the CBO is in the right here: No matter how much sense competition makes in theory, no matter how obvious it is that it will drive down the price of health care, the fact is that it keeps failing when we put it into practice.

When I asked Sen. Ron Wyden to give me examples of programs that made him confident that competition could work, he mentioned the Federal Employee Health Benefits Program (FEHBP) and the California Public Employees Retirement System (CalPERS). Rep. Paul Ryan has also pointed towards the FEHBP... The only problem? Neither system controls costs...

That leaves us without a clear example of a competition-based program substantially cutting costs. As I wrote yesterday, I hope that’s simply because we haven’t yet cracked the code on competition. Cutting costs through competition comes with far fewer downsides than cutting costs through government price controls. But cutting costs through competition has not yet worked. Cutting costs through price controls, conversely, has worked, as even the most cursory analysis of international health-care systems proves:

(Kaiser Family Foundation)

The reality of our health-care debate right now is that both parties keep trying different versions of a cost control strategy that hasn’t worked because they’re uncomfortable with the cost control strategy that has.

    Posted by on Friday, December 16, 2011 at 06:24 PM Permalink  Comments (71)


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