Subverting Competition in Healthcare May Force Price Controls

ruralhealthclinic-jeuaNew Orleans   There are obvious glitches in the Affordable Care Act that the politicians will handle.

One of them, as I’ve argued before, is going to be extending the deadline for enrollment to escape penalties past March 31, 2014, and that assumes that the government doesn’t waive the penalties entirely for the first year, which will more likely be the action taken if there continue to be huge systemic problems in enrollment.  The reasons are simple.   Politicians won’t take the heat from something that is obviously not fair to their citizens.   It is equally obvious as President Obama has argued that come hell or high water, they will fix the online process.   This is his legacy program and he does not want the enrollment problems to be in his official biography and eventual obituary.

Interestingly, there is another huge political problem looming in the Senate that perhaps was not as anticipated, but may have been the most effective obstacle created by the continued Republican rearguard actions, especially at the state level where half of the governors and their state legislatures have blocked Medicaid expansion and state managed marketplace exchanges. That problem, as a recent New York Times article indicated, lies in the widely disparate pricing for policies in rural areas, where healthcare is scarcer anyway.   No matter how urban the country is now, we have become no small number of Tea Party Congresspeople coming from areas where rural interests still dominate, and the weight of more rural states is still strong in the Senate where population is irrelevant to voting strength.

Talk about the irony of being hoisted by your own petard!  We have a private insurance company dominated healthcare model in the Affordable Care Act, because ideologically the notion of government managed and run healthcare like Britain or Canada was past the pale.  Our system would privilege private insurers and get the job done through the almighty power of free competition, by God!  Well, it turns out, not surprisingly, when politicians refuse to expand the insured base through Medicaid expansion and delay the marketplaces, then private insurers don’t want to come into those states, and these same market forces leave one or two companies in those situations with a virtual monopoly for providing the coverage, and prices do not go down, but in fact even in some situations increase.  So from place to place in rural areas, rates for the same coverage may be three and four times higher.   You can feel the political heat from here!

The solution would be that the government caps prices, but price controls might even be more inflammatory for the real conservatives than the problem they have now created, probably inadvertently given the low level of economic education even by supposed free market advocates.   As conservatives get over the fact that they can kill Obamacare and are forced to reckon with the ongoing reality of its impact in their districts, this will be a problem they will not be able to avoid.   It’s going to be interesting to hear the contorted arguments and watch the policy gyrations as they argue against price controls that would balance the cost for all Americans, and try to figure out a way to put the government’s finger, if not whole fist, on the scale to get some cost balance, since that’s only fair and their constituents are going to be calling for it, and loudly.

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