A commenter writes,
if you can’t decide who is going to pay for the chronically ill, then the number one game in town is the selection game. It is way more important to make sure that “the other guy” pays for the chronically ill. You even end up in situations where you don’t want to be too good at treating the chronically ill, lest all the chronically ill select your plan which is still a net negative.
I think the libertarian reluctance to admit these are going to be socialized costs has led to a patchwork of payers with more interest in playing the selection game then playing the cost control game. It’s also the case that their opponents in the cost control game, providers, have a lot more leverage over a divided foe then a unified foe (either single payer or strong government regulations on cost/utilization).
I think it is fair to point out that our health insurance market as it has emerged gives health insurance companies stronger incentives to hide from costs than to reduce costs.
Another point is that the politics of health care make it more attractive for politicians to help many people who are relatively healthy to handle routine low-cost illnesses, obtain birth control, etc., than it is to try to target support for the people who really need it. Hence, you get the shell game of Obamacare, where you try to give healthy people the sort of benefits that seem to help them, but stick them with premiums that include the cost of subsidizing the people with chronic illnesses.
Politically, what you want are policies with lots of beneficiaries. But the requirement of compassionate health care policy is a policy with few beneficiaries. (For a determined libertarian, this means placing very high expectations on charity.)
Hence, we play shell games. One of them we call “employer-provided” health insurance, as if employers simply give it away. In fact, if an employee is worth $40,000 a year to the company and health insurance costs $10,000, that means that the rest of the paycheck has to be worth no more than $30,000 a year. The cost of health insurance is borne by workers. That means that the workers with illnesses that require expensive treatment are subsidized by workers who are generally healthy.
Another shell game is Medicare. Old people undergo a lot of expensive medical treatments. This cost is borne partly by taxes on the young. It is increasingly being deferred to taxes on people in the future. This Ponzi scheme faces a day of reckoning, which is likely to come within a decade. That is, if you believe the CBO analysis of Medicare, and I thought that fact-based people were supposed to believe in the CBO.
Relative to a policy of honestly taxing the healthy to pay for the sick, these shell games are inefficient. They cost more in terms of lost economic output. The labor market is distorted by “employer-provided” health insurance, leading to less employment and output. The health insurance market is distorted by Obamacare, and in fact that market is in trouble. Subsidized health insurance under Obamacare is sort of working. Mandated health insurance on the exchanges is imploding.