What Does It Mean To Have a Private Health Care System

Well, I'm still a bit under the weather, but at least I'm up to clear broth with rice noodles.  Meanwhile, there's been a lot of blogging about my healthcare blogging. 

I'll start by responding to Matt Steinglass, who I greatly respect. 

Megan's arguments is predicated on the contention that reform will lead to the effective disappearance of private health care, and complete government dominance of both the health insurance and health care markets. That's what she means by the "camel's nose". The problem is this: countries that have the Bismarck model of universal coverage through regulated private health insurance do not move to single-payer government-controlled systems. Germany started the first Bismarck-style system 126 years ago. It still has it. France, the Netherlands, Switzerland--they all started with regulated private insurance backed by a public plan for the needy, and they all still have regulated private insurance backed by a public plan for the needy. Except for the Netherlands. They used to have a public plan for the needy, but in 2006 they scrapped it and moved to an all-private health insurance system, with subsidies for those who can't afford private coverage. What they have, roughly and leaving some bits out for simplicity's sake, is what the US would have if it passed the current House bill, then eliminated Medicare and Medicaid, and funded the system by handing out subsidies or vouchers so everyone can afford coverage. The direction that Megan envisions things "naturally" going is precisely the opposite of the way they actually went in the Netherlands over the past 20+ years.

I don't think Matt understands what worries me about national health care, or else he doesn't actually understand how the system in the Netherlands works underneath his interaction with an insurance company.  It isn't the cost.  It isn't the taxes.  It isn't the redistribution.  It isn't even the mandate, which is borderline plausible to me in the way that mandatory auto insurance is, and forced retirement savings might be:  the moral hazard is huge, because your neighbors won't let you die.

My objection is primarily, as I've said numerous times, that the government will destroy innovation.  It will do this by deciding what constitutes an acceptable standard of care, and refusing to fund treatment above that.  It will also start controlling prices.

Now, at this point in the discussion, some interlocutor starts chanting what I've come to think of as "the mantra": othercountriesspendlessandhavelongerlifespans.  Then they ask me how I can ignore the overwhelming evidence that national health care is superior to our terrible system.  Now, what's odd about this is that all of those countries do precisely what I am concerned about:  slap price controls on the inputs, particularly pharmaceuticals.  Their overwhelming evidence indicates that I am 100% correct that a government run system in the US will  destroy the last really profitable market for drugs and medical technology, and thereby cause the rate of medical innovation to slow to a crawl.

To which Matt rejoinders that all the Dutch insurance companies are private.  Indeed they are, but they're essentially tightly regulated utilities.  There's no market discovery of drug prices; instead, the prices are set by looking at an average of the rates paid by government systems in nearby countries.  The government decides what is reimburseable.  It further defines the basic health package that everyone gets, though as I understand it most people also purchase top-off insurance.  The supplemental insurance functions more like an actual insurance market.  As I understand it, there's considerable pressure to stop that.  And the markets are in peripheral services that mostly aren't reimbursed by health insurance here, either, like eyeglasses and dental. 

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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