Wednesday, February 17, 2010

Progressive Competition

The real magic of the invisible hand is based on two pillars: self interested action to motivate people, and competition. Without competition, self interest leads to monopolies and sloth, but workers compete with other workers, and companies compete with other companies, we get better workers and widgets.

So one would think that opening up states for real competition would be an obviously good idea. Yet it is highly instructive what progressives think about competition and markets, that they approve of only highly constrained competition that basically neuters it. In Minnesota, we have 3 health care providers, and they all have highly regulated choice offerings. We have 68 mandates, meaning, I am paying for things I would not otherwise pay for (osteopathy, chiropracter, port-wine stain elimination). Insurance means exchanging a certain small payment for an uncertain large payment; in this case, I'm paying for many things I'll certainly never use. If providers all have to provide identical service menus, entitling consumers all they can get from that list, this is not competition.

It's as if the state decided that food was too important for the mere market, and so gave us all food insurance. We paid a special food contribution (not a tax!), and we were all entitled to a buffet offered by 3 different private companies. The buffet has to include traditional American fare, as well as Chinese, Mexican, Italian, Korean (dog), etc.--68 mandates in all. Most people don't want all the choices they pay for, but as they don't pay when they eat most people do not notice they are paying for things they don't eat. Now, as the food budget as a percent of GDP in America grows, and Americans are not any healthier than other developed countries, people ask, hey, can I just buy what I want to eat? The government tells you 'no', that is just a race to the bottom, and your stupid, irrational inclinations will cause you to buy the medical equivalent of a pet rock.

So we have 3 buffets but the same menus, no out-of-pocket spending, and no real competition. This is what progressives think of as 'the market'. They convince themselves things will get better if they have even more top-down control (single payer) because then they could implement technological and logistic innovations (cutting out the darn middle man) that will lower costs, all the while keeping health care employment levels and compensation rates the same. One might be tempted to say, it can't get worse than the status quo, but that what the Russians said in 1917, and boy were they wrong.

8 comments:

Jakob said...

Have you looked into HSAs plus high deductive disaster coverage? When I'm no longer covered by my employer I will sign up for that. Will feel so good to actually shop around for health care with my own (pre-tax) money.

Sreedhar Chintalapaty said...

Wouldn't the logical extension of this article be that the whole concept of health insurance as a necessity to get health care is mistaken?

For instance, why should I be forced to pay for my annual physicals when I don't even get them done? Is that something mandated by the government? Why is it so hard to get routine medical care without an insurance?

gizmoduck said...

Hah! "Medical equivalent of a pet rock" elicited an audible laugh from me as I was reading in a study lounge.

Anonymous said...

I don't know how we could get it through congress, but three providers, and any food I want, and as much as I can eat? I don't know how I've managed to live without such a service all these years!

Goliath said...

But when a large corporation does this on its own, any attempt to criticize it is excessive regulation?

Cable and television companies do exactly this all the time. Most people are never going to watch 750 of the 800 channels included with basic digital cable, but companies refuse to offer any sort of 'a la carte' pricing, despite a push to require it from the FCC itself. It costs people unnecessary money, but we wouldn't want to burden the market with regulation.

I agree that this particular system in Minnesota is busted (the Massachusetts car insurance 'industry' strikes me as a similar example). But if Minnesota health care offered all 68 mandates not as mandates but as options, would that be a bad thing?

And if they weren't even going to offer some of then as options in the first place, is it bad to require that they merely give people the choice?

tol said...

We improve houses In Maryland,US.
Centre / External remodelings,
equitable prices,license,
references,photos,free estimates,
also pay off houses to refurnish:
http://www.renewhouse4u.com.
Mobile:410-978-7981.
Thanks.

Anonymous said...

It's as if the state decided that food was too important for the mere market, and so gave us all food insurance.

Since progressives are statist morons who just want to give the government more power, do you have any explanation for why the state hasn't decided to do this?

Could it have anything to do with the actual real-life consequences of various approaches? As in, most people care less about abstract intellectual debates over false dichotomies (which is better, market or government) but are instead concerned with outcomes?

Anonymous said...

In order for there to be a market, people have to be able to compare. Why don't you also attack the situation where companies make contracts/pricing intentionally complex to avoid competition.
In fact, one of the first things ancient governments did was to create systems of weights and measures so that people could compare and shop.