Conflicting health policy visions in the Senate: News: The Independent Institute

Next year, the US Senate health care committee will be chaired by a Democrat who shares two major goals with the senior Republican. Both believe we should have universal healthcare, and both believe this can be achieved with money already in the system.

However, their views on how the healthcare system should work are so different that there is little overlap.

Currently, Bernie Sanders (D-Vt) is slated to become chair of the Committee on Health, Education, Labor and Pensions (HELP) and Bill Cassidy (R-La) is expected to be the senior member. Sanders will need help from Cassidy if anything is to be done in a tightly divided Senate.

Since Sanders and Cassidy have rather amiable dispositions, some are optimistically predicting much bipartisan cooperation on the HELP committee over the next two years.

But that overlooks how different the two think about healthcare.

Sander’s views

Most people vaguely know that Bernie Sanders advocates Medicare for everyone. However, what Sanders has in mind is very different from what older and disabled people are experiencing today.

For example, nearly half of all Medicare participants are enrolled in private Medicare Advantage plans. And traditional Medicare routinely contracts with for-profit hospitals and medical facilities. If Sanders had his way, “profit” would be eliminated entirely from all aspects of the healthcare system.

This means that no doctor, hospital, insurer, or participant of any kind would receive an economic reward for making healthcare less expensive, more efficient, more accessible, and more quality.

Cassidy’s views

In contrast, Bill Cassidy long believed that most of our health care problems stem from the US’s (along with most other developed countries) success in suppressing normal market forces. As a result, none of us ever sees a real price for anything. Not a patient, not a doctor, not an employer and not an employee.

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Adam Smith taught us that in a well-functioning market, producers strive to meet the needs of their customers because it is in their commercial self-interest to do so. The more needs they meet, the greater the economic reward they receive.

Over the last 250 years, economists have produced a tremendous amount of research that shows how well markets actually work. However, there is surprisingly little research on how non-market systems work. Still, there are certain things we do know.

If you suppress the price system and shield providers from economic penalties and rewards, self-interest doesn’t go away. It just redirects. Part of the reason the UK and Canadian healthcare systems are doing so poorly is that it is not in anyone’s self-interest to make them work better.

For example, the main motive behind the establishment of the British National Health Service (NHS) in 1948 was to make health care available to all people based on need rather than on the basis of social class or ability to pay. But decades later, government research (the Black Report and the Acheson Report) found just as much inequality in UK healthcare as before the NHS was formed.

Without prices, patients have to wait in line

If you suppress the price system, you inevitably increase the importance of non-market factors – mainly waiting. In general, the lower the cash price of care, the higher the time price.

In the US, non-market barriers to care appear to be a bigger barrier to primary care than the fees doctors charge — even for low-income patients. This form of rationing is an even bigger problem in Canada (where patients wait an average of 11 weeks to see a specialist) and the UK (where 6.4 million people are on waiting lists for hospital treatment).

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A few years ago, Senator Cassidy, along with Pete Sessions (R-Tx), introduced a bill that would give every American a refundable health care tax credit. Markets would be deregulated so that meeting people’s needs would be in everyone’s self-interest.

If you combine the average premium with the average deductible imposed by people in the (Obamacare) exchanges over the last year, a family of four (who received no subsidy) had to pay $25,000 before they even benefited from their health insurance plan . In contrast, the Cassidy Act would allow people to purchase insurance that meets their financial and medical needs.

Instead of the Obamacare practice of forcing insurers to do whatever it takes for everyone insured, the Cassidy Act would allow plans to become centers of excellence specializing in diseases like diabetes and heart disease.

Instead of the Obamacare requirement that insurers pay the same premium for all insured regardless of medical condition, Cassidy would allow for the kind of risk-adjusted premiums we see in the Medicare Advantage program. This is the basis for a robust and competitive healthcare market.

Instead of the Obamacare practice of making healthcare even more bureaucratic than it was, Cassidy would free the market and allow patients to compare prices. And we know that suppliers who compete on price also compete on quality.

One way to think about all of this is to see that Sanders doesn’t think incentives should matter in healthcare. Cassidy accepts the fact that incentives are always important — and that’s why we need to get them right.

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In Sen. Cassidy’s world, government would have two functions: (1) ensuring that everyone had the financial resources to enter the healthcare system and take advantage of market competition; and (2) to serve as a safety net, meeting any needs that the private sector fails to meet.

Ironically, there would be no safety net in Sen. Sanders’ world. If the Canadian government does not provide a mammogram or a hip replacement or heart surgery in a timely manner, it is illegal for the private sector to provide these services. In 2016, 63,459 Canadians traveled abroad for medical care.

There is of course a lot to be done to ensure that there is a difference of opinion in the HELP Committee.

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