Shopping for Health Coverage Versus Shopping for Health Care

As I read the spirited debate over whether Obamacare will drive health insurers out of business (here and here), I wonder if we need to bring the discussion back to fundamentals: The key problem with U.S health insurance is that there is too much of it—whether provided by private insurers or government.

Avik Roy and Rick Ungar disagree on the likely outcome of Obamacare: Private-insurance monopolies or government monopoly (a.k.a. “single payer”). I think both are correct. Private monopolies will arise (within each state or regions within larger states) to exploit the huge subsidies (tax credits) available through the so-called Health Benefits Exchanges.

But this will only persist for a few years. Today, the politicians supporting an increasingly shaky Obamacare must ensure that the health-insurance industry remains divided—some hoping to profit from Obamacare’s forthcoming monopolies and others fearing exclusion. This prevents them from coming together in a unified effort to repeal the law. The Democrats’ success at keeping the health-insurance trade association on-side and on-message is pretty impressive, given the fact that even the U.S. Chamber of Commerce now publicly advocates repeal.

The likelihood of Obamacare surviving both the U.S. Supreme Court and next year’s voters is pretty slim, so its supporters cannot afford to let any more hostages escape. (The pharmaceutical industry, for example, is also refusing to join the repeal movement.) So, while Democratic leaders cannot stop single-payer extremists like Mr. Ungar from telling the truth, they must continue to pretend that the end-game is simply a “fairer” private system, rather than a government take-over.

If Obamacare does succeed, growing public anger at the abuses of these monopolies will cause their political protectors to switch sides and collapse them in favor of “Medicaid-for-all”.

Even if individuals were able to enter a Health Benefits Exchange and acquire a policy of our choice, this would do us little good, because the federal government will be determining the package of benefits. While we may be able to shop for coverage, we would not be able to shop for care—a turn of phrase I’ve borrowed from Doug Ghertner, the president of Change Healthcare, in this blog entry.

Although Mr. Ghertner is a lot more optimistic about Obamacare’s Health Exchanges than I believe is warranted, he recognizes that they would not change the fundamentally malformed relationship between a patient, an insurer, and a provider.

Because prices would still be determined secretly by insurers and providers, patients would still be ignorant of the cost of a procedure, and unable to make decisions about price versus quality, Mr. Ghertner’s business, Change Healthcare, is part of a growing effort to break this down, and give patients good quality information about health-care prices so that they can make timely decisions about the services they use. (Castlight, featured by Forbes.com’s Zina Moukheiber here, is likely the nearest competitor.)

As I’ve written before (here and here), I am continually amazed at the willingness of entrepreneurs to challenge the status quo in health care, especially when “single-payer” advocates like Mr. Ungar are fearlessly cheerleading the looming imposition of total government control over our access to health care.