Wednesday, August 17, 2016

Why The Republican Alternative to ACA Would Fail

The Republicans presented their alternative to  "Obamacare" (the Affordable Care Act or ACA) in June.  That would be the system they are going to install once ACA is properly destroyed, stomped on and sent to the trash bins of history.

There's lots I could write about that alternative, too fluffy to be truly viewed as an alternative realistic proposal.   But in this post I want to focus on one basic belief the conservatives will not let go: 

If we only give consumers more choice and greater incentives to learn about prices then competition will drive the costs of health care down and the quality of health care up.

Here's the same statement from the Republican manifesto:

Unleashing the power of choice and competition is the best way to lower health care costs and improve quality. One way to immediately empower Americans and put them in the driver’s seat of their health care decisions is to expand consumer-driven health care. Consumer-driven health care allows individuals and families to control their utilization of health care by providing incentives to shop around. This ultimately lowers costs and increases quality.

The problem with that statement is that it is largely false, or that at least it is false in evaluating the bulk of health care expenditure.  Greater consumer choice can lower costs when it comes to getting dental cleanings and check-ups, new eyeglasses and certain other simple-to-understand basic services essentially healthy people consume.  But most of health care consumption is not of that sort, and consumer choice will not result in lower costs or higher quality.

For more detail on my counter-argument, the following earlier posts are useful: 

This one and this one explain why health care markets are inherently not competitive markets, and this one (ignore the pre-ACA stuff and scroll down to the where-when-who-why part) gives more information about the characteristics of health care costs.

Finally, note that the Republican statement I quote also has that little bit about "providing incentives to shop around."  What might those incentives be?

My guess is that they want people to pay more out of pocket and to rely more on their own savings for health care spending.  But that, of course, means that health care would become less affordable to many individuals, especially those without high incomes.

That fits, in a way, given the Republican drive to abolish the Affordable Care Act.