31.8.16

THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET.

The geniuses who brought us the so-called Patient Protection and Affordable Care Act are learning a lesson, the hard way.  "Critics of Obamacare have pointed to the recent problems as proof the market is not working, while even the law’s staunchest defenders are arguing that the marketplaces need some fixes."  What's going wrong?

First, choice is disappearing.  The so-called public option might reintroduce choices, where the constraints imposed on private insurers have driven those out.  "It’s politically controversial and hard to make work in practice."  That's an understatement, but we're dealing with New York Times court intellectuals Reed Abelson and Margot Sanger-Katz, and they probably had to strain real hard to admit that much.

Second, prices are rising.  Read the section, and you see nothing at all about the stifling of price discovery inherent in third-party payments, although you see more hope for a government monopsony (yeah, that works so well when it's Walmart doing it).  "Bring down costs instead of raising prices."  Who is the real faith-based community here?

Third, the market (for insurance) is too small.  Even the relatively rudimentary "remove the lines around the states" that one Donald Trump was fumbling towards would be more effective than the Times-sanctioned fixes.
Change the incentives, so more people who are currently uninsured buy health insurance. Hillary Clinton has talked about giving out more generous subsidies, so insurance costs less and more people can afford to buy it. Many Republican politicians suggest another way to lower prices: eliminating current requirements that insurance cover a wide array of services. Some policy experts, including Uwe Reinhardt, a Princeton health economist, in a recent Vox.com interview, have suggested tightening up the penalties for remaining uninsured, so people can’t wait and buy insurance only after they get sick.
If you're going to have mandatory purchase, with penalties for failure to purchase, the penalty for failure to purchase has to be more painful than the cost of the insurance.  Which is currently not the case.  But subsidizing people to buy overpriced health insurance does nothing about the absence of price discovery, something that is present wherever third parties are doing the paying.  And nobody has mentioned medical savings accounts.  Sad.

Fourth, the rules are complicated.  Quelle surprise!
If the insurers think the marketplace is unfair, or that there’s no way they can ever make money there, they are unlikely to participate. Because the health law relies on private companies to participate, conditions have to be favorable enough to keep them involved.
Somehow we managed to fight and win World War II in triplicate, but perhaps, even in the provision of health care, there are unexploited gains from trade that might be more easily harvested in an emergent, spontaneous way.

Here's how the essay ends.  "The divides are not just partisan, but reflect persistent uncertainty about the most important things going wrong, and the most effective solutions to fix them."

Open markets are environments in which powerful and appraising evolutionary forces are at work.  Try them, you might like them.

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