Starve-the-Beast Health Care Policy
By Arnold Kling
Much has been written about Ryan’s plan to have the vouchers only keep pace with inflation, which is generally well below health care inflation.
But almost nothing has been said about how the Democrats’ own health care law includes a provision that would hold the growth of subsidies below the rate of premium cost growth.
This may seem like an obscure point, but we are talking about a health care law crafted for obscurity, so I think we should give Jed credit for trying to figure it out, whether or not his analysis ultimately holds up. (My guess is that it will, but I have not independently verified it.)
I think that any health care policy going forward will do two things.
1. Create a two-tier health care system, where people who rely solely on payments from government get noticeably less in terms of medical procedures (not necessarily implying a difference in longevity or other tangible measures of outcomes).
2. Starve the beast. That is, take funds away from the health care system, and force some form of rationing. Under a Ryan-type proposal, individuals would self-ration, as their vouchers (or “premium support”) would fail to keep pace with the growth of new and expensive procedures. In other countries, the beast is typically starved by a government budget constraint, which limits the resources available to doctors and forces them to ration care. Under Obamacare, the beast will be starved in various ways, including perhaps the mechanism that Graham highlights, in which those relying on government subsidies find that those subsidies will buy less and less in terms of health insurance coverage.