There’s plenty of fuzzy thinking on both sides around this subject, but Paul Ryan’s budget has cystalized for me an important question—do conservatives want to reduce health care spending or don’t they?
After all, if you ask a liberal true believer about health care policy and health care costs, they’re likely to inform you that Medicare is much cheaper per capita than private insurance and that European single-payer systems are even cheaper than Medicare. The liberal true believer position is that if we had a more Europe-esque system and financed it with Europe-esque higher taxes then we’d all be better off. The smart conservative reply to this is to point out that though liberals like to tell themselves these European savings largely come out of the pockets of insurance executives and shareholders, that in fact it largely comes from the use of monopsony buying power as a kind of soft price control. To this a liberal may reply “so what?” you get universal coverage and lower prices. To that the smart conservative reply is supposed to be that reducing the prices you pay for health care services will reduce the pace of technological innovation in the health care sector. Liberals sometimes deliver a “more pie for everyone!” response to this that involves revolutionizing how we finance health care research (see, e.g., Dean Baker’s patent ideas) but there’s another branch this dialogue can take.
Specifically, all this bad stuff that conservatives say would result from a European-style system is a necessary consequence of any effort to reduce health care spending. If we cut Medicaid so that poor people need to reduce their consumption of health care services, this will reduce profits and therefore innovation in the health care sector. If we cut Medicare so that elderly people need to pay a higher share of their health care costs, this will presumably decrease their consumption of health care services and therefore profits and therefore innovation in the health care sector. Any effort to reduce health care spending necessarily has the consequence of decreasing the amount of private capital that flows into the health care sector. There may be reasons for thinking we should cut out all these public subsidies for health care consumption and establish a real free market in health care, but if that’s what you want to do then “it will stifle innovation” can’t be the reason you fear a “government takeover” of health care or the creation of a “European-style” system.