Only One Of The Major Approaches To Controlling Health Care Costs Is Unproven

David Wessel’s overview of the six think tank plans for long-term debt reduction offered yesterday is generally fairminded, but I think there’s a mistake in his description of the ideological divide on health care:

There are two fundamentally different approaches. One relies on market forces, making beneficiaries pick up more of the tab and relying on them to be discerning shoppers and on competition among providers and insurers to control costs. The other relies more on government muscle, enforcing aggregate caps on spending and shifting Medicare from fee-for-service to give providers incentives to care for the whole patient, not to sell individual services.

In short, the debate isn’t only about how much savings to squeeze from Medicare, but also about which unproven avenue to restraining health costs is best.

It’s difficult to “prove” anything in public policy, but the world has a lot of examples of health care systems that are more statist than Americans. What you see in Canada, and in basically every European country, is that the statist approach does in fact succeed in pushing costs down lower than what we experience in the United States. What you also see is that relatively non-statist approaches like the one they use in Switzerland lead to higher than normal costs for Europe. You also see that the super-statist approach of the United Kingdom leads to extremely low costs. Last, right inside the United States of America we conveniently have a single-payer health insurance system for senior citizens, and a more market-oriented one for non-seniors. And guess what? Medicare is cheaper. The administrative overhead is lower, and the unit cost of services rendered is also lower.

The argument against a statist approach that needs to be taken at least somewhat seriously is the idea that statist approaches make health spending too low. The sky-high costs of the US system generate giant profits that encourage capital to flow into the health care sector. A cheaper system would presumably end up with less equipment, or less R&D or less of something. But if the goal is to spend less money there’s tons of evidence on the side of big government.