Managed Competition

For more than two decades folks who are right of center have been split over the issue of managed competition. Now the issue seems to be coming to the forefront again.

HEALTHCARE LAW PROTESTS AT SUPREME COURTManaged competition is the concept behind the ObamaCare exchanges, the RomneyCare exchange, the federal employee health benefits program, and the health systems of such countries as Switzerland, Norway and Israel.

The ObamaCare exchanges are the worst example of it. But that’s because the ObamaCare exchanges are the purest example. All these systems create perverse incentives on both sides of the market. But elsewhere, regulators try to restrain the worst outcomes. ObamaCare, by contrast, puts perverse incentives in place, opens the barn door, and lets happen whatever happens.

I am probably the most outspoken critic of this approach. At the risk of unduly repeating what I have been saying for 20 some years, here is my testimony last week on this issue and here is my WSJ editorial on it.

Comments (18)

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  1. Trent says:

    “The deductibles are higher than what most people are used to, the networks of doctors and hospitals are skimpier (in some cases much skimpier), and lifesaving drugs are often not on the insurers’ formularies.”

    Then why even have the exchanges?

  2. Lucas says:

    “In September, the Los Angeles Times reported that Blue Shield will have only about half the doctors in its exchange plan as it has in its traditional plan.”

    Then no one can guarantee who gets what Doctor?

  3. Connor says:

    “Under the Affordable Care Act, insurers are required to charge the same premium rate to anyone who wants to sign up, regardless of health status; and they are required to accept anyone who applies.”

    These are very poor business techniques

  4. Wally says:

    “Then there are the job-lock employees—people who are working only to get health insurance because they are uninsurable in the individual market. Under ObamaCare, their incentive will be to quit their jobs and head to the exchanges.”

    My aunt did this to get healthcare for her family. It required a small amount of hours per work but was overall advantageous for the family.

  5. Bob Hertz says:

    The Congressional testimony was very intelligent and very readable, a great piece of work.

    I would ask these two questions:

    I do not see much competition here, managed or otherwise. The three subsidy programs seem designed to keep all the insurers in business.

    And that is probably a good thing. When Kentucky, Washington, and New Jersey went to guaranteed issue in the last 20 years, insurers bailed on them left and right because there was no risk adjustment. If the insurers back out of the Exchanges, we have very huge problems.

    One final small note: there is a sentence on how insurers could make money on high risk patients. This is presented as a kind of negative I think. I can remember some past articles by Dr Goodman where it was a positive thing for insurers to be paid more for bad risks/

  6. Butt says:

    I think this bill is based on political purpose. Obama wants to demonstrate the power and reshape our society.