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Fixing the Healthcare System

November 21, 2013 Leave a comment

President Obama now finds himself in the kind of mess that central planning creates. The web site fiasco is just the beginning of the problems that result when politicians try to micromanage a complex healthcare sector. The President is now playing “whack-a-mole” as he attempts to fix the problems caused by the Affordable Care Act but each “fix” creates another problem. For example, health insurance prices may need to be adjusted upward if people are permitted to keep their existing insurance policies resulting in riskier individuals buying insurance in the exchanges. As argued in a recent paper, true reform of the healthcare system requires changing laws at the federal, state, and possibly local levels to permit markets to function as they do elsewhere in the economy.

John Cochrane is an economist at the University of Chicago who has written an article (see After the Affordable Care Actdiscussing how difficult, but desirable, it would be to reform our healthcare system. Here is a summary of his main point (see page 2) regarding the absence of well-functioning healthcare markets.

Such markets do not emerge, not because of deep-seated market failures, but because our current web of health care regulation forbid them from doing so. But deregulation is not easy. The impediments to well-functioning health care and insurance markets go deep in to federal, state and local law, regulation, and practice. And the pieces are linked: Greater competition, innovation and entry by suppliers, greater control by consumers, and insurance innovations that cure the current mess each need the others in order to function.

Clearly he argues that government policy prevents the formation of markets. As an example, I pointed out in an earlier post that Medicare prevents advertising of prices which is a feature of any competitive market system. So one must conclude that true reform is difficult to carry out, no matter how desirable, because so many government policies need to be changed.

This paper is a highly-recommended read and is nontechnical in nature so it is appropriate to non-economists wanting an economist’s views on this subject.

Accountability in Government

November 6, 2013 Leave a comment

I find it infuriating to hear Kathleen Sebelius and the President talk about being accountable for the Obamacare web site fiasco. The fact is neither one is accountable for this disaster.

Accountability requires that something bad must happen to an employee who is incompetent. That unpleasant event is usually being fired for nonperformance. As far as I know, Kathleen Sebelius did not get demoted, she did not take a pay cut, and she did not get fired. If Sebelius wasn’t fired, that must mean she is doing her job well and that job must not include creating a usable web site for Obamacare. Imagine that this fiasco happened to Amazon or Google. People would have been fired on day one. As far as I know, nobody experienced any damage to their careers as a result of this web site mess. Thus one can only conclude that there is no accountability at all but, to the politicians making the mess, it sure seems like a good talking point to pretend that they are accountable.

This seems to be the standard operating procedure for the Obama Administration. They talk but they don’t act. Maybe somebody should tell the President that we expect him to act. Want to know why government is so incompetent? Lack of accountability is part of the answer.

Categories: Obamacare
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