Rush Limbaugh’s take on the disastrous rollout of the Affordable Care Act could, ironically, warm the hearts of those at the other end of the political spectrum. He contends that President Obama knew all along that the Affordable Care Act would crash and burn, but pushed it through so that the conflagration would clear the way for single-payer health insurance.
The conspiracy charge sounds deranged, but problems with the new health insurance system may indeed revitalize demands for more substantive reforms, which many policy makers and voters set aside in the putative interests of political pragmatism. Whatever the advantages of a single-payer system such as that currently administered by Medicare, one view held, American voters were unlikely to get behind it.
Yet one of the greatest advantages of a single-payer system — its relatively low administrative costs — has been thrown into sharp relief by problems registering with the new health exchanges. Andwhile Republicans despise the Affordable Care Act despite its conformity with many of their earlier proposals, their proposed changes (other than simple rollback) look complicated, kludgy and costly to administer.
The malfunctioning website has magnified problems inherent in coordinating enrollment across many different companies in many different exchanges in cooperation with many different government agencies. The harmonization challenges are orders of magnitude greater than those faced by a single company or a single state, making streamlining difficult. Improved software can do only so much.
In theory, competition and choice should increase efficiency. In practice, health insurance companies are able to take advantage of the complexity and uncertainty surrounding health care choices to make comparison shopping very difficult.
Lack of clear information about the prices of medical procedures, combined with a proliferation of insurance options whose potential benefits will be strongly affected by unpredictable events (such as being involved in an automobile accident or developing cancer), put consumers in a weak position.
The process of negotiating relationships with new health care providers because old ones are “out of network” is physically and emotionally exhausting. Insurance companies benefit from promoting policies that are difficult to understand and make consumers fearful of any change in their coverage. That fear and aversion has spilled over into the transactions required for many people to benefit from the Affordable Care Act.
David Himmelstein and Steffie Woolhandler, co-founders of Physicians for a National Health Program, regularly assert that elimination of the huge paperwork and overhead imposed by private insurance companies could save enough to cover the estimated 31 million of Americans who will remain uninsured under the Affordable Care Act.
My fellow Economix blogger Uwe E. Reinhardt, expanding on this theme, notes that the Institute of Medicine of the National Academy of Sciences recently estimated excess administrative costs of $191 billion, again more than enough to attain truly universal health care coverage.
Most such estimates are limited to the monetary costs incurred by insurers, doctors and hospitals and don’t include the value of the time that health care consumers must devote to managing a torrent of inscrutable paperwork that can become truly frightening for the critically ill.
Even if its rollout becomes more expeditious, the Affordable Care Act does little to reduce the incentives that companies have to barricade themselves behind high information and transaction costs. In the financial sector, I previously noted, this perverse incentive is described as “strategic price complexity.”
A complicated new program applied to a complicated old industry makes it hard for everyone to figure out exactly what they will be getting relative to what they are paying. As a result, many ordinary people and small businesses fall prey to redistributional paranoia.
Accusations of ripoffs proliferate, along with assertions that the Affordable Care Act is unfair to young people or that it simply represents transfers from the affluent to the poor, or from whites to people of color.
The program clearly has redistributive impact, but much of it will be muted over the life cycle. People who pay more for their insurance will get more benefits in return. The biggest transfers will go from the healthy to the sick (who are sometimes poor precisely because they are sick) and from one part of the health care system (emergency room care) to another (insurance-covered routine care).
But the structure of the program seems unintentionally designed to intensify distributional conflict. Its highly means-tested subsidies create strong political resentments and contribute to very high implicit marginal tax rates on lower-income families.
A single-payer insurance system, whether based on an extension of Medicare or on the Canadian model, promises many profoundly important benefits. Right off the mark, it promises simplicity.
No wonder conservative pundits are afraid of it.