The Single-Payer Siren

[Draggingtree]

Hoover Institute

The Single-Payer Siren

by Richard A. Epstein

Monday, July 17, 2017

 

The United States is facing another crisis in organizing its health care system. It is clear that the private exchanges concocted under the Obama administration are failing at a record rate for the simple reason that they violate all known sound principles of insurance. The planners who put these programs together unwisely thought that universal coverage would overcome the standard insurance problems of adverse selection and moral hazard.

But that didn’t happen. Under the Obamacare plans, the insurers are allowed to compete only on the cost of providing a fixed set of government packages of mandated services. They have no power to select their own customers, or to charge those customers rates sufficient to cover insurance expenses. People are allowed to game the system by signing up just before they need treatment, only to leave once the treatment is received. The young dump plans that require them to pay for the insurance of the old. The old sign up in droves. Systems with cross-subsidies are inherently unstable. Yet the insurers are unwisely limited in what they can spend on administrative expenses, which unhappily limits their ability to recruit new customers or to monitor the behavior of their existing ones.