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Home Publications Blogs Beat the Press Security in Insurance: The Most Important Gain from Obamacare

Security in Insurance: The Most Important Gain from Obamacare

Saturday, 07 December 2013 08:38

Ezra Klein highlights the most important feature of Obamacare. People who have insurance now will be assured that they can still buy it if they lose it for some reason. This will make a huge difference to the bulk of the population who do already have insurance. They can now change jobs or even quit and still be assured of being able to get insurance at a reasonable price.

Comments (3)Add Comment
Is it a "gain" w/o cost controls?
written by bailey, December 07, 2013 9:32
Is it a "gain" if Buyers are price gouged? A principal reason we needed an ACA was to make Health Care affordable. What percentage of Insurance Buyers believe there's even a slim chance the same money hungry Industry that wrote this sham Bill will control Buyer costs? Sorry, maybe I'm too cynical. After all, they did promise to do this.
bailey, they are cutting costs by cutting out good docs and hospitals.
written by pete, December 07, 2013 10:21
Essentially, the new plans parallel medicaid, for which many folks must search for docs or get in line. Recall that the Oregon study revealed that having medicaid was no different than free county hospitals. So, these plans eliminate places and doctors who charge more do to higher quality. The upshot will be shortages of docs and hospital beds for some patients, no matter what Dr Emanuel says. This will keep costs low by what economists typically refer to as non-price rationing. Having ACA insurance does not guarantee lower cost high quality medical care on demand.
Price Rationing, Non-Price Rationing, Economic Rent and Health Care Cost
written by Last Mover, December 07, 2013 2:10
This will keep costs low by what economists typically refer to as non-price rationing.

Speak for yourself pete. Plenty of economists understand that for prices to ration demand, they must reflect opportunity cost.

When prices are loaded with economic rent (monopoly profit) as in health care, they ration nothing in terms of added value resources for that portion of price substantially and chronically above a price set by competition. Nothing is given up because there is no opportunity cost for charging it.

Stated differently, most (high) prices for most health care are not necessary to attract the resources in question into the health care field under free market competition standards. In the range of (excess) price where there is no opportunity cost, the same resources at a given quality can be attracted at a lower price.

In contrast, you are mistakenly comparing a monopoly price to a lower "rationed non-price" where a doctor leaves the latter for the former to provide "better" health care.

However, the rationed non-price is still a price, just a lower price with less or no economic rent, still accepted as a price ceiling by some doctors who voluntarily work for it. Those who refuse to accept it and leave to work for the higher monopoly price only do so to collect pure economic rent, at least on average.

Those doctors who work for the lower price give up only the economic rent as an opportunity cost, which is not a legitimate opportunity cost in terms of efficiency. Specifically, they do not give up a productive activity that adds value.

Whether those who work for the higher price can add any value at all beyond economic rent is highly questionable given well known widespread market failures that already plague health care (including the absence of competition).

The essential question is what "superior" doctors would earn in terms of added value in a truly competitive market compared to other doctors, absent collection of economic rent by either. Because of widespread market failure, prices charged for health care cannot answer this question.

This is why single payer can keep health care cost low with high quality at the same time, through "non-price rationing" which actually does use price to ration, by setting it administratively, but forcing no one to provide for it from the supply side. (If a shortage occurs that means it is set too low and vice versa for a surplus.)

In other words single payer does ration quantity of doctors through price, then rations quality through regulated qualifications. From there, doctors themselves ration treatment generally independent of price, for example in sharp contrast to highly expensive and inefficient fee-for-service treatment.

If there are "better" doctors who are unhappy with single payer prices because higher prices aren't available, they should leave the profession since no one is willing to pay them more for "better" health care that no one wants.

Don't blame single payer systems for paying prices that are "too low" and "cause" non-price rationing "shortages" by doctors who abandon them. Blame the monopoly prices that draw those doctors away in the first place, who already represent an artifial shortage in the first place, then ask what doctors would have shown up to supply health care absent those monopoly prices.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.