James Capretta warns in an American Enterprise Institute column that deregulating individual health insurance will not lead to lower costs.
Many Republican policymakers in Congress and some officials in the Trump administration continue to confuse insurance deregulation in the individual market with unleashing market forces in health care. They are not the same thing. Thinking otherwise leads to misplaced emphasis on ideas that might help some insurance enrollees in the short-term but will have very little effect on their lifetime costs.
The primary problem with the provision of medical care in the U.S. is the absence of an overall system of cost discipline. Unlike other sectors of the economy, medical services are not bought and sold in a well-functioning marketplace that rewards value, innovation, and efficiency. There are many reasons for this, including the large imbalance in information between suppliers of services and patients, which leads to market failure. Further, despite the existence of many government rules for health insurance and the provision of medical care, the U.S. also does not have effective regulatory control over total costs. Instead, what we have is a mishmash of large public subsidies for insurance enrollment, government regulations, and some private activity and incentives too.
Unfortunately, the sum of these parts does not add up to a coherent whole. Instead, U.S. health care suffers from rampant waste, inefficiency, high administrative costs, and uneven quality.
