Government run health care: Expectation versus reality

Posted by Marc Hodak on May 20, 2010 under Unintended consequences | Be the First to Comment

Travis Dove for The Wall Street Journal

There has been a lot of breathless speculation on both sides of the debate about what government-run health care would look like.  On the one hand, there are those who contend that it will provide universal access, guaranteed minimum benefits, and at a reasonable cost to the taxpayers–heck it will even reduce our deficit!  On the other hand, there are those who believe that the distribution of care will be politicized, that central planning will result in unfair and inefficient outcomes to both providers and patients, and that government rules will constrain rational trade-offs, making the system grossly uneconomical.

Well, Medicare is not a speculative program.  It’s been around for decades, and has had every chance to realize those savings and work all the bugs out.  Here’s the update:

Logically, states would cut the most expensive, least efficient services and keep the most cost-effective. But because of mandates and the need to save money quickly, that isn’t as easy as it sounds.

For example, home care—because relatives often provide some of the care—is generally cheaper than housing people with developmental disabilities in institutional facilities. In 1993, the average Medicaid cost for each person with disabilities was $48,500. At the end of 2008, the latest figures available, it cost an average $55,000. Adjusted for inflation, that actually represents a 23% decrease, largely as a result of more services being shifted away from costly institutions to the home, says Charlie Lakin, director of a University of Minnesota program that tracks services for the developmentally disabled. [Institutional care in South Carolina costs about $100,000 per person a year, compared to $39,000 for home and community services, according to the University of Minnesota research.]

But many in-home services, though critical to those receiving them, are optional. Furthermore, there aren’t many minimum standards set for in-home services, so it’s easier to cut them without violating funding requirements. There are fewer immediate consequences for the state when it cuts those services because families won’t generally abandoned disabled relatives and leave states on the hook for housing.

Cutting home care could ultimately prove penny-wise and pound-foolish, however. It could push more people into institutions or large group homes because that is where services are guaranteed, even though institutional care is more expensive.

And, by the way, Medicaid’s unfunded obligations run in the trillions of dollars.

The progressive’s answer is to expand such entitlements and mandates while promising, and perhaps really believing, that this will save us all money in the long run.  Because when I’m paying for your care, and you’re paying for mine, and the payments are filtered through a government bureaucracy, what else could one expect?