Obama Justice Department makes case against single-payer healthcare

They didn’t mean to, but officials at the Obama Justice Department have laid out the case against government-run healthcare. In filing suit against mammoth health insurance mergers, they’ve explained that reduced competition limits options for consumers, raises costs, and threatens access to care.  That’s exactly why a single-payer system would be a disaster for America.

The Justice Department is right: competition is good for consumers, and the government does have a legitimate role in enforcing antitrust laws. The recent trend in healthcare and health insurance markets, driven mostly by the Affordable Care Act (ACA), has been toward consolidation.

{mosads}But the Justice Department intervened against billion-dollar mergers between Cigna and Anthem, Humana and Aetna— together four of the largest insurers in the country — to try to preserve options for consumers.  The public should applaud this move and support more actions to reform public policies and foster greater competition.

First, a little background: Why are these gigantic companies attempting to merge? They’ve suffered under the ACA, losing billions of dollars in the law’s exchanges, where enrollees are sicker and more costly than they anticipated. The law requires them to write policies for any and everyone, and to price those policies blindly, without regard for the many factors that would typically dictate financial risk.

These large insurers have suffered, but they’ve survived: In this sense they are the fortunate few. Many smaller insurers have already shuttered their doors in the wake of the law’s expensive regulations and poorly designed structure.

The Government Accountability Office studied this phenomenon in 2014 and found that the average number of individual insurance plans available to consumers in each state shrunk from 36 to three in just two years, a 90 percent decrease. Even the non-profit Consumer-Oriented and Operated Plans (or “co-ops”) created by the law have failed at a rate of nearly 70 percent, mostly for the same financial reasons.

As expensive as health insurance plans are today, it’s hard for consumers to shed tears for insurance companies. Many people have had terrible customer service experiences with insurers who seem intent on charging as much and offering as little as possible. In some sense, our interests will always be opposed: Consumers want the greatest value for themselves, while companies are out to maximize profit.

However, consumers should recognize that the profit motive, when combined with market competition, can serve us well. When sellers compete, they attempt to undercut one another on price and outdo one another in the quality of services or goods provided.  If they fail to do so, then they will go out of business, meaning it’s in their interest to serve customers.

The problem with our current health system is not the profit motive, but a lack of competition. This problem would get worse in the wake of large-scale mergers, but consumers are already suffering from a non-competitive insurance marketplace.

The ACA effectively requires all plans to offer the same coverage, at levels that vary only according to the government standards of bronze, silver, gold, and platinum. In some sense, the only variation among insurance companies is the logo next to the plans they sell. This meaningless competition doesn’t offer real choice.

However, things could get worse. The ultimate lack of competition is single-payer, also known as socialized medicine, or most recently, “Medicare for all.” Put simply, this proposed policy change would replace private insurance companies entirely, instead using government funds to pay for everyone’s medical costs.

In this case, the government would function as a monopsony, with all the downsides spelled out in the Justice Department’s case against mergers between private companies: reduced competition, higher costs, more difficult access to care.  Moving to a single-payer system would make it harder, perhaps impossible, to change laws in the opposite direction to encourage greater competition among private companies.

It’s likely tempting for many consumers, burned by the ACA’s disappointing results, to trade one bad, government-centric approach for another. But we risk learning the wrong lesson from the ACA if we blame private companies, rather than a lack of competition, for the law’s failure.

The Justice Department is right that competition is the key to providing consumers with some control on price and some leverage in the marketplace. But we can’t just stop at preventing mergers; we should apply this lesson more broadly and reform our healthcare system to better foster a more robust, competitive market with consumers at the center.