An Economics Lesson for Paul Ryan

March 13, 2017 By: El Jefe Category: Healthcare

Paul Ryan was on Face the Nation yesterday morning talking about the Republicans’ new anti healthcare bill they’re trying to sell to the American people.  Host John Dickerson tried numerous times to get Ryan to acknowledge that millions will lose their healthcare and that all major medical associations are opposing the measure.  Ryan engaged in his now familiar obfuscation with a big smile, repeating this most often used mantra of giving people “choice” and fostering “competition” in health care delivery.

Here’s the problem with the Republicans’ key economic assumption in their ideology.  Choice and competition come from a functioning free market.  You can call our healthcare delivery system in the US a lot of things, but “free market” is not one of them.  Here’s why:

Over 30 years ago, Michael Porter of the Harvard Business School developed a model to describe markets.  In his model, he describes 5 essential forces that control markets.  To be a fully functioning market, the power of buyers must be in parity with the power of the sellers.  At the same time, buyers must have alternatives from existing competitors, and those competitors must be continually under threat from new entrants into the market as well as new products or services that can substitute for the product already being sold.  An example: You want a car; you have numerous choices between new and used, expensive or thrifty.  You can buy online, you can buy from individuals, you can buy from numerous dealers.  You can check prices online, making the market relatively transparent.  As well, you can choose when you buy that car.  Or you can buy a motorcycle.  Or you can not buy a car and take Uber.  This market balance represents a relatively free market, subject to truth in advertising and financing laws.

Now, let’s look at our healthcare markets: Sellers (insurance companies and healthcare providers) dictate coverage and pricing.  The polices are intentionally complex and pricing is completely opaque.  In most Americans’ cases, EMPLOYERS pick which plan their employees can buy.  In this market, the sellers hold all the power and the buyers have only the choices that are dictated.  Additionally, the insurance markets are protected by state agencies, making it very difficult for alternatives to get into the market.  To make matters worse, when you’re sick, the LAST thing you have time or the inclination to do is price shop for healthcare.  Removing the market protections the ACA provides puts individual buyers at  the mercy of this cruel government protected market.  Republicans are trying to jam free market ideology into a market that is anything but free.  The cabal of insurance companies and healthcare delivery companies is impossible to to fight, especially by individuals.

So, with these clear market realities that make the Republican plan unfair and unworkable, what does that say about Paul Ryan’s argument for his plan?  There are two possible answers: 1) Ryan is stupid with no understanding of the realities of markets; or 2) He’s a lying sack of sh*t (sorry Momma) who is looking out for his base and the interests of his largest donors to the detriment of everyday Americans like you and me.

I’ll take Door Number Two, Alex.