My new column, second in a series, is up at Forbes. It is the second of a three-part series, and looks at incentives issues with Obamacare. A few excerpts:
In the late 1960s, as part of the Great Society program, the US government constructed huge government housing complexes, with the goal of guaranteeing that everyone, no matter how poor, would have access to housing. By the turn of the century, most of these complexes had succumbed to the wrecking ball -- the era of large public housing complexes was over.
Why? Well, there were a lot of reasons the program failed, but a big one was faulty incentives. By getting free housing, recipients had no "skin in the game," no ownership, no financial participation in their housing. As a result, many treated their taxpayer-funded abodes with contempt. Why not? They weren't paying for it. And if the property was in good shape at the end of the lease, they didn't get any extra money.
I often compare Obamacare to the great failed public housing projects by warning folks that government health care is going to be much worse. With the housing projects, we taxpayers paid large sums of money but only a few actually had to live in the horrible government apartments -- at least most of us were able to keep our own homes. With Obamacare, it is going to cost us even more money, and we are all going to have to move, figuratively, into the projects.
If we are all forced to have the same, low deductible, first-dollar health plans, what incentive is one going to have to stay out of the health care system, even for something minor?
I also talk about the incentive for drug development
Look around the world today -- not one country with a government health care system pays drug reimbursement rates at a level that provides any incentive for new drug development. In fact, almost all of the world's health care R&D is paid for by Americans. What happens when politicians, trying to close an exploding health care spending hole in the Federal budget, do exactly what every other country in the world has done and use their power to drive drug prices down to marginal cost?
In fact, to be confident that there will continue to be health care innovation in the future at all, one has to believe that the US Government will act completely differenlty in running its government health care system than does every other government in the world, despite the fact it will have the incentives to behave identically to all of them. Is this a bet you feel good about?