Grudgingly, pundits on the left - including Ezra Klein - are starting to admit that Obamacare 2.0 "can't control costs."
The base insight is that providers -- doctors and hospitals, mainly -- have most of the leverage in the battle with insurers. If there's one hospital in town, then either your insurer cuts a deal with them, or you get another insurer. What you don't do is get another hospital.
The problem [of doctor and hospital "leverage"] is exacerbated by the fact that the insurer doesn't really care to negotiate lower prices. They tried that in the late ’90s, and everyone hated them for it. It turns out that workers don't feel the cost of their health care because they think employers pay it, and employers don't care that much about cost increases because they take it out of wages. Neither group likes premium increases, but they don't really care. But everyone screams if you tighten networks and review care. As such, providers have pretty free rein. That's part of why we pay so much more than any other country per unit of care.
Additionally, health-care reform is going to great lengths to avoid touching providers. Hospitals and doctors are simply too powerful to seriously anger. Insurers aren't.
Candid, but only part of the picture. Klein ends up concluding all this makes the "original public option" essential, as if such a beast would have some magical, para-market properties. His desire to "tighten networks and review care" is, of course, doublespeak for state price controls and rationing a la mammogate. But I'm still happy to see acknowledgement of a) the cost symptom and b) this bill's inability to treat it.
The cost problem is the big healthcare reform problem. And if Obamacare 2.0 isn't going to solve this problem, what does it amount to? Little more than a special interest bonanza loaded with mandates (public option or no). Klein, closing his eyes to the possibility that a freer market may be the only cure for current healthcare distortions, fails to diagnose these real problems. He focuses instead on an expensive government band-aid -- the public option -- and a rather septic one. Cost spirals are always a symptom of a government meddling. But in the timeless logic of the left, more government (i.e. more of the disease) will do the trick.
Take Klein's first point above about hospital and doctor "leverage". He points to an urban institute paper, which figures out the symptom of provider leverage, but fails to diagnose the diseases: Certificates of Need. These state policies give hospitals considerable anti-competitive power--because it's pure, government-created protectionism. And, of course, doctors are a licensed, protectionist guild. Instead of abolishing bad regs that give undue power to providers, Klein and the Urban Institute want a government panacea.
Atypically, they underplay insurer "leverage". But why? Health insurers do enjoy undue power due to government-created in-state monopolies. That doesn't make them evil, just protected. And yes, it's also easier for a monopoly to jack up a premium than negotiate a lower rate with a provider. But the reason we have dominant health insurers is still due to a lack of interstate competition and a crazy-quilt of state insurance regs (i.e.: government pathologies). Insurance monopolists use state mandates to create barriers to entry for market entrants in that area. Premiums go up.
The price of goods and services also gets distorted because of our preoccupation with third-party payment versus out of pocket. As David Goldhill points out so eloquently here, people who pay copays aren't bargain shoppers, they're cost-shifters. But if they were buying more plans on the individual market, they might not want Cadillac Cost-shifting Plans. (They'd be much more likely to choose HSAs and HDHPs, which control costs better than any other form because they're patient-driven plans.)
Providers and insurers - though they "negotiate" rates - are sort of like industrial colluders dividing the spoils of the economic distortion. These spoils come from the system of government design. And when consumers don't feel the full impact of their purchasing decisions, they don't shop. Prices go up. Premiums go up. We might gripe about premiums. But we'll go on shifting costs of Viagra and Nexium onto the risk pool, or paying for a $2000 CT scan that should probably only cost $400 if we had the incentive to shop. These system, and it's distortions, are government induced.
The distorting tax treatment of health insurance that encourages people to take employer health plans, makes things even worse, not only because it subsidizes wealthy employed people on the backs of the marginally employed, but it reduces competition and means people lose their insurance when they lose their jobs. From our WWII job-based, third-party-payer system, to the fact that I can't legally buy a cheaper policy in Idaho... government is the problem.
This healthcare debate shows that posturing against "corporate interests" is so often a convenient moralism to pepper on a weak argument. In fact, almost every major element of Obamacare works in the service of Big Pharma, Big Doctor, or Big Insurance. A 2000-plus page bill can only be filled with more distortions and more rent-seeking opportunities. It cannot control costs. It's refreshing, at least, to see the left is starting to admit this much, at least.