Healthcare and monopoly – localism edition

Russell Arben Fox asks:

How should a distributist or localist or communitarian in America feel about proposals which would attempt to provide the same sort of equalization which Democratic party reformers are squawking about, but do so solely on a state-by-state (or perhaps region-by-region) basis?

Just more of the same? No different from any other kind of centralization? Or different in degree, but not in kind?

First, you have to remember that successfully reorienting our healthcare system requires two things: cost-sharing pools and competition.  We need to do two things to achieve this:

1. National sale of insurance so that insurers can scrap together larger cost-sharing pools (which lead to lower premiums) and drive harder bargains with healthcare providers and suppliers.
2. An end to anti-trust exemptions so that health insurance consumers have choices and the industry can’t fix prices.  Consumers of healthcare especially need the freedom to exit if they are unhappy with their insurer.

I think many localists and states’ rights advocates miss the larger picture when they advocate for more state control of health insurance.  For one thing, many of the problems we currently face are rooted in state-based monopolies in the insurance industry, largely due to the restriction on interstate sale of health insurance and the anti-trust exemption these companies receive.  This also leads to overcharging from the supply side and consequently unaffordable healthcare for many Americans.

This is a confusion of scope and scale.  Simply because something is able to be sold on a national level does not mean it is in any way more or less “centralized” than if something is sold locally.  The problem arises when monopoly or tyranny exist, not simply when something is very large.  For instance, a local grocer could very well constitute a monopoly if it were the only grocer in town.  It could then wield monopolistic power over the local community, driving up prices and driving down quality of goods and services.  The same is true of healthcare.

The same is true of government, actually.  A local government can be every bit as tyrannical as the federal government.  (Think of the Sheriff in the excellent Clint Eastwood film Unforgiven, for instance.)  It isn’t enough to say that something is simply small or local.  The existence of some sort of competition or choice must also exist.  The scope of the local grocer or local sheriff’s power may be very great within its limited region, and regardless of that limited scale.  Conversely, a nationally competitive insurer may be large in terms of scale, but have a much more precarious position of power due to its competitors in the market.

There are many things that should be decentralized in both scope and scale.  The provision of healthcare itself, for instance, is best handled at a local level.  Doctors and community health clinics and the entire healthcare community can function at that local level quite well.  Often there are enough providers in a community for some competition to naturally exist.  This discussion is and always has been more about the insurance side of things.  And yes, of course, the insurance side and the supply side are intertwined, but they are nevertheless very different pieces to this puzzle.

In sum, it doesn’t really matter where the centralization occurs or on what scale.  Centralization can lead to monopoly and monopoly is bad for everybody. Whether we are limited to one national insurer or one local insurer makes little difference.  Therefore we need to exploit the strengths of the insurance model by creating a national marketplace that is at once able to sustain large cost-sharing pools and also be highly competitive.  This doesn’t go against the grain of localism.  This creates a more affordable healthcare landscape for consumers, and creates a less byzantine medical system that should be good for providers of healthcare services as well.

In the end it should lead to stronger communities less burdened by healthcare costs and better able to focus on other pressing local issues.