Biden’s big Medicare expansion would not curb rising health-care costs. This is why

More is not always better.

The market for health insurance is a case in point. Increasing coverage can lead to higher costs or other problems.

Medicare insurance coverage for seniors has long been one of the most popular government programs. This health benefit will be expanded under the $3.5 trillion budget resolution bill making its way through Congress, but there’s no evidence this will improve the health care market.

Peter Crabb

We can learn from past experience that expanded health insurance coverage doesn’t lead to lower health care costs. The Patient Protection and Affordable Care Act led to a significant drop in the number of people without coverage, but costs continue to rise faster than average prices.

Economic theory and evidence explains this unfavorable market outcome. Only greater competition in the market for health care providers and the market for health care insurance will increase services and hold prices down.

In any competitive market, suppliers have to keep prices low and offer quality service to survive and prosper. When there are barriers to entry, there is little competition and little incentive to provide good service.

Local “certificate of need” policies around the nation limit the number of hospitals and other medical facilities that can be built. Additionally, legal restrictions on how Idahoans purchase health insurance reduce the consumer benefits of competition.

Under current law, insurance companies must set up separate firms with different policy offerings in each of our 50 United States. Interstate competition has improved efficiency and raised consumer value for many different types of products, but consumers of health insurance have been denied these gains.

Absent the opening of these markets to more competition, some simple rule changes could increase transparency and competition. For example, since hospitals currently receive government funding of one type or another, their accounting records should be open to the public. Subjecting these organizations to public audit will increase the incentive for cost controls and improve consumers’ ability to understand prices.

There’s really no need for expanding government health insurance. The market for health care services will only improve with more competition and transparency.

Peter Crabb is a professor of finance and economics at Northwest Nazarene University in Nampa, Idaho. prcrabb@nnu.edu

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