8/27/2009

Competition: Grocery Wars

From deep in flyover country, RSP's home of Chicago, IL to be exact, comes news of a vicious price war between grocery stores Jewel and Dominick's. So vicious in fact, Dominick's has cut prices up to 30% on what the company is calling "things the typical shopper will have on their list." Think staples, not impulse buys (exactly the wrong place to cut price).

Grocery stores are among the most competitive industries on Earth. The largest chain in the U.S. has net pretax margins of 2.5%. You can't go more than three weeks without food, but if you're willing to play catastrophe roulette, you can go three weeks without health insurance. So why is competition good at keeping costs down for something you absolutely cannot live without (food) but not good for something slightly lower (health insurance) on the hierarchy of needs?

Real competition in health care and health insurance (they aren't synonymous, mind you) isn't on the table. Because we've convinced ourselves health insurance is pre-paid health care we ignore how we're stoking demand for health care, raising costs for everyone. That's on top of defensive medicine and Medicare's fee-for-service model, which, amazingly, creates supplier-induced demand. That's why the public option is faux competition. It's designed to snare, at first, the chronically unemployed, the uninsurable and the least healthy. Its premiums, in the absence of subsidies, will be higher than the private market. Which means it will be subsidized, either directly or through price controls. It also means, over time, legal barriers to private coverage to catch healthier/younger people in the public option's tuna net. Ask a public option advocate this: if I consent to the public option, will you consent to a side-by-side national, mandate free insurance market?

There are undeniable failures within health insurance, one of which flows directly from our employment based system: the uninsurable (your kid gets diagnosed with a financially catastrophic disease and then you're unemployed). Private ownership is imperfect too but it's a stronger bond than the third party problem created by our current employer model. This will distance me from my conservative brethren, but I believe government has a proper role in protecting some of the uninsurable.

How's this for a little health insurance reform: access to a means tested pool for the uninsurable, a national mandate free market (in addition to, not in lieu of, mandates) and ending the employer tax preference. Throw in subsidies for the poor and a refundable tax credit for the premiums for kicks. One other thing, too: provider price lists.

That's change we can believe in!

3 comments:

The Conservative Soldier said...

I only wish the Obamatrons actually cared about or desired reform. They simply want absolute control. But your proposals are excellent, nonetheless.

Johnny Keynes said...

I like the direction you are going. I actually heard a very sensible solution from a Dem this week (don't remember who). In admitting that the public option would not get done, he proceeded to suggest something the founding fathers would agree with 100%: that we find states that are willing to try to implement some of the suggestions that are being proposed today...Public Option, Co-Ops etc....and see what works. The state as incubator for gov't programs is used far too infrequently but the positives of doing so are too numerous to list here.

Anonymous said...

You could also consider countries with public health care as incubators. We could learn a lot from what has worked and not worked in Canada, England, France, Italy, Denmark, Germany, Spain, Czech Republic, Austria, Switzerland,....