The political economy of health reform: Price regulation vs. regulated competition

James Capretta
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James Capretta: American Enterprise Institute

AEI Economic Perspectives, 2021

Abstract: The US has mature health-sector institutions and long-standing insurance and care arrangements that limit the scope of potential future reforms. The realistic path is incrementalism one way or another: toward either tighter government regulation of prices paid for insurance and services (especially in private insurance) or a structured market that leads the sector's suppliers of medical services to set competitive prices on their own. How each option would fare when implemented through the nation's actual political and administrative processes is an important consideration. Medicare and Medicaid reveal that payment regulation can produce the desired reductions in spending but also lead to special-interest influence and rigidity. A structured market, with the right safeguards, can deliver strong results by self-correcting and being more resilient to outside manipulation. It will only be adopted, however, if consumers believe it will lead to financial benefits and no risks.

Keywords: AEI Economic Perspectives; Health Care Policy; Health Care Reform; Medicaid; Medicare (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2021
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