Sunday, November 3, 2013

What government schools can teach us about government healthcare

Up with teachers, down with doctors?
One of the points made in favor of single-payer healthcare is that the government can use its "monopsony" power to reduce provider prices below market levels. Is that a sound argument? Let's think about another "single-payer" government function: public education. As I wrote recently for Forbes:
...The government clearly does not try to underpay for education. Quite the opposite, in fact. Spending more on schools is a perennial promise made by politicians of all stripes. Per-pupil expenditures have more than doubled in real terms since the 1970s, while test scores have barely budged. If single-payer systems are always effective at depressing prices, our public schools didn’t get that memo.
But if government did succeed in underpaying for services, would that be a good thing? In the context of public education, advocates of larger government would clearly say no.
It’s easy to see that there would be downsides to the “savings” generated in that scenario. If schools paid too little for teachers, the government would be unable to recruit and retain the best ones. Teachers (and principals and textbook writers) would increasingly leave the public schools rather than be paid below the market rates that their skills are worth.
This point is surely understood by those who constantly push for more school spending, particularly on teacher salaries. They never suggest that the government’s education monopoly could be an instrument for spending less rather than more.
There is a remarkable inconsistency here:
Imagine a politician proudly advertising his new plan to underpay teachers! Yet this is the argument made by single-payer healthcare boosters, with the word “doctors” implicitly substituted for “teachers.” The Economic Policy Institute (EPI), for example, has published several studies arguing that public school teachers are somehow paid below market levels, and that this has dire consequences for classroom learning. But EPI also touts its public health insurance plan, which would use “concentrated purchasing power” to force provider prices below market levels. In other words, underpaying teachers is bad, but underpaying doctors is good.
This irrational "up with teachers, down with doctors" mindset calls into question the entire cost-saving justification for single-payer healthcare. Read the Forbes piece here, and also see my blog post for National Review on the same topic.

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