Feed on

When I was a kid I vaguely remember hearing Republican support for a “starve the beast” strategy to shrink government so much that it can be drowned in a bathtub. Someone forgot to tell the Republicans that monsters lurked in the drain. Think about Medicare. Its costs were growing faster, much faster, than projected until the turds hit the fan in the 1980s (at about the time we bailed out Social Security). In an effort to stop the bleeding, price controls were imposed – really the rates that the government reimbursed hospitals for was reduced. Now, you might think that being starved of funds would put pressure on Medicare to shrink or become more effiicient or for doctors to lower costs.

But it did precisely the opposite. What ended up happening, as we all would expect knowing what we know today, was a great cost shift. Indeed, the 80s seems to be a time when the rate of increase in US health spending moved out of line with other countries’ experiences. In this case, hospitals began charging more to patients with private insurance, which in turn put more pressure on private insurers to raise premiums but also to pursue unpopular cost-cutting strategies in response. Of course, think of how the voting population responds to this. “Look at the exorbitantly large increases in private insurance premiums!” Look at how evil insurers are! And of course, this greases the wheels even further for a discussion of both single-payer health care and perhaps even single-provider health care.

Now, there are forces that push us away from both single-payer and single-provider in health care, but it is clear to me that starving the beast (even if unintentional) has resulted in precisely the opposite of what its proponents would suggest. Maybe the better option would be to allow the beast to continue eating until the tax payments required to keep it alive would have spurred the population to wield a pitchfork. Is there a better test case for this theory out there?

Leave a Reply