Why Pessimism About Healthcare Regulatory Reform Is Warranted: MA's Cost Control Clusterfoulup

Matt Yglesias writes the following about strict regulation of private health insurers versus a public option (italics mine):

Another thing is that I've been pondering this and I actually think it's wrong, on "a wonk level," to conceive of effective regulation of private insurance as a second-best alternative to passing a public option. Unless you're going to totally marginalize private insurance with a Canadian- or British-style system, the first-best alternative is to effectively regulate private insurance as they do in the Netherlands. Trying to introduce a public option is a second-best step that amounts to admitting that you lack confidence in the regulations and the regulators and are going to use the cruder measure of a public option in their place.

Let me ask the obvious question:

After watching what happened when a party in thrall to radical anti-regulatory ideology 'ran' the government for the last decade, does anyone think our regulatory agencies won't be captured?

Consider Massachusetts' ongoing attempts to control costs by moving to a lump sum payment per patient (as opposed to fee-for-service). No one can agree on anything, although if past experience is any guide, Partner's hospitals (the largest in MA) will make off like bandits. Paul Levy, the head of Beth Israel Deaconess (and who has championed openess in healthcare reporting--particular antibiotic resistance and infection control) says:

Some hospitals, particularly those that belong to the Partners HealthCare system, have been able to negotiate fees that are significantly higher than those paid to their competitors. Paul Levy, head of Beth Israel Deaconess Medical Center, is worried that those higher fees will merely be transferred to a new system, cementing current inequities.

Levy is advocating a return to government-set rates to solve the problem - a solution the hospital association opposes.

"Everyone should have the same global payment,'' Levy said. "Otherwise you'll still have the Partners hospitals making 30 percent more and they'll be embedded forever.''

For regulatory mechanisms to work, there has to be a broad and overwhelming cultural consensus that the stated goals of regulation are legitimate, otherwise political pressure will be brought to bear to undermine those goals (i.e., what is known as "regulatory capture"). But as radical anti-regulation ideology has become cojoined with the identity politics of white theopolitical conservatism, how is such a consensus even possible?

In the current political climate, where the Coalition of the Sane is simply trying to prevent the village from being run by the village idiot (to use Frank Schaeffer's phrase), the public option is the only health insurance reform option.