Republicans believe forcing people to buy private health insurance as the place to reduce cost. Democrats believe that the insurance fee-for-service model is at fault.
For Republicans, the fix is the free market: people should buy whatever health insurance, or health care, they want and can afford. If all they can manage is cheap insurance with skimpy benefits, that is what they will have. By definition, costs are controlled. Republicans had no serious problem with the status quo before the Affordable Care Act (aka “Obamacare”).
Democrats believe the problem is fee-for-service medicine: doctors provide too many services because they are paid separately for each one. Therefore, the ACA creates Accountable Care Organizations (remember HMOs?) to “manage” care. These one-stop-shopping health care organizations are accountable to payers, not patients: they are to be given global budgets to deliver health care “efficiently” to populations. ACOs use modern management techniques to align physicians’ incentives (their term) with those of the ACO to deliver the “correct” amount of care, “value” instead of “volume”, at lower cost. Well, maybe.
To ordinary families, particularly one in the throes of a medical crisis, either approach looks like rationing. In a Republican world, insurance may simply not cover a costly service a loved one needs. A Democratic ACO may decide that a third-line cancer drug is too expensive for the extra month or two of life that it provides, on average, for a patient who has failed first-line treatments.
In health care, insurers are supposed to force down the price of health care services, so that they can compete for customers by offering lower premiums. But the real world rarely works this way: instead, insurers often pass along increased prices to consumers.
There is indeed vigorous competition among health care providers – hospitals, drug companies, doctors – but it is rarely competition on price. Instead, they compete on quality. A hospital claims it has the latest scanner; a drug company advertises a new, better painkiller. Such competition does not lower prices; it raises them.
There are many reasons medical markets fail: there is significant uncertainty about the science, we have a single standard of care (not Fords and Cadillacs), fearful people estimate risk poorly, trust matters. Moreover, many providers have market power and charge what the market will bear. Sick patients have little leverage.