Wednesday, June 03, 2009

Reason's Ron Bailey On Regulated Health Care

Reason's Ronald Bailey has a wonderful little blurb on the Reason blog on the scary thought of health care as a regulated entity. Take a gander.

President Barack Obama is pushing for health care reform by October. One of his main proposals is the creation of a "public option insurance plan" to keep private insurers "honest." By "honest" Obama means that private insurers would have to compete with the public health plan by keeping their prices as low as the government's plan. So how would the Feds keep their prices low? By imposing price controls, explains the New York Times:

To help control costs, the administration indicated support on Tuesday for a proposal to strengthen a federal panel that recommends how much Medicare should pay doctors, hospitals, nursing homes and other health care providers.
Senator John D. Rockefeller IV, Democrat of West Virginia, recently introduced a bill that would expand the role of the panel, the Medicare Payment Advisory Commission, and give its recommendations the force of law. Senators said Mr. Obama and his aides had expressed general support for such a change, which would establish the panel as an independent rate-setting body in the executive branch.

This would basically turn medical care into a regulated utility. In other words, private insurers would have to compete with a government agency that could tell doctors, hospitals, and drug companies how much they are going to get paid, period.

How have price controls worked out in other areas of the economy? Not too well, at least with regard to electrical utilities. As one research report found:

...monopoly regulation appears to have stifled productivity and long-term innovation in the U.S. electric utility sector.

You can be sure that price control regulation will do exactly the same thing to health care innovation and productivity.

And don't you just love it. The way government insurance will compete with private insurers is by forcing health care providers to accept lower rates of reimbursement. And I know plenty of folks will regularly complain about drug companies making too much money, but has anyone been saying that hospitals and nursing homes are rolling in dough and driving up health care costs? Reason's Ron Bailey


Anonymous rose said...

That is scary stuff. How, in 2009, does our government still have no respect for the laws of economics. Price controls on agriculture, oil, rent etc. have all had disastrous consequences. Is there any example in history of price controls leading to positive outcomes?

I keep thinking LL, that 4-8 years of Barack Obama, especially with a democratically controlled house, actually makes it possible that a libertarian candidate could compete successfully in 4, or more likely 8 years.

He's going to seriously injur the economy. The next couple economic cycles will be brutal. I think that's fairly certain and it will happen on the watch of a guy who the consensus will eventually regard as a gigantic government ideologue, which will swing the pendulum hard in the other direction.

If we get hit with another terror attack, we're going right back to conservatives. But if he's modestly successful and the wars ramp down and terrorism is kept under control...that is absolutely setting the table for a libertarian to come in and offer an alternative bundle of free-markets and passive foreign policy.

Maybe just wishful thinking on my part. He might have enough people on the governments tit in 8 years, whether through entitlements, or union membership, that no failure will matter. There is also the issue that our generation is basically socialist. I dunno, food for thought.

3:00 PM  

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