price controls

Let’s put aside our right-leaning suggestion box for a moment and put the challenge straight to the left as follows… (Warning: intellectual honesty check.) Will your bill:

1. Control Costs? If you have any third-party payer system, you’ll have a situation in which people overconsume. Because they have no incentive to be bargain shoppers, they won’t shop for bargains. Costs will continue to go up. Subsidized healthcare ensures people will continue consume more of what they don’t have to pay for directly. That’s the major driver of costs in healthcare. How will you deal with this problem—which is the main problem (not “administrative costs”?)

2. Avoid Using Price Controls? Bureaucrats determining prices will, as it always has, mean gross distortions (that whole supply and demandt thing). In the absence of real prices, resources don’t get allocated properly, because prices are a way to deal with dispersed, complex information. This is the problem we saw in the Soviet Union and it’s a major problem for the Canadian system. Will your system use price controls?

3. Avoid a Special Interest Bonanza? Any subsidized, government-provided reform will mean healthcare becomes a Freddie and Fannie phenomenon. Private companies that serve the government insurer will become special interests. They will game the system and rape it, as they have in so many other spheres of our life when colluding with government. Their prices will go up (unless controlled) and their profits will remain private. Losses will get covered up by continued subsidies and cost-shifting through higher taxes. This may also mask the cost-spiral (for a while). Eventually, heavy rationing will ensue or taxes will go through the roof. Is this bill healthcare corporatism?

4. Avoid Rationing Healthcare (Limiting “Access”)? If the government really wants to control costs, it will have to ration care. The problem is, we need a system in which individuals ration their own care, not bureaucrats with little or no connection to the individual. I ration my own healthcare (by shopping with my HSA dollars) and I prefer to keep it that way, despite the protestations of leftish types who believe they can make better decisions about my healthcare than I. Rationing means quality goes down and access gets limited.

5. Avoid More Deficit Spending? President Obama seems to be betting on energy taxes (cap and trade) to pay for what would amount to massive increases in government spending on healthcare. If the cap and trade bill doesn’t pass, will the government be able to pay for healthcare reform by simply cost-shifting to the wealthy? Or will taxes go up for everyone and big time rationing happen? The American people are at their end with the record deficits. Are you willing to push the envelope?

If your healthcare bill can’t pass this simple 5 question test, it’s not a good bill.