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Tuesday, July 08, 2008

WSJ editorial carries foward theme of Medicare as a harbinger of what a single payer would be like

Recently, I wrote that if you wonder what a single payer for medical care in this country would be like, all you need to study is how Medicare is working now. This same idea is expressed in this editorial from the Wall Street Journal. If you want to look at a real life example in the U.S. of what you may have learned in your Economics 101 class about price controls, all you need to study in how Medicare works.

WSJ says this:

The fight over doctor fees [the current annual dance over cuts in Medicare physician payments] is merely an appetizer for such a system, where competing interest groups would clash for their share of the spending pie. Highly politicized Medicare-like price controls on providers and services would spread to every health decision. The result would be rationing and declines in quality of care.

The writer explains:

As a virtual monopoly, Medicare uses a complex formula to set reimbursement rates for thousands of services. In short, it controls prices. That's why doctors are supposed to eat a pay cut, even though everyone knows this would prompt more doctors to stop seeing Medicare patients. But price fixing is the way that an open-ended entitlement like Medicare – which gobbled up $432 billion in 2007 – tries to control spending.

Thomas Sowell said that ignoring basic economic ideas is about as realistic as ignoring gravity in this essay on price controls. Medicare is all about price controls and rationing.

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