Placebo - Why the Democrats' Proposals Will Not Work | Michael F. Cannon | Cato Institute: Commentary

Placebo - Why the Democrats' Proposals Will Not Work | Michael F. Cannon | Cato Institute: Commentary: "Universal coverage is impossible without coercion; that's why the leading Democratic proposals would force Americans to obtain health insurance, either on their own or through an employer. Those who do not obtain the prescribed level of coverage would pay a fine. Those who do not pay the fine would go to jail."

"employer mandates 'are like public programs financed by benefit taxes': They can increase unemployment, work against the very people they purport to help (i.e., low-wage workers and the sick), and 'fuel the growth of government because their costs are relatively invisible.' Economists Kate Baicker of Harvard and Helen Levy of Michigan estimate that, by effectively increasing the minimum wage, an employer mandate could kill 315,000 low-wage jobs. Unlike the hundreds of thousands of jobs lost to the current recession, those jobs would not return"

"here's zero evidence that anything beyond a basic health plan actually improves health outcomes, yet the individual and employer mandates gradually make coverage less affordable by outlawing the leaner, less expensive plans. (If Congress enacts these mandates, we can say goodbye to health savings accounts as we know them.)"

"Despite Medicare and Medicaid's failure to contain health-care costs, the Left claims that one more government program ought to do the trick."

"Thus the $1 billion in the stimulus bill for "comparative effectiveness" research — which would help government bureaucrats decide, e.g., whether Mom's next round of chemo (in the words of a draft committee report on the stimulus bill) 'will no longer be prescribed.' Massachusetts has created a commission to help the government develop a 'common payment methodology across all public and private payers,' including the use of 'evidence-based purchasing strategies' — code for explicit government rationing."

"A government-controlled price is almost never right. Price controls are responsible for both the current surplus of specialists (because prices are too high) and the shortage of primary-care physicians (because prices are too low). Medicare and Medicaid price controls are generally not binding on private payers, though they do influence overall supply. That's one reason, for example, many Massachusetts residents — particularly those newly insured under the Romney plan — are facing long waits for primary care.

Price controls enable a veiled form of government rationing: If government sets the prices low enough, many doctors won't participate, which creates non-price barriers to access. States set Medicaid's prices so low that nearly half of all doctors limit the number of Medicaid patients they will accept. Some 20 to 30 percent refuse all Medicaid patients. Medicaid patients often travel hours to find a participating provider."

"Even setting prices too low can sometimes cause spending to rise: In 2007, Maryland's low Medicaid price controls kept Deamonte Driver from seeing a dentist for his toothache. (Only one in six Maryland dentists accepts Medicaid patients.) The infection in Driver's abscessed tooth, which could have been treated with a simple extraction, spread to his brain. That led to $250,000 of medical services, including two unsuccessful brain surgeries. Price controls do not contain costs so much as pretend that certain costs don't exist — like the loss of Deamonte Driver, who died at age 12, as the Washington Post put it, 'for want of a dentist.'"

"When the Left claims that government programs do a better job of containing costs than private insurance, what they mean is that government does a better job of hiding costs — such as the monetary and non-monetary costs it imposes on patients and providers. Pacific Research Institute economist Ben Zycher points out that the taxes required to run Medicare destroy economic activity, making that program's administrative costs 'between four and five times [those] of private health insurance.'"

"Medicare's 'fee for service' payment system, on the other hand, pays providers an additional fee for each additional service or hospital admission. That actually penalizes providers that try to improve those dimensions of quality. EMRs help avoid duplicative CT scans by saving and making accessible the results of previous scans. But Medicare will pay for a second scan. And a third. And a fourth. So a provider that invests in EMRs is not only out the cost of the computer system, but also receives fewer payments from Medicare.

The story with medical errors is similar, but more horrifying. If a medical error injures a patient who then requires additional services, Medicare will pay not just for the services that injured the patient but also for the follow-up services. That's right: Medicare pays providers more when they injure patients. Again, if providers invest in error-reduction technologies, they are not only out that initial investment, but Medicare penalizes them with fewer payments."