Posted by on December 18, 2019 8:08 am
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By George Landrith,  Frontiers of Freedom


Government mandated price controls do not work. The intentions of Members of Congress when passing such government mandated price controls may or may not be good, but intentions are not the issue. Even if their intentions are good, the results will not be. That is the bottom line.  


Applying these facts to healthcare is critically important. For this reason, it is deeply troubling that Congress continues to move towards government mandated price controls as its “fix” for surprise medical billing issues.


Surprise medical billing is potentially an issue when a patient who has insurance sees an out of network doctor or facility. When this happens, the facility or doctor can bill the patient for the difference between the typical invoice amount and the discounted amount that the insurance company has agreed to pay. This happens most frequently with emergency room visits, but only about 1 in 5 emergency room visits result in such a surprise billing problem.  


In other words, in 4 out of 5 cases, the healthcare provider and the hospital have worked out a reasonable fix already. Nonetheless, while rare, it can be a big headache for the individual presented with a very large and unexpected medical bill.


Congress seems to have decided that if they create price controls that will solve the problem.  However, this shows that Congress has not learned from history; and that they fail to grasp even simple economic truths. Government mandated price controls create scarcity and distort market incentives. They also reduce innovation and impose negative unintended consequences.


Not only will the economic consequences be harmful, but in vulnerable underserved areas, including rural areas, this could be a deathblow. These areas are already weakened by federal healthcare mandates. For example, only 11% of America’s doctors practice in rural areas, but those areas account for 20% of America’s population. Government mandated price controls will only exacerbate these shortages.


There are ways to fix this surprise billing problem without all the negative and unintended consequences. As already stated, in 4 out of 5 cases, or 80% of the time, healthcare providers and insurers have already worked out the solution to spare the patient any negative surprises. And for the remaining 1 in 5 or 20%, both states and hospitals have powerful market-based incentives to fix this problem. 


This has the advantage of encouraging and preserving the incentives of healthcare providers and hospitals to negotiate and work out the issue in a cost effective manner while protecting patients from surprise medical bills. It will also promote continual price savings through ongoing market incentives — rather than locking prices at a government mandated level that both distorts markets and reduces incentives to find greater efficiencies in the future.


If heavy-handed, federal mandated price controls are put in place, both the states and hospitals will be locked out of finding innovative, market-based solutions that fix the problem and avoid all the heavy costs and burdens on patients and healthcare consumers that inevitably follow government mandated price controls.


Lowering healthcare costs can, and should, be done within a free market framework. That will both lower costs and encourage innovation. The truth is that those Republicans who support government price controls in this context are unwittingly aiding those who seek a complete government takeover of healthcare with a single-payer system. This, of course, would drive healthcare quality down, and deprive patients of needed healthcare as government lowers costs by rationing healthcare (i.e. delaying or denying treatment).


We must not forget that President Obama and Vice President Biden and their allies in Congress repeatedly promised that they had a plan that would save us all thousands of dollars every year, and allow us to keep our healthcare plan, and keep our doctors. Obviously, Obama and Biden and Nancy Pelosi’s Congress failed to deliver on those promises. It was the lie of the year as judged by even liberal fact checkers. Literally, millions of Americans lost their preferred plans, were forced to find new doctors, and virtually everyone saw their health insurance costs increase dramatically — not decrease by thousands.


So when Congress promises us that they have a new “fix” to a new healthcare issue and that it will save us money and cause no other problems or distortions, we are justified in being deeply skeptical. Their track record is bad!


Maybe they are lying to us. Maybe they are just terribly mistaken. Either way, we end up paying through the nose and having our healthcare options limited. Quality suffers. Innovation is limited and curtailed. And their failures are always used to justify more of the same in the future. 


As Congress rushes at year’s end to do something about surprise medical billing, we should be doubly skeptical. Remember, in 2010, Speaker Pelosi — speaking of the hastily negotiated Obamacare bill that was going to save us all thousands — told us, “We have to pass the bill so that you can find out what is in it, away from the fog of the controversy.” But despite all the glowing promises, what we got was a disappointing and costly mess.  Likewise, Congress’s efforts to “fix” surprise medical billing as the legislative year ends should give us all great pause.  No good will come of this! 


George Landrith is the President of Frontiers of Freedom a public policy think tank devoted to promoting free markets, individual liberty, and constitutionally limited government.  Previously, Landrith served as the Vice President and General Counsel to the National Legal Center for the Public Interest — now associated with the American Enterprise Institute.