Most politicians in Washington are too polite to say they are for government-imposed price controls. The idea of the government telling companies that they have to charge a certain amount for a product or service strikes most Americans as, well, un-American. But price controls are an easy way for congressional policymakers to tell people they are solving an immediate need, and it has the benefit of being scored the right way by the Congressional Budget Office. What happens is price controls take on all sorts of aliases. The most common euphemism this year is “government arbitration.”
We saw this recently in a plan advanced by House Ways and Means Committee Chairman Richie Neal. In a September 2019 letter reported by Politico, the Massachusetts Democrat proposes establishing a committee composed of “stakeholder groups” (read: insurance companies, hospitals, and providers), as well as officials from the federal departments of Health and Human Services, Labor, and Treasury. This committee would serve as a kind of price control politburo, deciding what rates health providers and hospitals could charge, how much insurance companies could pass along as “balance bills” to patients, etc.
What Neal is responding to is the very real problem of “surprise medical bills.” This happens when a patient chooses to receive medical care at a hospital which is “in network” for purposes of the patient’s health insurance plan. While there, and usually without advance warning, the patient receives services from a medical professional (like an anesthesiologist) who is outside the patient’s health insurance network. Our patient then months later receives a giant “balance bill” on account of the out-of-network provider they never chose and had no say in. It’s fundamentally unfair, and it’s an issue that states and healthcare providers are grappling with.
The correct answer in such a sticky situation is for the national politicians to keep their noses out of it. But that’s not realistic, and there are no easy answers. Enter from stage left a government price control, aka a “committee” with “negotiation” and “arbitration.”
We also see government-arbitrated pricing in H.R. 3, Speaker Nancy Pelosi’s signature drug bill in the House. It imposes government price controls in the form of government “negotiations” on up to 250 prescription medicines. Failure to accept the government price control means the imposition of a 95% excise tax on the sales of the drug.
Some choice! The rock of price controls vs. the hard place of a 95% tax.
Getting back to Neal’s price controls as a response to “balance billing” and surprise medical bills, it’s important to see who the winner is here: Big Insurance. If the government says that a medical provider can’t charge more than a certain amount for a service, it means that insurance companies are capped in what they have to pay that medical provider. In essence, Neal’s approach is a collusion between Big Government and Big Insurance.
When the government imposes prices (either directly, or indirectly through polite-sounding “committees”), it’s a building block of “Medicare for all” laid down for all time. Setting a rate and fixing a price are synonymous terms. When the government controls how much a doctor, drug company, or medical specialist can charge for a product or service, they have all but socialized that industry. It’s no better than your local utility board telling the electric company what your bill can be that month.
The result of price controls is that medical services will become less available (since the market can’t set a price to give everyone an incentive to participate). Less availability means scarcity. The government will then have to ration who gets the scarce care and who has to go without. If that sounds familiar, it should — in another time and place, these committees were referred to as Obamacare “death panels.” That’s the endgame of “Medicare for all” price controls like what Neal and Pelosi are proposing.
Imagine a future where President Elizabeth Warren’s cabinet secretaries are in charge of pricing the cost of your hospital visit, your annual physical, or your prescription medicine. If that doesn’t sound appealing, the price controls that make that future happen should be opposed in the here and now.
Ryan Ellis (@RyanLEllis) is president of the Center for a Free Economy.
