We the People

Price Controls in the Public Option

BY RON MEYER

I have yet to see a comprehensive article completely dismantling the public option. The mainstream media seems to have missed another key issue in this health-care debate which puts all the pieces of the discussion together.

The missing-link in this debate – the role of price controls – paints a clear picture of the problems with the public option. It shows why the public option will lead to a single-payer system, and why a single-payer system would be bad for America.

Rahm Emmanuel and Barney Frankhave already admitted that the public option was designed to lead to a single-payer system. However, some liberals are still trying to hoodwink the American people by telling them they can keep their current insurance plans and their doctor.

The fact is — as Democrats will happily admit – this plan is designed to hurt insurance companies and will drive them out of business.

If the government demands that insurance companies cover anyone who applies without charging a higher rate, their costs will go up. Covering individuals with preexisting conditions is logically more expensive than covering a regular insured person. Insurance companies will charge everyone more to make up for these costs, raising everyone else’s rates.

Private insurance rates will go up even further because of the other price controls the public option will induce into the market. As it is already well-known, Medicare and Medicaid pay doctors at a rate set by the federal government. This rate is set well below what private costumers would pay and, in order to break even, doctors charge their private costumers more to make up for the lost revenue.

The public option would multiply this practice significantly. Once the government offers a free or heavily subsidized public option, many people would rather take the free insurance over their private plan. Therefore, doctors would be forced to take the public rate from many more costumers and would have no choice but to raise their private rates.

Another twist may arise when, in order to keep costs for the public option low, the federal government demands that doctors take even less for their services. In turn they will raise the private rates even more.

The public option really isn’t an option at all. I suppose in the end you may be able to keep your private insurance – if you’re willing to pay at least two or three times more than what you do now. The more likely scenario is that these government-initiated higher costs of private insurance will force us all onto the government plan and drive private insurance out of business.

Once we’re all on the government program, the big problem once again is price controls. If everyone is covered by the federal government, bureaucrats and politicians, just like in our current Medicare/Medcaid system now, would set all the prices for doctors’ services and medicine.

Most politicians believe that doctors and drug companies make too much money. Profit is a four-letter word to these people. Once the politicians control the prices, they will undoubtedly try to purge this “evil.”

This is one reason that government has never been effective at guessing market prices. The government does not know how to allocate resources the way prices do in a free market system. Doctors have high salaries for a reason. Medical school and other training takes time and lots of money. However, many people remain willing to go to medical school because of the financial security the profession offers.

Who in their right mind is going to go to medical school and fork over $100K in tuition (plus what they paid for their undergraduate degree) to make a government salary? We already have a shortage of doctors today, and when the government begins to pay doctors even less the shortage will worsen and quality will fall. At this point, rationing will be inevitable.

The same is true for pharmaceutical companies. Above and beyond the profit required of them by their shareholders, the risky investment required to do research for new drugs and ground-breaking procedures is not cheap. When the government removes the profit motive for these services, we will see a dramatic fall in medical technology.

This problem will not only hurt Americans, it will affect everyone. No longer will socialized Europe be able to lean on our medical technology. If we, by socializing our system, stop developing medicine, to whom will the world turn?

Free prices create competition, lowering prices and raising quality. Government mandates and price controls create a monopoly, raising costs and lowering quality. Americans are and should be rejecting a government take-over of health-care. The next step is to seek real reform with free enterprise.