The Central Planners Are Coming

Most people use hospitals and see doctors that are located within a few miles of their homes. That is, healthcare is a decidedly local activity. So why are liberals continuing to force a centrally planned system on 315 million Americans spread across fifty states covering 3.7 million square miles? Market economies perform better than those that are centrally planned, but instead of possibly calling for market reform, liberals cling to weak arguments for a central government takeover of healthcare. Arguments which, if not rejected by Americans, will surely lead to stagnation and decline for almost 20% of the economy.

In many instances, liberals’ arguments are not arguments so much as evasions and distortions of the healthcare debate. We see this in a recent Wall Street Journal piece written by a trio of central planners. Responding to conservatives who claim that we face a choice between government control and individual choice, the central planners argue that the “real choice” is between encouraging providers to be more efficient and innovative or paying higher prices for healthcare. But this is not a choice, it is just another way of stating a preference for lower prices, which is everyone’s preference. It hardly tells us how to achieve the efficiencies that would bring about the lower prices.

Claiming there is no evidence that competition would contain costs, the central planners offer big government as the answer. In fact there is plenty of evidence showing that markets generate efficiencies and contain costs better than centrally planned economies. We only need remember the failed societies of last century that tried the top down, centralized approach (evidently liberals have forgotten a thing called the “Soviet Union”). Not to mention we have more than 200 years of economic theory and analysis explaining why markets beat central planning.

It is true that healthcare markets in some instances may not be as competitive as they could be. The government controls a large segment of the market in the form of Medicare and Medicaid, and in the private sector, there are too many geographic markets controlled by dominant providers or insurance companies to the extent that competition beneficial to consumers is restricted. Rather than justify a government takeover of healthcare, such facts justify a renewed commitment to markets, including more enforcement of the antitrust laws.

The central planners also tell us that Medicare’s costs have increased less than the costs of private insurance over the last decade, which apparently supports their love of big government. But this comparison is flawed and meaningless because government controls Medicare prices and providers simply shift their costs to private insurers in response to government action on prices. No matter, the central planners still love big government and promise even better results through their plans to reform Medicare and healthcare.

The ObamaCare plan calls for hospitals and physicians to “coordinate” their care of patients. Instead of fee-for-service, providers will receive a fixed amount for each patient and the idea is that providers then will craft the right care for their patients (at lower cost). People might recognize this as the “managed care” model from the 1990s that liberals deplored, but managed care evidently is back in favor, at least as long as authoritarians are in charge. In an Orwellian example of doublethink, at the same time the central planners validate managed care, they also demonize a market approach as one that will “return us back to the managed care days of the 1990s.” Huh?

Because the government will control all healthcare, it is unlikely that the “reforms” envisioned by the central planners will generate any cost savings. And even if they did, the savings would not be passed along to consumers in the absence of competition. The natural inclination for the central planners at that point will be to impose price controls and restrict access. And that would give us stagnation, eventual decline, and who knows what else. After all, our present employer-based system, disliked by many, is a result of employers getting around wage controls imposed by government during the Second World War.

As the central planners reject competition and outline the new managed care vision, they show their ignorance of markets and competition. They claim that Romney’s approach (i.e., competition among insurers) “fragments Medicare, placing millions of people into a variety of insurance plans.” According to them, “no single insurer would have sufficient market share to catalyze changes in the way health care is paid for and delivered.” This is more nonsense, as large market share is not required for firms in competitive markets to introduce efficiencies and innovations. “Fragmentation” is just another way of saying decentralization of power and that is a good thing.

The economist Friedrich Hayek observed: “All political theories assume, of course, that most individuals are very ignorant. Those who plead for liberty differ from the rest in that they include among the ignorant themselves as well as the wisest.” The central planners writing in the WSJ don’t include themselves among the ignorant, and the power they would wield in the coming economy combined with such arrogance is very scary. Rather than subjecting almost 20% of the U.S. economy to the authoritarians, it’s time to emphasize markets and competition and undertake the reforms necessary to make competition work.

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