Just Say ‘No’ to Price Controls

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Market forces are the best way to set prices when it comes to toilet paper, hand sanitizer, prescription drugs, and health care services.  When government gets involved in fixing prices, it ends up distorting prices in a way that hurts both consumers and the companies that provide the service or product.

The fact is that markets work, and government is terrible at managing consumer access to products and services. Just look at the U.S. Postal Service for a classic example of government price fixing and management leading to billions in taxpayer losses.

The Coalition Against Rate-Setting (CARS) is an alliance of organizations opposed to price controls (rate setting) in the health care system. This advocacy coalition – of which Institute for Liberty is a member – sent a letter to the White House signed by a wide array of taxpayer and consumer protection groups as a warning that “some members of Congress and some individuals in the Trump administration have repeatedly floated the idea of ‘fixing’ the pressing problem of surprise medical billing (SMB) through a ‘rate-setting’ system.” The idea of rate setting is “fatally flawed,” because it would put bureaucrats in the place of patients and doctors in setting prices.

The CARS coalition has come together because some politicians are advocating for a flawed short-term fix to SMB that will fundamentally – and over the long-term – damage the American health care system. The coalition letter cited a May 27, 2020 story in Politico that reported, “Trump administration officials are floating a plan that would outlaw health care providers from putting patients on the hook for thousands of dollars in expenses — but without mandating how doctors and hospitals would recover their costs from insurers, according to administration officials, Capitol Hill aides and industry lobbyists familiar with discussions.” The goal of ending surprise medical billing is a laudable one, but the solution presented will make the problem worse.

Price fixing will stifle innovation, damage the doctor-patient relationship, and undermine market competition and transparency. The CARS coalition highlights in our letter that “any mandates or price controls would make surprise billing problems worse and disrupt care for millions of patients across the country.”  The impact of price fixing will devastate a health care system already ravaged by the COVID-19 crisis.  

An alternative solution to SMB – one that will work and protect patient care – is to address the problem of increasingly narrow health insurance networks. Right now, millions of patients are dealing with illness. Many are getting hit with SMBs because of insurance companies network policies that make it impossible for a patient and a doctor to work within obtuse insurance procedures, especially in a crisis situation. Saving a life is more important than figuring out if a person is covered in a specific network.  These problems frequently arise in emergency circumstances where quick decisions are needed in real time to save lives. Confusion over coverage in these crisis situations is a design flaw created by health insurance companies – a design flaw that benefits their ‘bottom line’.  

A coalition of 160 economists sent a letter to the White House and Congress on April 18, 2020 making a similar case:  “We are opposed to the enactment of price controls that would peg provider reimbursement to a ‘benchmark’ rate picked by the federal government. Such proposals represent a direct government intervention in health care that would hurt access to care, especially for patients in rural areas.” Rate setting would worsen the existing SMB problem, not solve it, and lead to the consolidation of many hospitals and medical offices in the nation. Such health care consolidation on the heels of the COVID crisis will be a detrimental blow to patient care in America.

Rate setting is the wrong answer to the question over surprise medical bills. Congress and reformers need to look at the policies and practices of Big Insurance.   

Andrew Langer is President of the Institute for Liberty

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