Junk Fees, Politics & Threats to Healthcare Access

President Biden has decided to distract Americans suffering from his disastrous economic policies which have cost the average American household more than $7,000 a year.  So rather than reverse his horrific economic and energy policies, he devoted a significant portion of his State of the Union Address to urging Congress to outlaw what he terms “junk fees” for overdrafts, travel bookings, ticket fees, etc. He now brags that his speech is moving states to take action to outlaw so-called junk fees.

So President Biden’s answer to making Americans thousands of dollars poorer is to promise to save us a few bucks on our hotel reservations, event tickets, or late fees. This is proof that he is nothing if not a typical, cynical politician. His message is effectively I’ve impoverished you and endangered your family’s financial future, but you should support me because I’m trying to save you five bucks here and ten bucks there.

In a free market, if we don’t like the fees a business charges, we can go elsewhere. It is government that charges us junk fees that we cannot avoid. For example, if you want to file your taxes electronically (which the IRS prefers), you have to pay a fee.

It is not hard to figure out why consumers would like the idea of banning or regulating “junk fees.” If Congress proposed legislating the price of a gallon of gasoline at $1, most Americans would likely be excited at the prospect of cheap gas — until they found out that it meant that there would be virtually no gas available. They would learn that the new lower legislated price would actually provide them with no benefit, but would have substantial downsides.  The fact is that government imposed price controls have adverse impacts and it is foolish to ignore that fact.

Why don’t we insist on disclosure rather than government regulators setting prices? That would allow us to decide what fees we are willing to pay given the service we’ve received, and those that we consider a rip-off. Regulators won’t make that distinction.

In the case of event ticket fees, no one will die if government intervenes. But the price of tickets will likely go up to compensate for the reduced or outlawed ticket processing fees. But in some instances, the zeal to outlaw so-called junk fees could be catastrophic. For example, in healthcare, a hospital bill can contain something called “facility fees” — that fee covers every expense outside of the doctor’s fees. So, it would include the cost of nurses; therapists; pharmacists; security officers; janitors; hospital personnel at admissions and record keeping; and the cost of keeping the heat on.

If those fees are regulated or deemed “junk fees,” we will see healthcare services become more and more scarce. There are all sorts of factors that make the hospital work — even the janitors who clean the hospital cost money and must be paid and so each patient will have to cover their share of these expenses. It is simply unrealistic to demand that we only pay for the doctor’s time, but not the other costs associated with the healthcare we receive.

Trying to argue that we should only pay for part of the cost of healthcare would be a kin to going to a restaurant and demanding that the final check only cover the cost of the food products purchased to make the food — that our final bill should not include anything to cover the restaurant’s rental costs, the heating and air conditioning costs, or employee costs. If there were a law mandating that restaurants only charge for the cost of the food consumed, restaurants would immediately shut down. There would be no incentive to provide food to customers and lose money in the process.

In Colorado, there is a proposal to eliminate so-called “facility fees” that hospitals charge (H.B. 23-1215). And Colorado Governor Jared Polis, during his State of the State address this past week, put the state's largest hospitals in his political crosshairs, stating "Coloradans still pay some of the highest costs for healthcare, particularly hospital care…. Let’s change that.” And the executive director of the state’s Medicaid department, Kim Bimestefer, has signaled that state regulators will relaunch their fight against hospital prices after the political battle took a break during the COVID pandemic.

But a misguided plan to eliminate “facility fees” will lead to the downsizing of hospitals — meaning healthcare shortages and massive job layoffs will follow and the likely elimination of support clinics located throughout Colorado. Smaller or more remote communities will likely see their options for vital healthcare evaporate. And even in large population centers, the options and availability of hospital care will be reduced. That will not reduce prices. If you want to lower prices, increase competition and supply — not restrict it.

If transparency is the issue, one can work on options that improve disclosure. But the idea that clumsy, government imposed, price controls are the answer is a self-evidently absurd proposition. If you want to create serious shortages and areas where vital healthcare needs go unmet, price controls are a great idea. But if you want to ensure that our healthcare system services the needs of the public, we should not turn to government bureaucrats and regulators to dictate prices.

George Landrith is president of Frontiers of Freedom, a public policy think tank.