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Opinion: Price controls for health insurance? Really?

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The proposed mandate that everyone obtain health insurance may actually be unifying the left and right -- in opposition. I wrote a post yesterday about the conservative critique of the mandate (it’s an attack on liberty). Today, our front page offers the liberals’ complaint about the requirement, to wit, that it isn’t accompanied by price controls on insurance premiums. The zippy headline on the Web version of the story is, ‘Mandate minus price controls may increase healthcare costs.’

To which I say: You can’t be serious. Price controls? I’m no economist, but I don’t know of any successful efforts by government to restrain fast-growing prices by slapping caps on them. The House and Senate healthcare bills take the much more fruitful approach of attacking the perverse incentives that lead to overconsumption of medical services, promoting preventative medicine and trying to boost efficiency through the use of technology and scientifically sound treatments. They’re not aggressive enough in these efforts, nor are they doing enough to harness market forces. But at least they’re focusing on the roots of the problem.

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If you want a preview of how well price controls would work, consider Medicare. The federal government has tried for years to impose a form of price controls on Medicare -- it sets reimbursement rates at artificially low levels for many services. The low rates have reduced supply by persuading some providers to curtail or eliminate their Medicare caseloads. They’ve also been politically impossible to maintain. In 1997 Congress enacted the ‘sustainable growth rate’ formula to dial back the rise in reimbursements, tying their annual growth to the increase in GDP. For the past several years, however, Congress has lifted the limits in the face of pressure from doctors, hospitals and seniors. And the healthcare reform bills would waive the formula again.

As my previous post pointed out, the main proponent of the individual mandate has been the insurance industry. With conservatives bailing and liberals demanding what amounts to a pound of flesh, you have to wonder how badly the industry still wants it.

-- Jon Healey

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