ObamaCare and Prices

http://www.futureofcapitalism.com/2011/02/obamacare-and-prices

Forbes.com has a post by Warren Meyer about the effect of ObamaCare on prices:

...with a single buyer (or one government buyer and a few government regulated insurance company buyers) the feedback loop of millions of customers testing and voting on prices and features goes away. The government will be presented with prices that are the demand, or even the fantasy, of individual sellers. Do they accept these rates, or set their own? How can they know the rate is fair?

Many of those in power have convinced themselves that a group of smart enough people can figure this out, but they can't. It's simply too complex. ...

the cost of failure here is enormous. The wrong government-set doctor pricing that is slightly too high can add tens of billions of dollars to the Federal deficit and substantially increase costs over a free-market alternative. A doctor pricing that is slightly too low could drive tens of thousands of doctors out of the profession, leading to long waits and poor quality (which not coincidentally are endemic to socialized medicine schemes in other countries). ... Centralizing the payments for health care prevents price-value trade-offs from being made where they belong, by individuals themselves looking after their own money and health.

Mr. Meyer doesn't deal with the problem of the incapacitated patient (unconscious in an ambulance) who isn't in a position to comparison shop on prices, and he probably doesn't do full justice to the bargaining power that that insurance companies have. But he's on to something.

by Editor  |  Feb 14, 2011 at 10:14 am Related Topics:  Hayek, Health Care receive the latest by email: subscribe to the free futureofcapitalism.com mailing list