The political left in the United States, and for that matter, throughout the world, only knows two ways to try to control health care costs: (1) squeeze the providers and (2) deny patients care. Since they don’t believe in markets or economic incentives or entrepreneurship (the way costs are controlled in other markets), all that’s left is to take it out on doctors and patients.

Today I will address the doctors. To help our thinking, consider these four questions:

1. Since Medicare pays doctors less than private plans, can we lower the cost of care by enrolling everyone in Medicare?
2. If through force of law or power of negotiations, we managed to suppress all provider fees, would that lower the cost of care?
3. Since nonprofit entities don’t have to earn a profit, could we lower the cost of care by outlawing the profit motive in health care?
4. Have other countries lowered their cost of health care by paying providers less than what we pay?

The answer to all these questions is basically “no.” If you are inclined to answer “yes,” you don’t understand the concept of social cost. But don’t feel too bad. That would put you in the company of some very smart people — who I will charitably decline to name.

Continue reading Squeezing the Providers, Part I →