Monday, June 2, 2014

Hampered Healthcare Markets

Rain keeps falling
Rain keeps falling
Down, down, down, down
--Simple Minds

Nice review of some ways that healthcare markets have become hampered over the years. Author highlights 1960s implementation of Medicare and Medicaid as an important inflection point, as healthcare prices really started taking off at this point.


However, government interference in healthcare markets was active prior to the 1960s. The author's list of interventions include:

1910. AMA lobbies states to increase medical licensure and gains privileges to oversee medical schools. Part of this oversight has been to control class sizes (reduce doc supply) and funnel government subsidies.

1925. Federal government allows patenting of medicines.

1945. McCarran-Ferguson Act exempts most medical insurance businesses from anti-trust scrutiny.

1946. Hospital Survey and Construction Act provides federal subsidies to favored hospitals.

1951. IRS declares group premiums tax deductible, thus motivating employers to become third party insurance buyers.

1965. Medicare and Medicaid begin, making government a large institutional buyer of healthcare.

1972. Federal government certificate of need for construction of medical facilities.

1974. Employee Retirement Income Security Act (ERISA) exempts health benefit plans offered by large employers (e.g., HMOs) from state regulations and lawsuits.

1984. Drug Price Competition and Patent Term Restoration Act permit extension of pharma patents beyond 20 years.

2003. Medicare Prescription Drug, Improvement, and Modernization Act provide additional drug subsidies to the elderly.

2014. Patient Protection and Affordable Care Act (Obamacare) begins implementation in earnest.

Other items could be added as well, such as restrictions on selling insurance across state lines, decisions/practices that have increased malpractice liability. However, the path of evidence is clear. Those who believe that, prior to Obamacare, markets were 'free,'--and that those free markets were the source of the systemic problems we have been facing--are living in denial.

The wholly predictable consequences of increasingly hampered healthcare markets: more demand, less supply, capacity leaving the system, lack of innovation, more bureaucracy. This translates into market outcomes of higher cost, lower quality, less responsiveness, and longer waits.

1 comment:

dgeorge12358 said...

One of the traditional methods of imposing statism or socialism on a people has been by way of medicine. It’s very easy to disguise a medical program as a humanitarian project, most people are a little reluctant to oppose anything that suggests medical care for people who possibly can’t afford it.
~Ronald Reagan, 1961