bounty44
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some other "fool" at mises spouting "childish crap"
quote:
How Government Regulations Made Healthcare So Expensive
"Those who cannot remember the past are condemned to repeat it," declared philosopher George Santayana.
The U.S. “health care cost crisis” didn’t start until 1965. The government increased demand with the passage of Medicare and Medicaid while restricting the supply of doctors and hospitals. Health care prices responded at twice the rate of inflation (Figure 1). Now, the U.S. is repeating the same mistakes with the unveiling of Obamacare (a.k.a. “Medicare and Medicaid for the middle class”).
Nobel Prize-winning economist Milton Friedman wrote that medical price inflation since 1965 has been caused by the rising demand for health-care coupled with restricted supply (Friedman 1992). Robert Alford explained the minority view: "The market reformers wish to preserve the control of the individual physician over his practice, over the hospital, and over his fees, and they simply wish to open up the medical schools in order to meet the demand for doctors, to give patients more choice among doctors, clinics, and hospitals, and to make that choice a real one by public subsidies for medical bills" (Alford 1975)…
Since the early 1900s, medical special interests have been lobbying politicians to reduce competition. By the 1980s, the U.S. was restricting the supply of physicians, hospitals, insurance and pharmaceuticals, while subsidizing demand. Since then, the U.S. has been trying to control high costs by moving toward something perhaps best described by the House Budget Committee: “In too many areas of the economy — especially energy, housing, finance, and health care — free enterprise has given way to government control in “partnership” with a few large or politically well-connected companies” (Ryan 2012). The following are past major laws and other policies implemented by the Federal and state governments that have interfered with the health care marketplace (HHS 2013)
•In 1910, the physician oligopoly was started during the Republican administration of William Taft after the American Medical Association lobbied the states to strengthen the regulation of medical licensure and allow their state AMA offices to oversee the closure or merger of nearly half of medical schools and also the reduction of class sizes. The states have been subsidizing the education of the number of doctors recommended by the AMA.
•In 1925, prescription drug monopolies begun after the federal government led by Republican President Calvin Coolidge started allowing the patenting of drugs. (Drug monopolies have also been promoted by government research and development subsidies targeted to favored pharmaceutical companies.)
•In 1945, buyer monopolization begun after the McCarran-Ferguson Act led by the Roosevelt Administration exempted the business of medical insurance from most federal regulation, including antitrust laws. (States have also more recently contributed to the monopolization by requiring health care plans to meet standards for coverage.)
•In 1946, institutional provider monopolization begun after favored hospitals received federal subsidies (matching grants and loans) provided under the Hospital Survey and Construction Act passed during the Truman Administration. (States have also been exempting non-profit hospitals from antitrust laws.)
•In 1951, employers started to become the dominant third-party insurance buyer during the Truman Administration after the Internal Revenue Service declared group premiums tax-deductible.
•In 1965, nationalization was started with a government buyer monopoly after the Johnson Administration led passage of Medicare and Medicaid which provided health insurance for the elderly and poor, respectively.
•In 1972, institutional provider monopolization was strengthened after the Nixon Administration started restricting the supply of hospitals by requiring federal certificate-of-need for the construction of medical facilities.
•In 1974, buyer monopolization was strengthened during the Nixon Administration after the Employee Retirement Income Security Act exempted employee health benefit plans offered by large employers (e.g., HMOs) from state regulations and lawsuits (e.g., brought by people denied coverage).
•In 1984, prescription drug monopolies were strengthened during the Reagan Administration after the Drug Price Competition and Patent Term Restoration Act permitted the extension of patents beyond 20 years. (The government has also allowed pharmaceuticals companies to bribe physicians to prescribe more expensive drugs.)
•In 2003, prescription drug monopolies were strengthened during the Bush Administration after the Medicare Prescription Drug, Improvement, and Modernization Act provided subsidies to the elderly for drugs.
•In 2014, nationalization will be strengthened after the Patient Protection and Affordable Care Act of 2010 (“Obamacare”) provided mandates, subsidies and insurance exchanges, and the expansion of Medicaid…
The search for alternative economic systems should include free markets through a closer reexamination of the health care marketplace before 1980 to 1990 to determine whether prices offered by physicians and hospitals were ever set by the laws of supply and demand.
Economist Henry Hazlitt provides the following description:
Prices are fixed through the relationship of supply and demand. ... When people want more of an article, they offer more for it. The price goes up. This increases the profits of those who make the article. Because it is now more profitable to make that article than others, the people already in the business expand their production of it, and more people are attracted to the business. This increased supply then reduces the price…
Since 1965, medical prices have exploded with physician fees (Figure 6). From 1965 through 1993, the price for medical care increased by 699% and physician fees 675% compared to only 359% for all goods and services measured in the Consumer Price Index. Today, medical prices and physician fees continue to grow at about twice the rate of inflation. Hospital prices have increased at almost four times. U.S. health-care spending has increased from 6% of the Gross Domestic Product in 1965 to 18% ($3 trillion) today…
The lack of competition between hospitals and other health care institutions also limited cost control incentives placed on executives. The lack of competition between both medical institutions and the doctors that control most of their spending could explain why hospital costs have been inflating twice as fast as even physician fees. Hospitals are loaded with waste and inefficiency. For example, a hospital stitch costs more than $500 today.
The U.S. health-care market appears to behave according to laws of supply and demand (at least until the 1980s). Assuming government subsidy of the elderly and poor serves the public good, the cause of the “U.S. health care cost crisis” appears to be that government didn’t allow the supply of doctors and hospitals to respond to increased consumer demands. Politicians from both major political parties created a self-fulfilling prophesy by assuming markets couldn’t work in health care.
The obvious solution is to increase the supply of physicians and hospitals to meet demand. Unfortunately, if medical schools doubled their class sizes by next year, it could still take over 20 years to achieve the number of doctors relative to population found in continental Western Europe. Competition could be achieved quicker by relaxing the licensing requirements placed on para-medicals (e.g., nurses), and possibly also foreign educated doctors, to compete with U.S. physicians to the degree to which they are qualified.
heavily edited---tons more at the site:
https://mises.org/blog/how-government-regulations-made-healthcare-so-expensive
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