George Gibbs Center for Economic Prosperity

Why pr⁠i⁠ce con⁠t⁠rols harm heal⁠t⁠h care

By: Sal Nuzzo / 2019

U.S. Senate legislation aims to prevent surprise bills but actually would hurt doctors and patients, a James Madison Institute policy expert writes.

Sal Nuzzo

October 21, 2019

In health care, the Latin phrase “primum non nocere” is the ultimate commandment. Loosely translated as “first, do no harm,” it’s the most familiar part of the Hippocratic Oath taken by physicians.

This command should apply to the debate over health care policy as well as to the delivery of health care. Ensuring health care policy proposals “do no harm” requires lawmakers to understand cause and effect. Misdiagnosis by well-meaning lawmakers can lead to fatal policies.

The latest example of a health care policy that would accidentally cause harm comes from the U.S. Senate. The shrewdly titled Lower Health Care Costs Act attempts to help patients by ending surprise medical billing. But the legislation would actually hurt patients, by starting a chain reaction that would put their doctors out of business.

Surprise medical billing is indeed a real problem facing consumersparticularly those in Florida. A study from the Kaiser Family Foundation found that Floridians are among the most likely to receive a surprise medical bill.

The typical scenario goes like this: You’re rushed to the emergency room, treated and released. Later you receive a medical bill for thousands of dollars because — surprise — some of the providers who treated you were “out of network.” Suddenly you face costs your health insurer won’t cover, creating an emergency for your wallet.

Surprise billing is a problem, but it is not a cause — it’s an unintended consequence of an insurance-based health care system. As insurance markets have deteriorated under Obamacare, the law’s mandates have caused insurance costs to spiral. Networks have shrunk, providers have been squeezed and patients have suffered.

For example, imagine you live in Houston and get pancreatic cancer. Fortunately, you have one of the best cancer treatment facilities on the planet in your city: MD Anderson. But they don’t accept any of the Obamacare plans on the exchange in Texas. Or imagine you live in Minnesota and your daughter is diagnosed with glioblastoma. The Mayo Clinic, one of the best hospitals in the U.S., also doesn’t accept Obamacare plans. The same is true for metastatic breast cancer treatment at New York’s Sloan Kettering —out of network.

As Obamacare has driven patients to obtain treatment out of network, it has become a driver of surprise medical billing. Although nobly aimed at ending surprise medical billing, the solution posed by the Lower Health Care Costs Act would do great harm.

The bipartisan bill would impose price controls on doctors, compelling physicians to base their rates on those of Medicare and to offer these rates even if patients’ insurers won’t fully reimburse the doctors. This provision would knee-cap physicians who are serving local communities as they attempt to run profitable private practices.

Worse, the bill would empower health insurers to lower the fixed price of care without passing savings on to patients. Insurers could continue to raise premiums on patients, even while reimbursing doctors less and less.

What would the Senate’s proposed price controls mean for patients? Fewer choices and less access to care. Many doctors wouldn’t be able to keep the lights on in their private practices. That means a shortage of doctors and a shortage of choices for patients.

In the real world of cause and effect, two things will happen if these price controls pass into law: Insurance premiums will increase even more, and care will get rationed. Patients will pay more for fewer options.

There are solutions to this issue, but they do not involve price controls and rationing. Allowing for arbitration is one possibility. Another is allowing states greater flexibility with alternatives to Obamacare’s onerous mandates. Despite the pronouncements from the radical left, health care is ultimately a series of goods and services governed by the economic laws of supply and demand. Ignoring this reality doesn’t make it go away; it only leads to “solutions” that are themselves a problem.

As Nobel economist Milton Friedman famously stated, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” The harmful effects of injecting excessive federal regulations and controls into the economics of health care were predicted long before lawmakers passed Obamacare. Now lawmakers have another chance to do no harm. They should take it.

Improving the system for patients requires more competition, greater choice, and more options for people in how they gain insurance coverage — not price controls that will hasten socialized health care’s arrival.

Sal Nuzzo serves as the vice president of policy for The James Madison Institute, a nonprofit economic research think-tank in Florida.

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