Quora: Can the U.S. Government Control Health Care Cost?

Doctor Affordable Care Act
Peter Yanez, who is insured under a policy from the Affordable Care Act, has his blood pressure measured by Linda Williams, a medical assistant, before getting a blood test at a Planned Parenthood health center on May 12, 2017 in Miami, Florida. A GOP plan to repeal the Affordable Care Act would cut federal funding for Planned Parenthood services at their health centers. Planned Parenthood has approximately 700 health centers across the country that serve 2,470,000 male and female patients and provide services for preventive health care, birth-control, cancer screeening, pregnancy tests and STD testing and treatment. Joe Raedle/Getty

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Answer from Michael Lee, Public Policy Analyst:

Why doesn't the US government force the healthcare industry to slash costs? Aside from the more general problem of lacking authority to force the health care industry to slash costs, the simple fact is that U.S. voters don’t necessarily want the government to do that!

The federal government is one of enumerated powers, so it doesn’t have the authority to command private individuals to do something just because the government thinks it’s a good idea. Laws have to have some basis in the government’s enumerated or implied powers or someone will challenge them in court and will succeed. (Yes, that can take a while, but we’re talking about a long-term problem here: the health care cost crisis in the U.S. has been going on for decades).

So there’s no means for the government to command the economy. There are plenty of avenues it uses to affect prices in any number of economic sectors, but outright price controls and floors (“You may not charge more than $20 for a hamburger”) are a bit of a rarity, with one prominent exception.

(Care to hazard a guess? Answer at the bottom).

The only workable possibility I can think of is using the government’s contracting authority through Medicare and Medicaid. This isn’t entirely unprecedented - it’s the basis for why hospitals that participate in Medicare are required to screen and stabilize patients under the Emergency Medical Treatment and Active Labor Act - but it’s never been used very broadly because policymakers are worried about the economic consequences.

Remember, politicians aren’t just focused on the health care cost crisis. They’re also worried about coverage and access! And if Medicare beneficiaries are unhappy with what’s happening to their benefits, they make their objections known!

(Here is a video from a news report of former House Ways and Means Committee Chairman Dan Rostenkowski (D-IL) being quite literally chased out of a town hall meeting in his district. Quite a few senior citizens were upset at the Medicare “catastrophic care” proposal he’d spearheaded that raised their taxes to provide protection against catastrophic health care expenses under Medicare and Medicaid).

Thus the other half of the equation here: the voters might not want costs to be cut. Or, slightly more accurately, voters tend to be just fine with everyone else’s health care spending going down, but they get exceedingly wary about anyone touching their own health care spending. It’s a basic expression of risk-aversion, and it crops up everywhere in public policy. It’s part of the reason we have that famous aphorism from President Reagan: "A government bureau is the nearest thing to eternal life we'll ever see on this earth!"

The worry is principally that cutting health care spending will reduce access to needed health care services. If you think about it in the long-term, that makes perfect sense: lower physician payments will eventually mean fewer (or possibly even less intelligent) people going to medical school, because they can make better money with fewer hours doing other things. Lower hospital payments will eventually mean decaying hospital infrastructure and possibly a staffing crisis, since so much of hospitals’ payments covers nursing care. Lower prescription drug payments will eventually mean lower incentives for pharmaceutical and biotechnology companies to develop the next generation of lifesaving cures, and people like having their medications!

Now, you can critique all three of those points a bit on any number of grounds. I’m not here to debate the substance of those concerns so much as acknowledge that they exist among the voters. And after decades of hearing about how any cut to anything in government represents a “meat axe” being swung, or how any cut to Medicare is one party or another “pushing Granny off a cliff,” it’s really not surprising that voters are wary of the government forcing spending cuts! Never mind how hard the health care industry works to protect its payments, of course…

Health care reform of just about any type is going to require people to give up something, whether it’s taxes, expansive health care benefits, or (if they’re providers), some portion of their revenues. None of these is easy to do, politically speaking.

Answer to price floors/ceilings question: the federal minimum wage! It’s a price floor on labor.

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