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Medical Regulation Piled on Medical Regulation

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President Clinton is continuing his piecemeal but relentless drive toward federal control of health care in the United States. Rebuffed by the American people and the Congress when he went for the Big Reform in 1993, he has decided that what he couldn’t force us to swallow all at once he will have us accept crumb by crumb.

Clinton recently proposed a benign-sounding “patient bill of rights.” The proposal is designed to respond to Americans’ increasing uneasiness with so called managed care, such as health maintenance organizations. In contrast to traditional fee for service, managed care entails myriad rules about which doctors a patient may see, what treatments are covered, and other matters.

Under the “bill of rights” patients would be guaranteed certain information about doctors and health plans, waiting time for service would be minimized, complaints about service could be taken to independent review panels, and reasonable emergency service would have to be covered even if the patient’s condition turns out not to be a real emergency.

In principle, there is nothing wrong with any of these things. What is objectionable is the government’s getting involved in the matter. It is especially objectionable when you consider that the problems addressed by the “bill of rights” are the result of earlier interference in medical care by government at all levels. This is a classic case of government imposing new rules to repair the damage its earlier rules caused.

Managed care schemes are a creature of the fast-rising price of medical care. As costs have risen over the last decades, businesses providing health benefits to employees have tried to find ways to economize. Managed care is one such method. By putting restrictions on patients, costs were supposed to come under closer control. Patients, of course, are not always happy with the restrictions.

The question is, why did costs rise so much that a new method of administering medical care was necessary? For that we can thank the federal and state governments. Since the 1960s, the federal government has been a major buyer of medical care through Medicare and Medicaid. Since the recipients of those government benefits don’t pay for their medical care, they buy more services than they would otherwise. That pushes prices up. For a long while, those programs paid almost any price doctors asked. When that system became politically untenable, the federal government began using a variety of ways to control the price of care. Where the programs underpaid doctors and hospitals, providers simply shifted the unreimbursed costs to paying patients.

The federal government has also helped boost the price of medical care by making it appear less expensive even for people outside of Medicare and Medicaid. It has done so by setting tax policy in a way that makes comprehensive medical insurance more attractive than it would have been had the government kept hands off. When people use insurance even for predictable, routine medical services, prices are pushed up. Patients do not act like cost-conscious shoppers when it appears that someone else pays the bills.

Medical services were pushed higher still through mandates at the state level. State governments have commanded employers and insurance companies to cover medical treatment, such as pregnancy services, that most people probably would not buy coverage for if they were paying the full cost. Those mandates are the result of lobbying by providers, who correctly calculate that if a service is covered by insurance, more people will demand it.

There is only one sure way to have the medical-care and insurance industries serve people as they would want to be served: repeal all government intervention in medicine and insurance. Medicare, Medicaid, and the web of regulations including licensing make people worse off. If the government would get out of the way, the free market will provide the best bill of rights anyone could ask for.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.