Are simple health care spending limits in your future? Can what is spent on health care be arbitrarily limited without adverse consequences?


Maryland is unique among the states. Its hospital system receives more from Medicare than other states. This is because Maryland sets hospital fees and all payers, including Medicare pay the same. This system has been in place for many years but now it is no longer working to control costs. A Washington Post article says this:

So Maryland officials came up with a new approach. On top of setting rates for individual procedures, they are proposing a cap on the growth of the total amount the hospital system spends per person in the state. The plan also allows hospitals to charge higher prices if they adopt preventive-care methods that improve patient health and reduce repeat visits, said Maryland’s health secretary, Joshua Sharfstein.

Under the proposal, total hospital spending would be tied to long-term economic growth in the state. That way, when the economy is in recession, costs would grow more slowly, while in boom times, they would be allowed to rise quicker, officials said.

In Massachusetts the much touted Romeycare system while greatly expanding coverage, has not controlled costs so they too have adopted a new strategy. Massachusetts will attempt to limit the growth in health care spending to the growth in the state’s economy. See this blog post.

It all sounds so simple, even logical. We simply won’t let prices rise, no wait that’s not right … we won’t let spending on health care rise beyond what the government thinks it should.

If such a strategy is so good why not apply it to gasoline, Big Macs and tattoos? Why not legislate that a gallon of ice cream remain 128 ounces and toilet paper be a half inch wider? Seems like there are more ways than one to manipulate revenue.

Yikes, I thought market forces, consumerism and competition were going to solve this health care cost problem. Doesn’t Obamacare promise high quality, affordable health care via competitive insurance exchanges? Who’s on first? Who?

One story is that insurance companies are our nemesis and another is the prices providers charge are the problem. And, exactly who is in charge of your health and preventive care; you, your doctor or apparently in Maryland, the hospital?

In the Maryland example we must accept the logic that in poor economic times somehow providing health care costs less. In Massachusetts what is spent on health care is to be linked to the state’s overall economic growth. Does that mean it’s to your advantage to get sick outside a recession?

Let’s think about this; what makes health care expensive for you? Is it the office visit co-pay or the fact you have six office visits, is it the coinsurance on that MRI or that coinsurance on each MRI you have when you see three different doctors, is it your co-pay for a prescription or that you take six different prescriptions?

Note to regulators and politicians: IT’S OVER UTILIZATION and INEFFICIENCY, STUPID!

Optimize both in all forms and you will have done the best you can to manage health care costs.

What do you think of this government approach to controlling health care costs? Do you see any potential adverse consequences? Do you think controlling spending affects the care you receive?

Please comment on this issue, let’s get the dialog going. People all over the world read this blog, SPEAK UP!

One comment

  1. Price controls.More government intervention with the free market. You would think that the folks who come up with these ideas would consult an economics and/or history book to see that these schemes always end badly. Price controls go all the way back to the Roman emperor Diocletian in 301 AD with his edict of maximum prices on up to President Nixon with wage and price controls and there were others in between. All failures. I guess it is true that if you don’t study history, you are bound to repeat it’s mistakes.


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