When did the feds ever control costs?

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A letter published in the Feb. 17 edition of The Citizen suggested that “Medicare for All” is what the U.S. needs. I believe there are a few errors in the writer’s reasoning.

I’ll start my response with something near the end of the letter (since I think it is the most dubious claim): “With Medicare as the sole payer, not only can costs be controlled …”. Can you think of a single instance where the federal government did a good job of controlling costs?

The actual costs of Medicare were eight times what the government’s projections said they would be by 1990 ($98 billion versus $12 billion). The Obamacare website cost hundreds of millions of dollars and didn’t work. The Social Security Administration paid $1.3 billion to people who weren’t eligible over a two-year period (per the GAO). This could go on a while, so I’ll stop here.

What the government can do is control prices. Unfortunately, as any Economics 101 textbook will note, price controls lead to shortages. Ask the people of Venezuela how well that’s been working.

A number of economists have noted that the two areas where costs have exploded the most in this country (healthcare and college tuition) happen to be the areas where the government is most heavily involved (probably just a coincidence).

Moving on, the letter takes issue with the idea that one problem in our current system is that health insurance insulates patients from the cost of care. Regarding insulating patients from costs, the letter says, “That is what all insurance is supposed to do.”

This is a misunderstanding. First of all, insurance is primarily intended to protect people from costs that would be catastrophic or at least cause serious distress. It doesn’t generally make sense to buy insurance to protect yourself from small losses. Second, most types of insurance do not insulate the insured from costs (at least fully); deductibles and co-pays are specifically intended to prevent this.

The idea that patients are largely insulated from the costs of their decisions and that this is one of the factors driving up health insurance costs in this country is one of the few things that both left and right-wing think tanks agree on.

If you walk into a restaurant and it’s $20 no matter what you order, a lot more people get the lobster (and an appetizer and dessert). If you’re told that the cost is the same whether you take a cab or a limo, a lot more people ride in limos.

The letter is critical of high-deductible health plans, but they have a proven track record of bending the cost curve downwards. Many (perhaps most) of the plans provided under the Obamacare exchanges have high deductibles. Again, this is one idea that left and right-wing analysts agree works.

Obviously, the level of deductible is not one-size-fits-all. People with low incomes or on a very tight budget may not be well-served by a $5,000 deductible, but in a free market they can weigh their options and choose for themselves. Also, other means can be used to assist people who need help with costs below the deductible level.

I have a few other disagreements with the letter in question, but in the interest of brevity I’ll leave it at those two points. In particular, I struggle to see how we can be expected to accept an argument that wraps up by suggesting that the best way to control costs is to turn anything over to the federal government.

Steve Metz
Peachtree City, Ga.