Thursday, January 14, 2010

Medical Care Prices under government control.


Prices are the mechanism in the market for appropriate allocation of scarce goods with alternative uses such as medical services. If a central entity controls prices rather than letting price float freely this causes disruption in appropriate distribution and reduction in quality.

Prices (or fees or whatever you want to call them) for medical services in this country are largely set by Medicare. Look at any private insurance contract and you will see that it relates to Medicare prices. This phenomenon is producing misallocation of medical services and reduction in their quality in our country.

Democrats point out the obvious fact that those who are not in some way participating in this bizarre and stupid system have a problem when they require medical services. The answer is not to bring these people into the system but to let everyone else out of it.