Can We Get ‘Price Controls’ Out of Medicare?


Here are some provocative paragraphs about doctors who treat Medicare patients and the rules they have to abide by:

So in other words, abiding by these “price controls” is a condition of receiving Medicare reimbursements – and many doctors turn down the deal.  How is this any different from public schools hiring teachers subject to the condition that they (a) don’t charge their students extra fees, and (b) don’t moonlight?

Not only do I see no problem philosophically, but I actively favor such rules.  I wish there were more rules!  How about a rule that doctors can’t collect any Medicare payments unless they got a perfect score on their MCATs?  Recite the entire Ring cycle from memory?  Stand on their heads for a hour every day?  Make the rules onerous enough, and Medicare effectively disappears – as it should.

The author is George Mason University professor Bryan Caplan, writing in response to his EconLog co-blogger David Henderson, who argued that Medicare imposes price controls on health care. Henderson explains the strict pricing rules put on doctors who see Medicare patients:

. . . the Reagan administration took the next step of imposing price controls on doctors under Medicare. Doctors were no longer allowed to do what was variously called “extra bill” or “balance bill.” They couldn’t charge even a penny more than Medicare paid. That’s what made it a system of price controls. Moreover, under later regulations, if a doctor takes even one Medicare patient, then he has to charge Medicare rates to all his Medicare patients even if those patients would rather ensure access by paying the whole bill (Medicare plus a doctor’s additional charge) out of their own pocket. It is this system of price controls that is causing many doctors to take no Medicare patients.

Caplan responds that  if doctors agree to see Medicare patients, then they implicitly agree to play by the rules imposed by the government. If they don’t want to play by the rules, then they shouldn’t see Medicare patients; they should agree to treat only those seniors who have opted out of Medicare and forfeited Social Security payments. It certainly is a provocative idea (like most of Caplan’s ideas).

Here is my question: Wouldn’t some of these issues go away if Medicare started reimbursing patients rather than doctors?

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