According to the NY Times, Congressional critters are busy working on fulfilling President Obama's desire for increased government regulation of the healthcare system in time for the August recess.
"He wants the bill through the Senate and the House before the August recess, so we can conference and have it done in September and signed in October," said Senator Barbara A. Mikulski, Democrat of Maryland. "He said we need to be unflinching and unflagging."
The article goes on to discuss some of the proposals floating around Capitol Hill, including this proposal from John D Rockefeller IV:
To help control costs, the administration indicated support on Tuesday for a proposal to strengthen a federal panel that recommends how much Medicare should pay doctors, hospitals, nursing homes and other health care providers.
Senator John D. Rockefeller IV, Democrat of West Virginia, recently introduced a bill that would expand the role of the panel, the Medicare Payment Advisory Commission, and give its recommendations the force of law. Senators said Mr. Obama and his aides had expressed general support for such a change, which would establish the panel as an independent rate-setting body in the executive branch.
Aside from being yet another abdication of Congress' Constitutional powers, this is an amazingly wrongheaded way of handling the problem of cost inflation.
The reason why is very simple: Price controls lead to shortages. This is a basic effect of supply and demand.
People will not supply as much at a lower price as they will at a higher price. Some oil wells that will repay their costs and earn a profit when the price of oil is $25 a barrel will not cover their costs when the price is $15 a barrel. Some people who will rent out a bungalow in their backyard when rents are high will not bother when rents are low. Some farmers will give up farming when food prices are kept below the point where they can earn a living.
On the demand side, people will demand more when the price is kept artificially low by price controls. Before rent control laws were passed in Sweden, less than one-fourth of unmarried adults there had their own separate housing units, but afterwards more than half did. People buy more of anything that is cheaper. With more being demanded and less being supplied, shortages are inevitable, whether with housing, food, medical care or whatever.
It is not just the quantity supplied that declines under price controls. Quality also declines.
When there are more people trying to rent apartments than there are apartments for rent, landlords no longer have to maintain the appearance of their buildings. They do not need to pay for painting, repairs or maintenance as often as they did when there was no housing shortage and they needed to attract tenants.
Sometimes quality deterioration takes the form of waiting -- not just cars waiting in line at filling stations, but also sick people remaining on waiting lists for months to get surgery or other medical treatment they need. Cheap medical care is one of the most expensive things there is.
I wonder if this is what the Nurses' Unions had in mind when they went to Washington looking for a solution. This plan will almost certainly force many hospitals into bankruptcy, as the amount of money paid out by the government becomes less than the price of providing care. This, in turn, will exert downward pressure on wages for nurses and support staff.
Zimbabwe tried to use price controls to address their hyperinflation, and this was the result: