Health Care BS

Gail Wilensky’s Health Affairs piece on the SGR is informed and thorough, but her approach to the subject is symptomatic of an ailment that afflicts many designers of health care policy: a tendency to disregard the market as a viable solution for any problem. Here’s a revealing selection:

Medicare needs to institute policies that … reward providers for the efficient use of services … Figuring out how to create the right bundles and recognizing the significant power shifts that could result will be difficult and time-consuming.

The market will reward providers for “efficient use of services” if the policy makers will allow it to do so. The current central-planning methodology is “difficult and time-consuming” because no group of experts, no matter how sophisticated, can possess all of the information that the market instills in a price.

Indeed, any government-imposed “sustainable growth rate,” whether it is based on the CPI, per capita GDP, or the effusions of the Delphic Oracle, is doomed to failure. Such efforts succeed only in creating perverse incentives that CMS must then attempt to fix by even more regulatory interference in the market.

I wish Milton Friedman were still alive and in charge of CMS.