July 20, 2009

Why Obamacare Can't Work: The Calculation Argument
From Mises Instatute

Obama assures us that this is not government-run healthcare, that this is not a single-payer system, that the only consequence to these reforms is that healthcare will cost less and that anybody who denies this is misleading or does not understand the facts. Without his reform, he insists, costs will grow unsustainably, which will threaten reimbursements and the stability of the healthcare system.

Unfortunately, since Obama uses faulty logic to diagnose the problem, his solutions will only make matters worse faster. The correct framework within which to diagnose the problem is to admit that costs are out of control because they do not reflect prices created by the voluntary exchange between patients and providers, between customers and producers, like every well-functioning industry.

Instead, health costs reflect the distortions that government regulators have introduced through reimbursement mechanisms created by command-and-control bureaucracies at federal and state levels.

Simply put, Medicare, Medicaid, workers compensation, HMOs and even private health-insurance firms that follow Medicare rates, rely on cost reports submitted by providers. This cost data is then pushed through mathematical models and additional data generated by government, such as inflation and regional-labor-cost modifiers, to unilaterally (or in agreement with lobbyists and industry groups) determine what the prices for services should be.

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