This is wrong in several ways. First, Medicare doesn’t “dictate” prices any more than corporations “dictate” prices by offering one price for various services. If you don’t want to pay AT&T’s price for cellular, then you don’t. Under our system, that’s a voluntary choice; nobody is dictating. The same thing is true for Medicare: no medical provider is required to accept Medicare prices or patients, with exceptions for certain emergency room patients. If Medicare sets prices too low, then providers will simply stop accepting Medicare patients.
Second, how is possible for the private system to “subsidize Medicare by making up for what Medicare pays too little for.” I mean, the private system is market based. So if medical providers could charge a higher price, they would. Under what mechanism does Medicare cause private prices to go up? The reality is the opposite: since health insurers know what the Medicare rate is, they have very little incentive to offer much more than that. They will, sometimes, when the supply of providers is tight (like in rural areas), but in general Medicare has no ability, no mechanism of causation, to cause private prices to go up.
As an aside, that’s a good test of the validity of an argument: if you make an assertion and there’s no mechanism of causation or causal linkage that could make that happen, that assertion is probably bogus.
As to hospital CEO’s saying they will close their doors, really, you believe that? There’s no self interest in those statements, surely? The example of hospitals IN EVERY OTHER DEVELOPED COUNTRY (which all have some form of government price controls) just doesn’t apply?
And most importantly, what’s the alternative to some form of government price intervention? We have decades of history both here and in the developed world that when we allow the imperfect inelastic market in health care to set prices, they go up far faster than the rate of inflation, in an unsustainable way, that every single other developed country has brought under control. The market is our best economic tool, but it just doesn’t work in every single circumstance. Health care, where lack of a product can kill you, is a classic example of an inelastic market, and thus relying on the market by itself is pretty much ass-hatted.
In the long run, we are either going to implement some sort of government price intervention in health care or bankrupt both the public and private economy in this country. The strong evidence of past decades is that persisting in trying to force the market to work for health care, where it just doesn’t fit, is foolish.
Keep in mind, not every form of “government price intervention” is full blown price controls. There are a number of variants, such as “all payer rate setting” and a few others. But some form of price reform is inevitable.
