The Price of Price Controls

ALTHOUGH the Clinton health plan seems dead, Democrats in Congress have retained one of its most important and troubling elements: price controls. The House majority plan, for example, would impose limits on doctor and hospital fees after five years if spending targets were not met. Supporters of price controls should know that this approach has already been tried. Not only did it fail to rein in costs, it actually helped accelerate the growth in health-care spending.

The beginning of wisdom in this area is to recognize that physicians contribute to health-care costs not only by charging fees but also by prescribing medication and ordering tests, consultations, hospitalization, surgery, and various other procedures. The bill for these activities is a more important factor in rising health-care spending than payments to the doctors themselves; indeed, from 1960 until 1991, the cost of physician services remained between 16 and 20 per cent of total health spending. Thus it should be obvious that any plan to control overall spending by restraining physician fees would be doomed to failure.

RA

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Richard Amerling

ALTHOUGH the Clinton health plan seems dead, Democrats in Congress have retained one of its most important and troubling elements: price controls. The House majority plan, for example, would impose limits on doctor and hospital fees after five years if spending targets were not met. Supporters of price controls should know that this approach has already been tried. Not only did it fail to rein in costs, it actually helped accelerate the growth in health-care spending.

The beginning of wisdom in this area is to recognize that physicians contribute to health-care costs not only by charging fees but also by prescribing medication and ordering tests, consultations, hospitalization, surgery, and various other procedures. The bill for these activities is a more important factor in rising health-care spending than payments to the doctors themselves; indeed, from 1960 until 1991, the cost of physician services remained between 16 and 20 per cent of total health spending. Thus it should be obvious that any plan to control overall spending by restraining physician fees would be doomed to failure.