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Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 2

By: Steve Johnson

7/21/2009 - 13 Comments

Obama’s healthcare reform bill will expand the government’s role in healthcare and create an even larger system of price controls, increasing the cost for everyone.

This is part 2 in an article series addressing the current healthcare reform proposal by President Obama.

Yesterday, I explained why the payment system is so distorted and today I’m addressing why sharing more information about prices will not solve anything.

The second part of Obama's solution to reduce healthcare costs is:

2. Knowledge is not shared as much as it could be

Obama suggests that if knowledge of clinical effectiveness and cost could be obtained and shared, then costs could be reduced. 

The problem is that prices can never be evaluated with effectiveness because many prices are fixed by local government regulations and therefore do not accurately reflect effectiveness. Most of the prices for medical services are based on the government's system of pricing - Medicare.  The problem is again the middle man. 

The only tool capable of evaluating costs with effectiveness is the free market, which does not exist because the government fixes prices.

Therefore, Obama’s plan to collect this information and analysis it will not result in any increase in effectiveness or reduction in cost, and instead will increase the cost of healthcare to pay for the system of collecting and sharing the information.

Gabriel E. Vidal recently wrote an excellent article addressing healthcare reform, here is a quote further explaining this position:

“Contrary to Obama's suggestion that knowledge of clinical effectiveness and cost effectiveness can be obtained and disseminated, there is no rational way to evaluate cost effectiveness outside of the free market. Central health planners cannot compare and recommend the best option between two different combinations of drugs, hospitals, and physicians to treat a particular ailment.

It is not just a matter of figuring out which combination offers better outcomes and lower costs. In fact, the bureaucrat actually needs prices to make that comparison! This is also why Obama's ideas on payment reform to change how Medicare pays providers, and knowledge reform to investigate which treatments are most cost effective will never work and will increase costs and reduce quality.”

There is no value in sharing knowledge about prices that are based on a system of fixed prices. This would only close the loop for a complete government run healthcare system and give the government complete control of what service you get. The government would be both setting the prices and collecting price information related to effectiveness. 

Therefore, they would be in complete control of giving you the service they want based on the reports they generate.  They could give you bad medical service and tell you that according to the effectiveness and cost sharing information, you are getting the best service.  So when you have to wait three years for a medical procedure, you could take comfort knowing that you are getting the very best service possible.

I would prefer the system we have now with all its problems. I don't want to reduce my quality of care or pay more for it.

Tomorrow, I will address third part of the proposed healthcare reform in part 3 of this article series.

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 1

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 2

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 3

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 4 

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