How Regulation Affects Quality, Cost, Autonomy and Access to Health Care

Cost is a favorite target of regulators. Somehow the federal government believes that it has a superior ability to negotiate pricing and in some perverse way prevent price increases. This seems strange in light of the passage of the Sherman Antitrust Act, 26 Stat. 209, 15 USC §§ 1-7.

Back in 1890, the Legislature figured out that when one industry controls a market, it tends to create inefficiencies, reduce innovation, and drive up the overall cost. This is exactly what Washington and state legislatures are doing. In “Legislating Low Prices: Cutting Costs or Care?,” a 2013 Heritage Foundation article, Christopher Pope states:

“[O]ver the past half century, real per capita spending on health care in the United States has risen steadily — doubling roughly every 17 years. Several factors have combined to bloat the cost of health care. Technological improvements have vastly increased the opportunities to heal the sick, while medical progress has allowed people to live for years into illnesses that would once have led to a swift (and cheap) death.

“Federal and state legislatures have expanded public entitlements for this care, while restricting cost sharing and inhibiting market innovations that might constrain its cost, but threaten entrenched providers. Even before the full rollout of the Affordable Care Act (ACA or Obamacare), government health care spending had soared from 3.5 percent of gross domestic product ($165 billion) in 1987 to 8.4 percent ($1,215 billion) in 2011.”

Pope goes on to argue that hospital regulation and government intervention leads to inefficiency, less innovation, higher costs, and the continued existence of hospitals that the marketplace forces otherwise would close, but for government stimulus and support. The government’s desire to ensure hospitals in every city and location actually works against itself by creating inefficient marketplaces.

The idea that creating more hospitals and regulating when and where they are constructed by the certificate of need process actually works to reduce access and increase the cost of health care. In the free market system, the government should step back and allow the providers the autonomy to determine what services are actually needed for a specific area and then provide those services.

The free market system would weed out the inefficient and less innovative providers, and would instead reward those that address the needs of the people. The system should encourage, not discourage, competition to create greater access, lower cost, better quality, and greater autonomy.