Newspaper article St Louis Post-Dispatch (MO)

Price Brakes May Squeak in Clinton Plan

Newspaper article St Louis Post-Dispatch (MO)

Price Brakes May Squeak in Clinton Plan

Article excerpt

President Bill Clinton told us Wednesday night that the "magic moment" had arrived when the nation's health-care problems would be solved once and for all.

He may be right. The political will seems to exist for the biggest change in U.S. medicine since the introduction of Medicare in the 1960s.

But the problems are tough ones. We want to extend health insurance to millions of Americans who have none. At the same time, we think the medical system is already too expensive at $889 billion a year.

In fact, three of Clinton's main goals - universal coverage, improved quality of care and increased choice for consumers - come down on the cost-raising side of the ledger.

But he contends that the plan's cost-saving elements, plus a tobacco-tax increase, will pay for these goals.

If not, watch out: The plan also includes an "emergency brake" that would limit the rate of increase in health-insurance premiums. In plain English, we're talking price controls.

As President Richard Nixon and numerous Third World governments have learned, price controls never really make an inflation problem go away. They simply substitute another form of allocation - rationing - for the normal pricing mechanism.

If Clinton controls premiums, the insurance companies will limit the amount they pay hospitals and doctors. The medical profession will respond by making cataract surgery, new wonder drugs, flu shots - choose your medicine - less available. Consumers will face less choice and longer waits.

So the price controls, if they kick in, make a mockery of some of Clinton's stated goals. This raises a couple of questions: If Clinton is confident that his cost-reduction measures will work, why include a dangerous "emergency brake"? If he's not confident about the cost reductions, is the plan too generous on the spending side?

"How much do you want to speculate about cost savings as you bring about extension of benefits?" commented Larry Meyer, head of the economic-forecasting firm Laurence H. Meyer and Associates in Clayton.

Meyer suggested that universal coverage could be achieved more gradually, so there would be time to assess whether the cost savings were adequate or whether higher taxes might be needed. …

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