PRICES WERE out of control at the end of third-century Rome, and the Emperor Diocletian was determined to rein them in. In AD 301 he issued his famous Edict on Prices, a complex piece of legislation that banned speculation and established price ceilings for a wide range of goods and services. But the ambitious law failed. Though violators could be punished with death, inflation and speculation persisted. Goods were hoarded, or sold on the black market. The economic crisis worsened. Eventually the law was abandoned. Like countless rulers before and since, Diocletian discovered the hard way that price controls don’t work. They worsen the problem they are intended to solve, leading to shortages, rationing, and even higher prices.
Yet the belief that government can control inflation by fiat never seems to lose its allure.
Which brings us to the “Health Care Quality Improvement and Cost Reduction Act of 2012,” a 178-page bill introduced in the Massachusetts House this month amid jaunty predictions of cheaper insurance premiums for Bay State families and tens of billions of dollars in medical savings over the next 15 years. An even longer bill — 235 pages — has been introduced in the state Senate.
These bills aren’t written in Latin and they don’t impose the death penalty, but their core principle is not much different from Diocletian’s: The state knows best. What fraction of the local economy should health care consume? How fast should medical spending rise? On what business model should provider networks be organized? How should hospital and doctors fees be calculated? Where should consumers get information on quality and cost of care? When are a provider’s high rates justified? What penalty should it bear when they aren’t? In the world these plans envision, decision after decision comes not through the voluntary interplay of doctors, patients, hospitals, and insurers, but from government agents who impose them from above.
Adding up the “dizzying and expansive” array of decrees in the House legislation, health care analyst Joshua Archambault of the Pioneer Institute finds 941 instances in which the bill mandates that something “shall” be done. Among these are more than 25 kinds of penalties, fines, and surcharges, for price control and punishment always go hand in hand.
Looming over all would be a new Division of Health Care Cost and Quality, a command-and-control behemoth that would dominate the state’s medical and health-insurance landscapes, with the power to affect billions of dollars and millions of lives.
And what checks and balances would restrain this behemoth? In the language of the House bill, it “shall be an independent public entity not subject to the supervision and control of any other executive office, department, commission, board, bureau, agency or political subdivision.” Throw in a toga, and Diocletian would feel right at home.
This is “Health Reform 2.0,” as some on Beacon Hill are calling it — the logical follow-on to Mitt Romney’s 2006 overhaul. In practice, the Romneycare model has meant less freedom, more tax-funded subsidies, surging growth in insurance premiums, longer wait times to see a new doctor, and undiminished reliance on emergency rooms. For those who deem such outcomes a success, more top-down interference with health care may seem like a splendid idea.
But those who regret having believed the exaggerated hype about “Health Reform 1.0” — particularly Romney’s 2006 assurance that everyone in Massachusetts “will soon have affordable health insurance and the costs of health care will be reduced” — may want to take the latest rosy predictions with more than a grain of salt.
State Representative Steven Walsh, the Lynn Democrat who co-chairs the Legislature’s Health Care Financing Committee, swears that this time “reform” will accomplish everything its advocates dream of. “Bring on the skeptics,” he crows. “We’re going to be a healthier community because of this in five years, and we’re going to save an awful lot of money doing it.”
Bureaucrats, no matter how well intentioned, cannot know how much medical services should cost or how insurance premiums should grow. Ham-fisted state intervention is responsible for much of what ails the Bay State’s markets in health care and medical coverage. More ham-fisted intervention isn’t the cure.
Many things have changed over time, but the laws of supply and demand aren’t among them. Price controls invariably make economic problems worse. It was true in Diocletian’s Rome. It’s no less true in Deval Patrick’s Massachusetts.Jeff Jacoby can be reached at email@example.com. Follow him on Twitter @jeff_jacoby.