Apparently, the Washington Post is shocked (-shocked-) that Bad Practices Net Hospitals More Money. This weekend’s article in the WaPo contains the following howlers:
In a four-year period, 106 heart patients at Palm Beach Gardens developed infections after surgery, according to lawsuits and government records. More than two dozen were readmitted with fevers, pneumonia and serious blood infections. The lawsuits included 16 patients who died.
How did Medicare, the federal health insurance program for the elderly, respond? It paid Palm Beach Gardens more.
Researchers at Dartmouth Medical School, who have been studying Medicare’s performance for three decades, estimate that as much as $1 of every $3 is wasted on unnecessary or inappropriate care. Other analysts put the figure as high as 40 percent.
Despite collecting “reams of information on quality of care”, the data are left unused. As a result, “[t]he way Medicare is set up …it actually punishes you for being good.”
So did WaPo finally discover that the market is superior? Nope.
The article suggests several culprits: monitoring, enforcement, geographic disparities in payments, not rewarding good care, and others. It does not, of course, blame the real offender: a socialist system that cannot work. Instead it blames the usual suspects: “the powerful lobby of hospitals, doctors and nursing homes.”
While WaPo cites several folks dismayed by Medicare’s failure to reward good practice, the perverse incentives present in Medicare are not, in fact, surprising at all. The waste, escalating costs, and rewarding of inferior outcomes is inherent to a nationalized health care system such as Medicare.
No amount of tinkering can repair a program based on fixed prices. Any brief reading of Mises or Hayek, a look at the fate of the Communist bloc, or review of the demise of nationalized industries in Western Europe proves beyond doubt that abolishing the market will not work because it cannot. It is, in fact, impossible.
Yet despite the collapse of communism, the socialist ideal has not disappeared, nor has it been weakened. As William R. Luckey writes in The death of Socialism: “The reason that socialism has not vanished is that it is not really an economic theory but a kind of gnostic ideology with economic overtones.”
In supporting the dominance of government allocation over market principles, Medicare is by definition a socialist endeavor. So why the surprise when socialism fails (again)? It is a closed economic system with a built-in mechanism for generating shortages and fiscal crises, for which there is no solution. Efforts to remedy its perverse incentives either exacerbate its problems or return it to market principles, voiding its raison d’être.
I applaud the WaPo for pointing out Medicare’s failure and perverse incentives, but the comments blaming providers move in precisely the wrong direction. In fact, it reads as if they are suggesting that what is really needed is to have Medicare take control of the entire system.
Why are we still pretending that socialism can work?