Open Letter to Two NPR Reporters

by Don Boudreaux on February 28, 2010

in Health, Hubris and humility, Other People's Money, Politics, Reality Is Not Optional, Seen and Unseen

Ms. Chana Joffe-Walt and Mr. David Kestenbaum
All Things Considered
National Public Radio

Dear Ms. Joffe-Walt and Mr. Kestenbaum:

Your excellent February 26, 2010, report on the history of how government officials chose the different methods that Medicare has used over the years to determine doctors’ pay
is frightening because…

… in your report, Joe Califano, a chief architect of Medicare, admits that the first method of determining doctors’ pay was chosen for political reasons, namely, to buy doctors’ support for Medicare.

… you report that Mr. Califano, LBJ, and Congress were genuinely surprised by the rapid cost increases sparked by this first method.

… you reveal that much of the treatment that Medicare paid for was previously provided free by physicians; that is, Medicare crowded out a sizable chunk of private-sector philanthropy.

… you tell how attempts to change this first method of paying doctors were deeply influenced by skilled lobbyists working on behalf of doctors.

… in describing the development of the method currently used for determining doctors’ pay, you (perhaps without realizing it) reveal that this current method is the product of a comically childish labor-theory-of-value analysis – the same sort of analysis that is at the foundation of Marxian economics.

… your report ends with the admission that, because the current method isn’t working so well, Uncle Sam – 45 years after Medicare was launched – is still searching for a sound method for determining physicians’ pay.

Given this history, what reason is there to suppose that Obamacare is a good idea?

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

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{ 1 comment }

Aussie March 2, 2010 at 1:51 am


that was a very good letter that you wrote. I endorse your comments because I have seen both sides of this system. I live in Australia.( It is not true to say that we have lower costs as some seem to believe. In fact the costs are rising rapidly). Our version of govt sponsored health was introduced in the 1970s. It is a total disaster in my view.

Prior to the introduction of this system, the doctors used to use their discretion about medical fees. If a patient could not afford the fees, then they were written off. The public hospitals also had a system of “user-pays” being the best way to describe what took place. In other words, if you could afford to pay fees based upon your income, then you were charged for the services.

With the intervention of the federal government the whole system that was running so smoothly was turned upside down. It is the govt that determines the schedule fee. What we, the patient gets back would not even be half of what has in fact being paid. We do not have free medicines either. The cost of some medications is capped but the amount is tied to the CPI so that it rises every year. Other medications that cost more than $100 per time are not even on the list of free medications. What we get back from the funds is the difference between the NHS amount and what we actually paid.

The old system of philanthropy is almost dead in this country, although it applies for patients that are born overseas and need urgent medical care – example: the Siamese twins recently separated that came from Bangladesh.

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