Command-and-Control vs. Free Market: Doctors, the Choice is Yours

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The U.S. Supreme Court on Tuesday ruled that private medical providers that deliver residential care services in Idaho cannot sue the state in order to raise Medicaid reimbursement rates to deal with rising medical costs.

The justices, on a 5-4 vote, ruled in favor of the state of Idaho, which asserted that medical providers have no legal recourse to sue.

The mentality of entitlement goes both ways. Doctors and hospitals want government subsidies for their services — which is to say, they want payment for their services to be paid for, forcibly, by others.

Yet, at the same time, they want those government programs to act like private entities. They want to sue the government for more money, the way a private or unionized workforce might attempt to sue a private, profit-making business for more money.

The reason you sue somebody in this kind of case is because you feel a contract has been violated, and your lawyers make a legal argument (valid or not) for this claim.

But what kind of “contract” exists between medical providers and government? Granted, providers sign a contract with the government in order to become Medicare or Medicaid providers. But government has a partial (and increasingly total) monopoly control over the transactions. If government has most of the market — by force, not because people acting as self-paying consumers have chosen it — then government has the upper hand, by definition. The Supreme Court decision simply reflects this objective fact. In essence, the Supreme Court is saying to for-profit health care providers, “The government isn’t paying you enough? Tough.”

For decades now, medical providers and associations (including the American Medical Association) have counted on the government to deliver the goods — i.e., payments for treatments and services without having to charge patients/consumers directly. Government, in turn, has attempted to keep those programs popular by treating physicians and hospitals as well as they can. Attempting to mimic a free market, government has tried to operate on the premise of a free market: that happy patients will arise from happy, well-paid providers and hospitals.

However, this can only work to a certain point. Provider desire for higher pay (when paid for by a third party) is virtually unlimited; similarly, patient demand for high quality care (when paid for by a third party) is virtually unlimited. The government can go further into debt, and raise taxes higher and higher — but only so far, until the biggest economic bubble in human history goes “pop” (just like the government-inflated housing bubble a few years back.)

Government under Medicare and Medicaid has attempted to substitute itself for the mechanisms of a free market for health care. In a free market, prices and costs would go up and down, based primarily upon the variables of supply and demand. Customers would communicate needs/wants as well as satisfaction/dissatisfaction based on numerous factors over time, and the profit-seekers in the marketplace would be forced to adapt in order to survive or economically flourish. That’s distasteful to most when applied to health care, so instead we have attempted a command-and-control model of the Communist variety — kind of Communism with a smile — from the politicians in Washington D.C. These politicians are propped up just as much, if not more, by the organized political interests of doctors and hospitals as by the voting majority themselves.

In practice, Washington’s (bipartisan) job has been to make sure that as many providers and patients are as dependent on the government for reimbursement as possible — at which point, government has (for all practical purposes) a monopoly on health care. [For excellent resources on a free market, check out the books of economists and analysts Henry Hazlitt, Thomas Sowell, John Allison, George Reisman and Ludwig von Mises, among others.]

Think public education. While there’s no law against private schools, most people either cannot afford them, or feel entitled to public schools because (1) they have been forced to pay for them by property and other taxes; or (2) they have been told they’re entitled to free education, regardless of paying, and they believe it. Does this lead to high quality, competitive educational institutions which are responsive to the varying, changing and diverse needs of a parent-student marketplace? Hardly. But it’s for all practical purposes a monopoly. And we have morphed, over the decades since Medicare, into the same thing with medicine.

Medicaid is a state-administered program which receives federal dollars. States have constraints (e.g. in the from of balanced budget requirements) that the federal government — who can inflate the currency and expand debt seemingly into infinity — does not have. That’s why you find this issue arise with Medicaid, in particular.

Medicaid is a federal health insurance program for lower-income people that is administered by the states. Idaho’s lawyers said that in order to receive Medicaid funding, they are required only to comply with the Medicaid Act and related regulations.

Complaints about payments should be addressed to the federal government, the state said.

In other words: If you health providers and hospitals out there aren’t being paid enough, then you can only beg the government for more. Or go through the pull (and the ugly “sausage making”) of the political system. This is what we have substituted for a marketplace, and those of us who continue to support government involvement in medical care have no business complaining.

The case focused on rates for certain residential services.

State officials recommended increases in reimbursement rates in the late 2000s but they were never implemented because the Idaho legislature declined to appropriate funds, according to court papers.

Writing on behalf of the majority, Justice Antonin Scalia said that the providers have no right to sue the state under the so-called Supremacy Clause of the U.S. Constitution, which holds that federal law generally trumps state law. [source for quotes: Thomson/Reuters 3/31/15]

That may be true, from a Constitutional state-federal perspective, but that’s not the main point in medical care today. The main point here is: He who pays the bill sets the terms, particularly when “he” is a coercive monopoly, wielding force, which is what government is, by definition. This is the fact of reality that medical providers (along with patients) will never escape, so long as they seek to replace a marketplace with political mechanisms they falsely believe are in their own (and their patients’) best interest.

Entitlement is not really a two-way street so much as a dead-end street. Whenever anyone — doctor or patient, or anyone in any other kind of economic context — seeks to use government to coerce payment for services, the freedom and autonomy that would otherwise have existed in a free marketplace is diminished, and ultimately destroyed. That’s where health care has landed in 2015, and it’s only going to get worse.

The only route to better pay for doctors, and better treatment in medical care? Total privatization of the marketplace.

The transition may not be easy, but the only alternative is fewer medical services provided by more poorly paid physicians and hospitals, all commanded on high from an unaccountable bureaucracy and a bunch incompetent and morally flawed politicians.


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