Econ 101: A Lesson in the Tender Mercies of Medical Care

So, it turns out that while you may be able to legislate price, you can not legislate costs:

For years, Mayo Clinic officials have complained that Medicare and Medicaid pay less than what it costs to treat patients.

Now they’re doing something about it.

In the past week, the Rochester-based clinic said it will stop caring for 50 Medicaid patients in Montana and Nebraska starting Jan. 1, unless they have a rare disease that can’t be treated elsewhere. Also on that date, a handful of Mayo’s primary care doctors in Arizona will opt out of Medicare, forcing some 3,200 patients to pay out-of-pocket or find new providers.


You mean that when government imposes price ceilings you get shortages?  Who would have thought that?

The difference between prices and costs is not just a fine distinction made by economists. Prices are what pay for costs — and if they do not pay enough to cover the costs, then centuries of history in countries around the world show that the supply is going to decline in quantity or quality, or both. In the case of medical care, the supply is a matter of life and death.

When politicians talk about “bringing down the cost of medical care,” they are not talking about reducing any of these costs by one cent. They are talking about forcing prices down through one scheme or another.

-Thomas Sowell

It is a law as sure as gravity; when you artificially reduce the price of something below what the market would otherwise demand, you will get less of it or worse of it.

Count on it.

Postscript:  For added fun, here is a foretaste of the feast to come:

“Both of these moves are very difficult for us to make,” said spokeswoman Shelly Plutowski. “Both point to the fact that we as a country need to change the way we pay for health care. Mayo Clinic and other providers lose money on every Medicare patient we see, and the same goes for Medicaid.”

Last year, it cost Mayo $840 million more to treat Medicare patients than it received in payments, Plutowski said. The clinic also lost $100 million treating Medicaid patients, she said.

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