The Most Frightening Health Care Article You'll Read All Day

“Maryland just became the biggest petri dish in America’s experiment to contain health-care costs,” reports John Tozzi for Bloomberg. What is the state doing? They’re looking to put a legal cap on hospital charges.

Maryland has a unique regulatory relationship with its health care industry. It has a commission that sets hospital prices, much like public service commissions in other states set utility prices. Maryland is now using that regulatory authority to limit hospital expenditures.

The state will get to continue setting rates, but overall per-capita hospital spending can’t grow more than 3.58 percent per year, the average growth rate of the state’s economy over the past decade. Hospitals agree to meet certain quality targets—reducing how many Medicare patients are readmitted, for example. They’ll also shift from fee-for-service payments into a pay-for-performance system, the details of which still need to be worked out.

“We’re really looking at being measured on how healthy the communities are and not just how much we bring in,” says Jim Reiter, spokesman for the Maryland Hospital Association.

The fundamental problem with health care in America is price. It costs a lot of money, both for taxpayers who fund health care programs with run-away budgets like Medicare and Medicaid and for individuals who are seeing insurance premiums accelerate from already troubling growth rates under Obamacare.

So, superficially speaking, controlling what health care providers can charge should result in lower health insurance costs.

The problem, of course, is the impact that will have on health care service.

Ask yourself this: If the government capped what cell phone companies and/or cell service providers could charge, would we have seen the rapid growth and advancement in smartphone technology we’ve seen over the last several years? Probably not, and that would be a tremendous loss. Smartphones get a lot of negative attention, but in terms of improved communication and access to information they are making our lives better. Easier. More efficient.

That innovation wouldn’t have been possible under a regime of government price controls. The same is true with health care. A government control on health care pricing is going to manifest itself in less money spent on innovation and invention and rationing of care and services.

That’s problematic in a country that has diverse opinions about appropriate levels of care. End of life issues are particularly sticky areas, for instance.

There is no getting around the fact that health care costs have to be controlled. But who do we want to control them? The state, setting arbitrary standards for what health care should cost that are often divorced from what health care consumers expect in terms of services and care? Or do we want the free market controlling it?

The free market isn’t perfect either. Many who need care can’t afford it. But better to be able to buy all the health care you want, knowing you sometimes might not be able to afford all you need, than to have the government decide what you need and how much you get.

It will be interesting to see what happens in Maryland, but I suspect the results there will be skewed by the ability of health care consumers to seek care in border states, much like national health care systems in places like Canada are kept afloat by those seeking care through medical tourism.