One typical reaction to these graphs is to argue that we need more price controls to hold down rising costs in healthcare. Liberal wonks like Klein often gesture in that direction. This is how Sarah Kliff, a contributor to Klein’s Wonkblog, put it:
We have a lot of examples to look at where governments have successfully held down the rate of health-care cost inflation. Most of them do that through some version of price controls, where the government sets the rates that doctors can charge for various services […]Rate-setting has a pretty decent track record in holding down health-care inflation but less of a stellar scorecard in American politics. In a way, the success of rate-setting makes pretty simple sense: When the government has the final say on how much a medical procedure costs, it’s pretty easy to hold down the price.
But even in countries that have adopted some form of price control—most on these graphs—prices are still rising, even if in absolute numbers their systems are cheaper than ours. Take this graph from the Commonwealth Fund that charts the rise of healthcare costs internationally from 1980 to 2008:Many of the countries pictured in the above graph—UK, France, Canada, and Australia, for example—use some form of price control. But, as you can see, healthcare spending is rising everywhere regardless of whether the country uses rate setting or not.Price controls in the US might save us some money in the short term, but they wouldn’t address the long term causes driving spending here as well as abroad. To do that would requires the kind of technological innovation we often highlight on this blog. Smart healthcare policy needs to focus on promoting the development of new technologies and delivery systems. Unfortunately, a price control regime involves the kind of bureaucratic controls and politicized decision making that slows or blocks innovation.The US needs to get a better handle on prices even as we open the system up in ways that can accelerate the technological changes that are our only long term hope. This won’t be easy, but it is the only way forward that doesn’t lead to disaster.