The Post declared this spring that the antitrust laws are, with respect to medical care, "obsolete" and that they "undercut the public's real interests." I fear The Post may have rushed too quickly to judgement. The answers are not quite so clear as The Post's assertions would suggest.
The Richmond Planning Agency asked the Justice Department whether it could participate with hospitals in concerted action affecting the supply and price of health services. This has come to be known as "joint planning," a process in which a planning agency encourages hospitals to agree among themselves which hospital will provide what service.
Joint planning entails two or more hospitals in a community meeting together behind closed doors to divide up markets. This may work to the detriment of hospitals' customers. Indeed, the Richmond Planning Agency apparently contemplated concerted action on hospital prices. Join planning also may harm other hospitals; it provides a means for the established hospitals to ensure under the ostensibly benign guise of planning that other hospitals in the community do not encroach upon their turf. p
Society has made an emphatic decision to prohibit, not to encourage, collaboration by competitors. If we have determined that the "efficiencies" of permitting McDonald's and Burger King to divide markets and avoid duplication are not sufficient to warrent reductions in competition, why is that judgement not equally applicable to health care?
While The Post is incorrect in saying that the antitrust laws are obsolete in health care, that statement does flirt with the core issue. Economic competition in health care has been stifled by planning and regulation and a uniquely intrusive bureaucracy. It has been distorted by third-party cost reimbursement, which enables hospitals to compete in terms of service, plant and equipment while knowing that the patients' health insurance will pay for it.
The proper response to this state of affairs is to consider the benefits economic competition might provide.
Legislation to deregulate the health care delivery system (while retaining regulations that promote safety and quality) was recently introduced by Reps. Richard Gephardt (D-Mo.) and Dave Stockman (R-Mich.). The Gephardt-Stockman bill would require providers to compete in terms of price as well as quality. It would help all Americans in obtaining health care, including the self-employed and the working poor, who currently receive no federal assistance. The federal contribution would be provided in a way that would not anesthetize individuals to the cost of health care insurance, as is currently the case, but would require them to consider the cost as well as the quality of their health care.
The bill would limit the amount of an employer's contribution for health care plans that an employee may exclude from his taxable income. The bill does not have the government set the limit. It leaves it up to a community referendum: the limitation would be the average premium paid by similarly situated employees in the same community. If an employee purchased with an employer contribution a health care plan that cost more than this community average, the employee would have to report the excess as income and pay income taxes on it.
The Gephardt-Stockman bill further encourages cost-conscious purchasing decisions by providing that if an employee obtains coverage for less than the community average, he may keep the difference between the cost of the premium and the employer's contribution as a tax-free cash refund. To ensure that the employee is sufficiently insured, the refund would be available only if he purchased a plan that provided comprehensive health care coverage and protected him against large medical bills.
In this way, the bill remedies the fact that the tax laws now encourage employees to obtain more insurance (which is tax-free) rather than more wages (which are taxable). This condition has significantly contributed to increases in the cost of health care. The Gephardt-Stockman bill makes the tax laws neutral on the employee's choice between insurance and wages.
The American people are increasingly coming to the conclusion that a competitive system of private initiative rather than government regulation is the most effective and responsive way to provide services. Changing the economic incentives of the system could go a long way toward constraining cost increases and responding to the needs of the American people. Competition in the health care industry is not, as The Post's editorial implies, "obsolete" or "inconsistent with the public interest." Rather, it is being suppressed by a regulartory framework that is thwarting the public interest.