Obama administration eyeing price controls in health insurance

posted at 3:20 pm on June 23, 2010 by Ed Morrissey

With one part of Obamanomics taking us back to 1963, why not have another take us back to 1971?  That was the year that Richard Nixon promised to control inflation and return stability to the American economy by imposing price controls, a decision that backfired and helped lead to artificial shortages and a decade of stagflation.  Almost 40 years later, Barack Obama offers his version of Nixonian economics, this time on health insurance:

In a shot across the bow to the insurance industry Tuesday, President Obama warned companies facing higher costs in part because of his health care law not to hike their prices, saying “we’ll be watching closely.”

Backing up his rhetoric behind the scenes, the Department of Health and Human Services (HHS) is quietly working on a new regulation to determine when insurance price increases are “unreasonable” and potentially prohibited by law.

The move may provide political cover heading into November’s elections as the President tries to keep the public from linking recent premium hikes to his newly-passed health care law.

But critics warn price controls could lead to either rationing or insurance companies going out of business, and point to Massachusetts’s experience with insurance price controls as a cautionary tale of what happens when pricing “turns political.”

It’s also a cautionary tale about allowing politicians to run the private sector.  Obama, Nancy Pelosi, and their allies wasted no opportunity to cast health-insurance companies as “villains” and profiteers, but the truth is much different.  The health-insurance sector is already a low-margin industry with profits between 2-6% in any of the years over the last decade.  Pricing has remained pretty close to the bone as it is, and in states with price-fixing schemes like Massachusetts, they’ve already begun to go out of business.

Price is not the same as cost, especially when government intervenes in markets to disturb the pricing equilibrium.  Price hikes in competitive markets only come when an increase in costs force providers to raise prices to meet them.  Presumably, either other providers have the same price pressures, or an inefficient use of resources resulting in cost increases will force a provider out of business when it can’t price its product competitively.  The low margin in the industry indicates a high level of efficiency (as well as a heavy cost of existing government mandates), and hardly shows profiteering at all.

In the 1970s, price controls resulted in gas lines, meat shortages, and all sorts of artificial problems when government interfered with the pricing mechanisms of competitive markets.  Nixon did it for the same reasons Obama is building — evil corporations, nasty profiteering, and all of the class-warfare rhetoric anyone can stomach.  The result will still be the same.

If government caps prices so that insurance companies cannot cover the cost of providing its services, insurance companies will go out of business and shortages will drive up the actual cost of health care.  Remember, even though gasoline remained at a constant price, consumers had to wait hours to get their tanks filled — a cost of time that far outstripped the price increases that would have resulted without Nixon’s intervention.  One cannot escape cost by manipulating price for very long, if at all, a lesson we learned almost 40 years ago, and one Obama wants to learn the hard way all over again.


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They can control the price increases of insurance…but they can’t control tax increases…

right2bright on June 23, 2010 at 4:49 PM

The plan is working….

d1carter on June 23, 2010 at 4:51 PM

Good job democrats, you now live in Venezuela.

Inanemergencydial on June 23, 2010 at 4:51 PM

Well of course.

Price controls have been a disaster every time they have been tried.

So of course the marxists would migrate to them.

Coming soon….5 year plans.

notagool on June 23, 2010 at 4:55 PM

With all the money these guys spend, you’d think they could buy a clue.

trigon on June 23, 2010 at 4:55 PM

Oh good. Another executive order, another executive branch bureaucrat concluding that his agency does have the power to regulate health insurance and set prices.

Why do we need congress? Obama can do it all.

Skandia Recluse on June 23, 2010 at 4:58 PM

One cannot escape cost by manipulating price for very long, if at all, a lesson we learned almost 40 years ago, and one Obama wants to learn the hard way all over again.

He’s being consistent.

He refuses to learn the lesson that Government spending doesn’t spur private sector growth.

He hasn’t learned the lesson that showing weakness doesn’t result in peace.

He plain hasn’t learned the lesson that Nationalizing Socialism doesn’t work.

Maybe he just can’t learn?

Chip on June 23, 2010 at 4:59 PM

Those who fail to remember the past are probably too stupid to be in charge of the future.

Oldnuke on June 23, 2010 at 5:05 PM

Maybe he just can’t learn?

Chip on June 23, 2010 at 4:59 PM

Maybe he doesn’t want to learn, because he’s not interested in positive outcomes.

Missy on June 23, 2010 at 5:06 PM

I can control prices. My Columbia-Harvard professors said so. It will turn out well. We know better.

chaswv on June 23, 2010 at 5:09 PM

“we’ll be watching closely.”

Whatever happen to:

Pivot to JOBS in January?

$150 Billion to help homeowners in forclosure?

Keeping unemployment at 8%?

Sending oil skimmer ships to the Gulf?

Obama and Democrats have the reverse-Midas touch; everything they takeover turns to crap. Oh, they tried price controls in TennCare, nearly bankrupted Tennessee.

TN Mom on June 23, 2010 at 5:11 PM

Why does your foot-rustling operation cost only $28.34?

Because I said that’s how much it costs.

~Obama

BobMbx on June 23, 2010 at 5:12 PM

Note for really smart people:

Price means something much different than cost.

Debt is not the same as deficit.

Up is up. Not down.

BobMbx on June 23, 2010 at 5:14 PM

Obama-rama ding dong is in an iron bubble.

He knows nothing and he learns nothing.

His only goal is to impose his will to power on America–which one can call fascism or tyranny. They never last but they cause untold damage.

Dhuka on June 23, 2010 at 5:17 PM

Earl Scheib, now that guy could control prices. $29.95 for years. Obama should take a lesson and start running late night infomercials to sell his snake oil.

Oldnuke on June 23, 2010 at 5:20 PM

Note to the youngsters: when we were sitting in those gas lines years ago, during the heyday of price controls, there were no cell phones — and certainly no iPods. If you were lucky, you had a cassette or 8-track player in the car, and you weren’t stuck jiving to the Top 40 AM station.

Parents used to send the teenagers to gas up the car because no one else had time to do it. Wasn’t fun. At all. The best part was sitting in line for an hour (in the sweltering summer heat), finally seeing the car ahead of you finish filling up — and then seeing the station owner bring his “All out for today” sign out and start closing everything down. At 10:00 AM.

Yeah, price controls. Such a good idea.

J.E. Dyer on June 23, 2010 at 5:20 PM

Price means something much different than cost.

Debt is not the same as deficit.

Up is up. Not down.

BobMbx on June 23, 2010 at 5:14 PM

NOT TRUE!!! If we will just pay $25 for a quadruple bypass then magically, that’s what it will cost. So it’s better…see you get operated on by the lowest bidder who knows he’s going out of business. Soon we’ll all be going to the vet.

lm10001 on June 23, 2010 at 5:23 PM

Eyeing the exits….

sonofdy on June 23, 2010 at 5:24 PM

Earl Scheib, now that guy could control prices. $29.95 for years. Obama should take a lesson and start running late night infomercials to sell his snake oil.

Oldnuke on June 23, 2010 at 5:20 PM

Earl Sheib, the Ron Popeii of car painting.

BobMbx on June 23, 2010 at 5:41 PM

It’s all so obvious that his plan is working. He knew that Obamacare would fail and drive those people that had coverage from their employer on to the gov. exchanges for their insurance. Then these very same insurance companies will go out of business because of price controls and guess what? We have single payer for everyone except the very wealthy. This is where the trio of Satan’s inner circle wanted us all to go a year ago but knew that we wouldn’t stand for it. We are the frog in the warm water that is soon to realise that we are being boiled alive!

inspectorudy on June 23, 2010 at 5:43 PM

Earl Sheib, the Ron Popeii of car painting.

BobMbx on June 23, 2010 at 5:41 PM

(Said with a cigar lisp…)

Hi, I’m Earl Sheib and I’ll paint any car for just 99.95.

Daggett on June 23, 2010 at 5:44 PM

Wait a minute….did ObamaCare repeal the McCarran-Ferguson Act? I thought the states regulated insurance premiums. As far as I know there is no federal authority to regulate the price of insurance. I thought that ObamaCare only narrowly provides authority to require certain terms in insurance policies, e.g. eliminating the lifetime maximum payout.

rockmom on June 23, 2010 at 5:45 PM

As far as I know there is no federal authority to regulate the price of insurance.

Wow! That’ll stop’em cold! Somebody copy the White House on this!

BobMbx on June 23, 2010 at 5:47 PM

rockmom on June 23, 2010 at 5:45 PM

Ya see that’s not really a problem. He’ll just write an executive order. “So let it be written. So let it be done”.

Oldnuke on June 23, 2010 at 5:51 PM

Obama: Our own, personal, Chernobyl.

nico on June 23, 2010 at 6:08 PM

Wont be to long before the insurance Co’s hang the gone out of business signs, as planned.

gbear on June 23, 2010 at 6:11 PM

“Dynomite!!!!”, sayeth Jimmah Obama-Carter.

ramrants on June 23, 2010 at 6:19 PM

I. Cannot. Take. Much. More. Of. This. Doofus.

alwaysfiredup on June 23, 2010 at 6:32 PM

trigon on June 23, 2010 at 4:55 PM

They could find a clue on a clue farm during clue mating season with little clues humping their legs with their little clue tongues hanging out.

They are deliberately doing all they can to destroy the country. Or they are insane. (repeating the same action over and over and over and expecting a different outcome…)

dogsoldier on June 23, 2010 at 6:44 PM

Hard pivot to destroy as many jobs as possible.

Daggett on June 23, 2010 at 6:51 PM

Two words: Single Payer

MJBrutus on June 23, 2010 at 7:18 PM

Why do we need congress? Obama can do it all.

Skandia Recluse on June 23, 2010 at 4:58 PM

His thoughts exactly. Congress is just a big playroom to make the people feel involved in things they know nothing about, like government and stuff. We ALL, except for those unpatriotic rightwing wingnuts and teaparty terroist, elected the ONE to make the best decisions for us and our soon to be new Mexican citizens.

/sar

Franklyn on June 23, 2010 at 7:25 PM

Because price controls have never produced a shortage of supply!

Of course, a shortage of supply is exactly what they wish to engineer, so that, a few years from now, in the most calculatedly cynical move in the history of American politics, they can screech “See? We told you the ‘free market’ wouldn’t work! Single payer! Single payer!”

Blacklake on June 23, 2010 at 7:31 PM

Apparently Obama pines for the good ole days of Soviet bread lines. What is it with these Marxists and rationing?

olesparkie on June 23, 2010 at 7:44 PM

In a shot across the bow to the insurance industry Tuesday, President Obama warned companies facing higher costs in part because of his health care law not to hike their prices, saying “we’ll be watching closely.”

That quote gives the game away. They’ll justify price controls as an attempt to stop “price gouging.” I think we’ve seen enough of this class warfare to write their script for them.

tom on June 23, 2010 at 8:01 PM

There’s a lot of things coming out of this WH that the feds or exec branch don’t have the authority to do, but they’re doing it anyway. That’s the main reason we don’t sleep as well since Jan 20, 2009.

Kissmygrits on June 23, 2010 at 8:06 PM

That quote gives the game away. They’ll justify price controls as an attempt to stop “price gouging.” I think we’ve seen enough of this class warfare to write their script for them.

tom on June 23, 2010 at 8:01 PM

“For those of you who get health care provided to you free of charge because you can’t afford to pay, through the institution of price controls I will prevent Big Foot Rustler from increasing your premiums by 30-40$ per year”

“Ummm…..Mr. President…40% of nothing is still nothing”

“Yeah…I know. This ain’t about insurance premiums…this is about community organizing…make the stupid poor believe their rates are increasing”

BobMbx on June 23, 2010 at 8:51 PM

There will be no medical services. The only option you will have is Single Prayer.

MSimon on June 24, 2010 at 8:12 AM

Barack “Sandman” Obama plots his own version of Logan’s Run where his ultimate objective is to retire any runners on Lastday who might be hoping to escape to Sanctuary.

viking01 on June 24, 2010 at 9:03 AM

Let’s try Price Controls…on government.

Noel on June 24, 2010 at 10:10 AM

Barack “Sandman” Obama plots his own version of Logan’s Run where his ultimate objective is to retire any runners on Lastday who might be hoping to escape to Sanctuary.

viking01 on June 24, 2010 at 9:03 AM

See you at Carousel.

Inanemergencydial on June 24, 2010 at 8:14 PM

Obama as Nixon. How droll. How come the “best and brightest” from the Ivy League have NO original ideas and the ones they implement, or want to implement, are all proven disasters?

Just asking.

JimP on June 24, 2010 at 9:37 PM

Mussolini boasted that the retraints on liberty he imposed on Italy were proof of the advanced nature of Italian civilization.

Akzed on June 25, 2010 at 12:16 PM

Comment pages: 1 2