RUSH: I mentioned the House of Representatives has, uh, how to say this? They have reformulated the House version of health care and it’s $871 billion price tag, because they realize they need to do something with it. That bill is the focal point of opposition. They claim in their revamped version here that the way they’ve redone the bill will keep costs low. They will keep costs low. Now, Ed Morrissey writes about this at the Hot Air blog and I want to get into what he says, and we’ll do it in the next hour, because there’s profound difference between cost and price, and these Democrats are trying to make people think that costs of something are the price and they’re two different things entirely. The last time we had wage and price controls was in the seventies with Nixon. I remember I was in Pittsburgh and inflation was at 3%, we had an oil crisis going on, and of course management always loves wage and price controls. ‘Well, I can’t give you a raise, the federal government says I can’t give you a raise.’ But prices, there’s no way to control prices.
I’ll just give you one example of how price controls fail. If you were alive back then, ask yourself, did the price of things freeze? You wanted to report whoever was violating this to some government authority, your wages were frozen but the prices weren’t. Let’s use a butcher as an example. You go into the grocery store to the butcher counter and you want to buy a cut of meat, and the price on that that particular cut of meat is frozen so they can’t raise it legally. All they do is create a new cut like the center rib eye red eye. Just call it something new. It’s exempt from the price. Price at whatever they want and make up whatever it is they can’t make because the price on the other side is frozen, this happened all the time, prices just constantly skyrocketed during wage and price controls. But the whole concept that the House now is going to keep costs down, which is fooling everybody into thinking that the price now for health care is going to get cheaper, the two are unrelated.
One glaring example. Have you ever heard of a loss leader? The Larry King show was a loss leader for the then Mutual Network. The Larry King show was on at midnight to six. It made no money. They were willing to lose money on it because they told affiliates, ‘You have to carry our newscast during the day and our commercials,’ which is where they made their money. So the costs of the Larry King show were sky high compared to the price they were able to sell advertising on it, which was zero. There are loss leaders throughout business where people sell something for a price much less than what the product costs. Sometimes they have to do that because of market pressure. Other times they do it to create loss leaders and get business elsewhere in their organization.
RUSH: Ed Morrissey posted this at 9:30 today on HotAir.com, the blog: ‘Perhaps the leading economists of the US could convene a special remedial course for Congress to explain the difference between price and costs. One might have expected the political class to have learned that difference from the disastrous US effort to fix prices and wages in the 1970s during Richard Nixon’s term in office, but apparently not. Democrats hailed their new, revamped House version of ObamaCare and its $871 billion price tag, based on forcing more providers into existing Medicare reimbursement rates. They claim that this will keep costs low, which is absolutely incorrect.’ And here’s the news blurb: ‘House leaders have cut the cost of their health-care overhaul to around $871 billion over the next decade, Democratic sources said Tuesday night, and were working to line up votes for the package with the aim of bringing it before the full House early next month.’ Remember, Thanksgiving is the target date here.
‘The $871 billion estimate — well under the $900 billion limit set by President Obama — is the latest of several versions scored by congressional budget analysts, according to a Democratic aide, speaking on condition of anonymity to discuss private talks. … But the idea is opposed by many conservative Democrats from rural areas, where Medicare rates are well below the national average.’ This is so convoluted. Do you realize what they’re doing here? They are going to reduce costs by forcing more providers into existing Medicare reimbursement rates. Anyway, Ed Morrissey, this is important here: ‘Fixing prices does not lower costs. Let me repeat that: fixing prices does not lower costs. ‘Costs’ are borne by providers, who get reimbursed –‘ What is so complicated about the word ‘paid’? It’s one syllable. Reimbursed? But I digress.
”Costs’ are borne by providers –‘ That means doctors and hospitals and nurses and clean water technicians and all the rest, ‘– who get reimbursed by either consumers (in a rational market) or by third parties (American health care) for their goods and/or services. In a competitive market, providers have to set their prices at an attractive level in order to get business without missing out on profit opportunities, but their prices have to cover their costs or they go out of business. Not coincidentally, the latter is what happens when price-fixing is used. When government fixes the price of goods and services, it usually does so to mask costs, not reduce them. This is what Medicare has done for years, which is why doctors avoid Medicare patients now. When the fixed price becomes less than the actual cost to provide the service, the provider is forced out of business,’ unless he can sneak around and overcharge for another service to make up for what he’s losing with his fixed price on his so-called reimbursement.
‘And what Medicare reimbursement schedule does the House use to show those cost savings, anyway? Would that be the schedule that will start dramatically cutting reimbursements over the next few years?’ Again, will that be the schedule that will start dramatically cutting payments over the next few years? So we’re going to bring this stupid $900 billion figure down to a mythical, what, $29 billion. Gotta get it under $900 billion before Obama approves it. So we’re going to reduce reimbursements, i.e., payments, which means that the people who provide the services, who have costs that — you can’t fix the cost of something. It costs what it costs, but the price that they can charge for it, or that they’re going to get reimbursed for it is gonna make it not worth their time. ‘Or will it use the Stabenow bill in the Senate that would eliminate those cuts, and which the Senate also ignored when calculating the cost of the Baucus bill?’
So we have pure smoke and mirrors, absolutely inanity here. This rigmarole, this razzmatazz to try to persuade people, ‘We are reducing costs.’ You are not reducing costs at all. You are reducing what doctors and providers are going to earn. The cost is not gonna be reduced. The price is what’s gonna be jimmied with here, and it’s not gonna be enough for these providers to make it worth their while to provide the service, which he points out what’s happening in Medicare right now. That’s why so many doctors are opting out of it. What the government, what Medicare says they’re going to be paid — i.e., reimbursed — is less than what it costs to provide. They’ll say to hell with this. So they’re setting up their own practices and they’re taking clients, pay them retainers like you pay a lawyer, have 15 or 20 patients, and that’s your practice, to hell with you and Medicare. They can never treat a Medicare patient once they opt out of it, as it exists.
What a mess, what an absolute mess. The market will take care of this if you just get out of the way and let it, but, of course, we can’t have that. At one point, folks, I will be honest with you, early on in my star-studded career, I wanted to be the smartest guy in the country. I wanted to be thought of as the smartest guy in the country. I have succeeded but it’s depressing because I am surrounded by pure idiocy. We all are. We are all surrounded by morons. We are surrounded by the clinically ignorant. We are surrounded by abject, total, 100%, dangerous, arrogant stupidity, and corruption. So what good does it do to be the smartest guy in the country? All it does is make you feel like you want to explode.