The new year is less than a week old, but there was still plenty of time for the editors at the Virginian-Pilot to reveal their complete lack of understanding of basic economics. The particular ignorance that caught my attention dealt with their bizarre defense of Virginia’s Certificate of Public Need nonsense. As I’ve mentioned repeatedly (with an assist from Norm Leahy), the COPN scheme has limited health care supply in the Commonwealth, leading to higher prices, higher insurance rates, and less health care availability for all.
It’s a basic, fundamental principle of economics: less supply equals higher prices and less product. It takes hard work ignore something this blindingly obvious – but that’s the kind of thing where the V-P editors are practical workaholics. In fact, they make the mistake in the first two paragraphs:
Plans to upend Virginia’s Certificate of Public Need — the state’s mechanism for managing the costs of health care facilities and services — deserve rejection.
The Virginia COPN was hatched back in 1973 in the fond hope of restraining rising health care costs by requiring pre-approval of medical facilities and certain services.
Even if one manages to remain blissfully unaware of the microeconomic basics above, common sense tells us that attaching bureaucratic hurdles onto medical business plans leads to higher costs, not lower costs.
But wait, there’s more…
the Certificate of Public Need Workgroup, created by the General Assembly last year…included a diverse collection of health care industry and practicing medical professionals, as well as insurance executives and large-employer executives (i.e., Huntington Ingalls Industries, Norfolk Southern Corporation)
Oh yeah, that’s really “diverse” – the obvious beneficiaries of the rent-seeking scheme (“health care industry and practicing medical professionals”), intermediaries who can pass along the cost “insurance executives”, and folks who can not only further pass it to employees and taxpayers in tax-deductible health insurance “benefits”, but actually use them as an excuse to avoid salary increases. Everyone had a seat at the table except the folks most badly impacted: health care consumers…
…and anybody who actually sticks up for consumers, like the Thomas Jefferson Institute? They become airbrushed into a “hyperventilating interest group.”
Nevertheless, the three lawmakers with the big plan — Del. John M. O’Bannon III, R-Henrico; Del. Kathy J. Byron, R-Bedford; and Del. Christopher Kilian Peace, R-Hanover — would scotch the working group’s recommendations in favor of their own, more draconian proposal.
So what’s the argument for this cut-’em-off-at-the-pass legislative move?
The COPN requirement curbs competition and stifles innovation. Or, as one hyperventilating interest group put it, “These reforms would also result in a healthier, pro-business free-enterprise health care system that is working well for many other states.”
So, in the V-P‘s universe, rent seekers with a personal interest in the status quo are “professionals”, while reformers looking to break the government-regulated oligopoly are transformed into a “hyperventilating interest group.”
The rest of it remains an unabashed ode to health care corporatism, in which the editors say – with straight faces – that government should essentially guarantee that hospitals are profitable. Life, liberty, and the pursuit of happiness? Nah, we need monopoly, restriction, and the guarantee of profit now.
This utter lack of understanding about the economics of health care shouldn’t surprise us. These are the same folks who insisted two years ago that Medicaid expansion would be a net boon for the Commonwealth, something so ridiculous that even Governor McAuliffe has dropped that laugh line in favor of a hospital bed tax that will now supposedly make up the gap in funds from Washington.
It’s a typical left-wing view: all about demand. Ever since Keynesian economics was born – 80 years ago, I might add – Democrats and their cohorts have fixated on managing demand: aggregate demand, health care demand, etc. Supply? What’s that?
In the eyes of the V-P crew, that’s something that should be held back…”in the fond hope of restraining rising health care costs.”
Meanwhile, according to the Mercatus Center at George Mason University, what COPN laws actually restrain are access to care – to the point of 10,800 fewer hospital beds – and new technology, exactly what one would expect from restricting supply.
Consumers in health care, like in every other industry, benefit from more competition: it means more health care available at lower prices. Producers in health care, like in every other industry, prefer government imposing barriers to entry and guaranteed profits – except that in health care, thanks to COPN, producers actually get what they want.
Meanwhile, on COPN, like in nearly very other matter, the editors of the Virginian-Pilot get it wrong.