Central Planners’ Miscalculations Have Consequences

After the election, the victors are exulting that ObamaCare is here to stay, and that the “best is yet to come” as their glorious plans to “fundamentally transform America” can proceed. In their intellectual arrogance, the power- seekers have left a key variable out of their calculations: human behavior. Their predictions, for example, of increased revenue from increased taxation, are based on “static analysis.” They assume that people will not change their behavior, as when they think they are being robbed. They assume that doctors will keep working, just as they always have, even though they may complain. But people need to see how this assumption has worked out before.

One of the finest surgeons I’ve ever worked with was an Argentinian hand surgeon. Before coming to the United States, he was waiting tables. The government of Argentina’s version of Obamacare made waiting tables more attractive to him than practicing medicine. The government miscalculated, never considering that a talented surgeon would make what Austrian economists call a comparison of doing surgery to “the next best alternative use” of resources. This surgeon was better able to feed himself and his family by waiting tables. He simply resorted to the next best use of his time and labor.

The consideration of the next best alternative use of an individual’s time and resources is innate, something that each and every one of us does without even thinking. The belief that American physicians won’t do this is naive and arrogant. It may represent one of the greatest miscalculations in the bloody history of central planning. And what will “medicine” look like if the “providers” work begrudgingly, under terms that they see as detrimental to their own interests and their patients?

Physicians in this country will always be physicians. However, they might not be practicing medicine. The tyrants who would point a gun at a doctor to extract some “right” to health care assume that the doctors will show up for this work camp the next day, again and again, instead of seeking work conditions that are more advantageous. The current shortage of physicians will look like a surplus in a short time, if price controls and bureaucratic risk outweigh the benefit of medical practice. As the nation drifts toward socialist redistribution and totalitarianism, economic miscalculations will proliferate as government economists assume that, this time, the laws of economics can somehow be suspended. Already there are many examples.

A few years ago, Walmart opened its first stores in Canada. Not long afterward, they met the iron fist of the unions and their demands. The workers belonging to these unions miscalculated. Walmart simply shut down these stores, eliminating these folks’ jobs. I suppose it never occurred to them that Walmart would react in this way. More recently, Hostess workers miscalculated, never imagining that the company would simply close. Hostess was exercising one of our few remaining rights, that of refusing to operate a company on terms that are not mutually beneficial.

New Yorkers elected a mayor they thought cared about them even more than they cared about themselves, as evidenced by his recent push to ban large sodas. Their health and well-being was his primary concern, right? Their miscalculation was apparent recently when he refused the help of non-union power workers in the aftermath of hurricane Sandy, revealing his true priorities.

When Medicare began, the price paid for physician and hospital services was whatever the physician or hospital wanted to charge. Predictably, more service was provided. In the early 1990s, the central planners tried to correct their earlier error with the Resource-Based Relative Value Scale, cutting physician fees drastically. They miscalculated again. First, they thought that they were able to come up with a rational price from their abstract formulas, and second, they set it too low, below the market-clearing price, so that physicians are increasingly reluctant to see Medicare patients.

With ObamaCare, there is little evidence that the government officials and bureaucrats who created the current disaster have learned anything. They still hold the fatal conceit that they can dictate human behavior from on high without causing misery, mayhem, and death. [IA]

Dr. G. Keith Smith is a board certified anesthesiologist in private practice since 1990. In 1997, he co-founded The Surgery Center of Oklahoma, an outpatient surgery center in Oklahoma City, Oklahoma, owned by 40 of the top physicians and surgeons in central Oklahoma. Dr. Smith serves as the medical director, CEO and managing partner while maintaining an active anesthesia practice. In 2009, Dr. Smith launched a website displaying all-inclusive pricing for various surgical procedures, a move that has gained him and the facility, national and even international attention. Many Canadians and uninsured Americans have been treated at his facility, taking advantage of the low and transparent pricing available. Operation of this free market medical practice, arguably the only one of its kind in the U.S., has gained the endorsement of policymakers and legislators nationally. More and more selffunded insurance plans are taking advantage of Dr. Smith’s pricing model, resulting in significant savings to their employee health plans. His hope is for as many facilities as possible to adopt a transparent pricing model, a move he believes will lower costs for all and improve quality of care. Dr. Smith resides in Oklahoma City, Oklahoma. Contact: KSmith@surgery centerok.com, 405-627-0274