We are often told by the advocates of government-run health care that a single-payer system would be innocuous because our masters inside the beltway would not actually own hospitals or employ clinicians. Well, the WSJ Health Blog demonstrates the vacuity of that assertion by explaining the latest P4P proposal from the single-payer system known as Medicare:

“Pay for performance,” one of the great health-care buzzwords of the moment, is often described as paying hospitals more if they take better care of patients. In a 104-page proposal unveiled today, Medicare offers a twist: Pay hospitals less if they aren’t among the top performers.

The problem with this bureaucratic stroke of genius is that Medicare’s current payment scheme only pays 95% of costs (that’s costs, not charges). So, how much further below costs are they planning to go?

Medicare would withhold 2% to 5% of hospitals’ reimbursement funds — with some payments excluded — and use it to create a big incentive pool. The incentive money then would be parceled out to two groups of hospitals: those that score the highest on a set of quality indicators, and those that show the most improvement.

And which hospitals would be hit the hardest by this idiotic scheme?

The biggest losers, at least early on, could well prove to be hospitals in the middle of the quality continuum, notes Arnold Epstein, chairman of Harvard’s Department of Health Policy and Management. That’s because the worst-performing hospitals have the most room to improve — making them candidates for bonuses. 

In other words, a hospital whose performance stayed at the 70^th percentile could be penalized so that a bonus could be given to a hospital rising from the 5^th percentile to the 35^th percentile. This is an idea so dumb only a government bureaucrat could think of it.

Here’s news flash. A hospital cannot stay open if it is paid less money for its services than it costs to provide those services. In 1980, before Medicare began implementing its various price control schemes, there were 7,000 hospitals in theU.S. Now, there are fewer than 5,000. Many rural areas have no hospital at all.

The primary effect of government price controls, as any economically literate person knows, is shortages. Unfortunately, our masters in Washington have never absorbed this blindingly obvious fact. Thus, they will continue to produce schemes like this latest P4P boondoggle, and the inevitable result will be widespread shortages of primary care and hospital services.

And don’t forget: Medicare doesn’t own any hospitals or employ any physicians. Yet its bureaucrats are using the power of the purse to do serious damage to the health delivery system. How can anyone with an IQ exceeding single-digits think this situation will improve if we give these clowns the whole system?