The Open Letter on Health Care Policy Reform

Dear President Clinton and all Members of Congress:

For thousands of years, governments have tried to control prices. The universal experience has been that price controls produce shortages, black markets, reduced quality, and economic hardship.

Now, once again, programs to control health-care prices are on the policy agenda. Under the guise of controlling Medicare costs and shielding the elderly from "unfair" prescription-drug prices, current proposals would restrict discounts on drug prices, cap health-care spending, and limit insurance premiums. Among those adversely affected would be hospitals, members of managed care organizations, public health clinics, and government programs such as Medicaid and the Veterans Health System, which, because of their mass-buying power, are able to negotiate favorable drug prices for patients.

In countries with price controls, health-care services are severely rationed. Patients wait months and sometimes years for surgery, suffering significant harm to health, even death, as a result. Government bureaucrats, rather than doctors or patients, select treatments. Pharmaceutical innovation languishes.

In recent decades, American health-care firms have created hundreds of new drugs, devices, and other medical products that have saved millions of lives, not only in the United States but around the world. The best way to save millions more is to enhance the incentives to research, develop, and market new health-care products. Existing price controls and other trade restrictions affecting health-care goods and services should be removed in order to encourage dynamic entrepreneurship in competitive markets. The result will be lower prices, greater innovation and higher quality.

Despite claims to the contrary, price controls do not reduce medical costs. Nor do they call forth improved health-care services. Instead, they produce lower-quality medical care, reduced innovation, and costly new bureaucracies to monitor compliance, adding to the burdens of health-care providers already entangled in red tape. Price controls harm consumers of medical services, especially those most in need of health- care services.

We urge you to oppose all forms of price controls in any health-care reform.

Signed by 532 economists and other scholars from all fifty states and the District of Columbia.

Please contact The Independent Institute for further information, including details on the new book, AMERICAN HEALTH CARE: Government, Market Processes, and the Public Interest, edited by Roger D. Feldman ($27.95 postpaid)

The Open Letter is sponsored by The Independent Institute, 100 Swan Way, Oakland, CA 94621-1428 • Phone 510-632-1366 • Fax 510-568-6040 • [email protected] • www.independent.org

Co-Sponsors of the Open Letter:

Association of American Physicians and Surgeons
Cancer Research Institute
Hispanic Business Roundtable
Independent Women's Forum
Liberty AIDS Education Foundation
National Kidney Cancer Association
National Taxpayers Union
Non-Commissioned Officers Association of the USA
Small Business Survival Committee