Obamacare Is the Latest Example of Failed Central Planning

Big government has been mismanaging economic affairs for a long time.

When Planned Parenthood wanted to add operating rooms in Virginia Beach two years ago, anti-abortion groups tried to stifle the effort by urging the state to deny a required Certificate of Public Need. When a Richmond-area oncology center wanted to move a linear accelerator from one location to another four years before that, state bureaucrats said no. They refused to approve a Certificate of Public Need because, among other things, the move could take business away from a nearby cancer center.

Federal officials are working frantically to straighten out the mess created by the Affordable Care Act’s effort to further centralize health care planning. As they do, it’s worth looking at how much mess remains left over from another stab at central planning — one that was repealed more than a quarter-century ago.

Virginia’s Certificate of Public Need program really confers “certificates of monopoly for favored businesses,” says Robert McNamara. He works for the Arlington-based Institute for Justice, which represents two businesses — a colonoscopy service and a radiology practice — that want to expand operations in the Old Dominion.

Last year they challenged the COPN process, arguing that the long, complicated, bureaucratic and costly process violated the Constitution’s interstate commerce clause and their equal right to earn a living under the 14th Amendment. A federal court shot down their challenge. To pass muster, wrote judge Claude Hilton, a law “may be based on rational speculation unsupported by evidence or empirical data.”

That is not good enough, said the 4th Circuit Court of Appeals last week. While rejecting the equal-protection claim, judge J. Harvie Wilkinson and his colleagues ruled that, as a matter of fact, Virginia’s COPN law very well could amount to an unconstitutional restriction on interstate commerce. They have sent the case back for further review.

The court cited a Virginia regulation indicating the COPN regime is meant to “discourage the proliferation of services that would undermine the ability of essential community providers to maintain their financial viability.” (That is bureaucratese for: “stop potential competitors from luring customers away from existing businesses.”) And because “current medical providers are by definition in-state entities,” the court noted, “a major purpose of the certificate requirement is to protect them at the expense of new out-of-state entrants.”

(Pause here for a moment. If customers migrate from an old provider to a new one, the odds are that they do so because they like the new provider better. If that is the case, then why should the state stop them from migrating?)

The court also noted that the COPN program gives “a structural edge to local firms.” If, say, Bon Secours wants to expand operations, then it could face opposition from rival HCA. But if a third company tries to enter the market, then it will face opposition from both. A market incumbent “necessarily face(s) one fewer objector than ... an out-of-state firm that seeks to enter the market de novo — itself.”

None of this has to do with health or safety, by the way: Separate regulatory agencies make sure doctors are trained and hospitals are clean. The COPN system is all about managing the number and location of providers — not their quality.

How in the world did we get to the point where a provider needs a permission slip from the government — and its competitors — to open its doors? The tale goes back to 1974, when Congress passed the National Health Planning and Resource Development Act (NHPRDA), which imposed COPN on the states.

Congress did that because, at the time, Medicare and Medicaid were issuing payments on a cost-plus basis, which created an economic incentive for waste and inefficiency. To correct that central-planning mistake, Congress added more central planning: COPN was supposed to put a lid on rising health care costs by stopping doctors and hospitals from adding capacity where it was not — in some bureaucrat’s eyes — needed. (Only in Washington does it make sense to hold down prices by restricting supply.)

Washington later changed the reimbursement formulas. Congress repealed the NHPRDA and freed states to repeal their COPN rules. Some did – but not Virginia. The state’s market incumbents like the system too much. And why wouldn’t they? It’s like asking a Ford dealership if Nissan should be allowed to open up shop across the street.

That’s not just the view of the medical interlopers, by the way. Nine years ago the Justice Department and the Federal Trade Commission conducted a joint investigation of the COPN system. They found that COPN laws “fail to control costs,” “can actually lead to price increases,” “pose serious anticompetitive risks,” allow “market incumbents ... to forestall competitors,” and “risk entrenching oligopolists and eroding consumer welfare.”

Aside from that, they’re a shining example of all the wonders central planning can achieve.

This article originally appeared at the Richmond Times-Dispatch.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Dr. Frankenstien||

    I'm shocked, shocked to find out that central planning didn't work.

  • From the Tundra||

    It didn't work *yet*. Just need to find the right people and get rid of the damn obstructionist Repubs. It will work next time, for sure,

  • ||

    So you've visited CA recently?

  • Lord Humungus||

    Sebelius: ‘The Website Has Never Crashed’

    I would suggest the website has never crashed,” Sebelius said during Wednesday’s House Commerce and Energy Committee hearing. “It is functional, but at a very slow speed and very low reliability, and has continued to function.”

    from the comments:

    The Titanic never really sank.

    It just displaced greater amounts of sea water at ever increasing depths until it docked in the lower mud.
  • Griffin3||

    I think you're sugarcoating it.

  • Drake||

    Some sort of an internet award is in order.

  • Sevo||

    Hey, it "opened" on time! You just have to sort of change the meaning of "open".

  • Hillary's Clitdong||

    There's no sugarcoating it. JAL 123 never failed mechanically. It was functional, albeit with slightly reduced controllability, and it continued to function until it landed in an unorthodox landing pattern.

  • some guy||

    "I would suggest the WTC towers never collapsed. They continued to stand, but at very low height, very low utility, and have continued to stand."

  • Ramjet||

    Hahahahahahaha. It's amazing that what Sebelius is saying is considered English.

  • Fatty Bolger||

    There's no sugarcoating it, the Hindenburg's docking did not go as smoothly as planned. However, all passengers arrived at their destination as promised, though there were some complaints about excessive warmth in the cabin and a harder than usual landing.

  • Tonio||

    Well, there is a difference between the website crashing (server-end problems) and the website being unreachable from browsers due to overloading. But, yeah, she's picking nits to an incredible degree.

  • ||

    It depends on what the definition of "is" is.

  • Bryan C||

    They've reportedly experienced both of those issues, so she's lying no matter which way she meant it.

  • Brett L||

    Now, now guys. The functionality it had, worked. It just lacked all the functionality it needed to actually function.

  • johnl||

    The "speculation unsupported by evidence" clause is the bedrock of the constitution.

  • SweatingGin||

    OT: Wayne County/Detroit just had a tax auction to sell off the old (crumbling) Packard Plant. It went for $6.3 million, and the statement from the winning bidder is insane and illiterate.

    "The Posential Energy in Detroits Assets”

    Gems like:

    “Dr. Van Horn has assembled the Investment Banks, Hedge Fund Lenders, Private Investors and several Foundations, who intend to merge their financial resources with the local developers in Detroit, to transform the dormant capital the lies in every real estate parcel in the city of Detroit, into a fixed value of capital that will benefit all of the cities residence.”
    “Prior to placing the bid on the Packard plant, Dr. Van Horn’s prophecy was to resurrect Detroit by providing education, jobs, vocational training to the city’s residence, simultaneously unplugging the financial arteries of the city.”

    Free Press on it.

  • Fatty Bolger||

    Guess what happens when you unplug an artery.

  • Swiss Servator, Bow to Bern!||

    A big, messy exsanguination?

  • ChrisO||

    It'd make a very good lair for an evil genius.

  • Tonio||

    That's what I'm thinking. Van Horn's statement sounds like boilerplate language designed to appeal to gullible public and pols.

    So, yeah, either lair or he has some plans to bilk government for more funds.

  • SweatingGin||

    Some speculation on the Free Press and News comment sections that the group of investors are based in Nigeria, and will come through with the money after she pays a few fees to cover the transfer.

  • Invisible Finger||

    And she's accepting new patients!

  • sarcasmic||

    If central planners aren't going to plan things, who will? Huh, smart guy? What's your plan? Unless you've got a plan that's better than the central planners', it doesn't count! So, what's your plan to replace the central planners' plan? Well?

    /derp

  • Alice Bowie||

    You can let people do what they want with no intervention.

  • sarcasmic||

    But who will give permission! Who will give orders! You're talking anarchy! Chaos!

  • Jquip||

    Papiere, vielleicht!

  • ||

    That is correct suh!

  • robc||

    You can let people do what they want with no intervention.

    Maybe you should apply this comment to the other thread.

  • blcartwright||

    but what if someone makes the wrong choice and gets hurt? Not everyone is like you! That's why we made to make rules for everyone, it's only fair!

  • tretzlaff@gmail.com||

    And those currently with the money and influence will continue to find ways to fleece others completely. Systems will be designed not for public or shared benefit, but to prey upon the prejudice and weakness inherent in our all to human minds.

    I'm not saying everything needs to be centrally planned, I'm saying sometimes the rules of the market need to be fixed to prevent abuse of people in the market with less information and or influence.

    The article is pretty weak sauce. The federal central planning weakness given in the example was fixed. A state law which should have been repealed was not, likely due to the influence of monied interests, not lack or failure of central planning.

    Logic #fail. Try again troll.

  • ||

    If you don't want central planners to tell you where you can provide medical care, you clearly don't want anyone anywhere to get any medical care.

  • Dr. Frankenstien||

    I don’t want to do nothing, there’s plenty to do
    The question I ponder is who plans for whom?
    Do I plan for myself or leave it to you?
    I want plans by the many, not by the few.

  • Tony||

    Similarly, the failure of Borders Group means all capitalism is bad at doing stuff.

  • Lord Humungus||

    you obviously don't understand capitalism.

  • Sevo||

    Tony|10.30.13 @ 11:07AM|#
    "Similarly, the failure of Borders Group means all capitalism is bad at doing stuff."

    See Schmpeter; one failure among many is an improvement; it got replaced with a better competitor.
    See every communist country ever tried; 100% failure rate is failure.
    Even someone as stupid as you can see that.

  • ||

  • Gamblorr||

    Except that when a business like Borders Group makes a lot of bad decisions and becomes unsustainable, it goes away and gets replaced. If Borders was still around and somehow making us all poorer and worse off, then you might have stumbled onto a point.

  • SweatingGin||

    They should have been bailed out!

  • Certified Public Asskicker||

    Right you are Tony. We needed government to ban tablets and smartphones, that way Borders could have lived on forever!

  • ||

    We can't afford another recession brought on by your pervasive technology. ATMs did recession 2009!

  • Certified Public Asskicker||

    ATMS destroyed the lollipop industry!

  • ||

  • Francisco d Anconia||

    No matter what you think of the song or the band, it will always be the first...

    12:01am on 1 August 1981

  • ||

    Get ready to feel old: I wasn't even alive yet when MTV started broadcasting.

    And I actually do like the Buggles...

  • ||

    Get off my lawn!

  • ||

    I'd figure a lollipop might be a nice thing after going ATM.

  • Rufus J. Firefly||

    Hey. Back off my boy Tony. At least he doesn't claim to be a classical liberal like Palin the progressive. As you were Tony. I got your back you presumptuous, projecting liberal living in the real world, you.

    Psh!

  • ||

    Are you fucking retarded?

    They are actively restricting access to that thing you think is a universal right, and increasing the costs on top of that.

    Jesus tap dancing christ get your talking points straight.

  • Brett L||

    Well, see, the lesson is that they just needed more revenue enforcement agents.

  • C. S. P. Schofield||

    Ah, but the Borders group was allowed to fail. Will Obamacare be allowed to fail?

    You make an important point. It is too simplistic to say that Central Planning has a history of not working. So does every other kind of planning, including letting the people makes their own plans unmolested. Plans fail. The problem is that Central Planning has a history of failing and then pretending desperately that it hasn't, making the failure longer, more drawn out, more expensive, and more painful than necessary. Obamacare is showing signs of failure (or dishonesty) on multiple fronts. It should be taken behind the barn and shot.

  • Brian||

    And more violent. Planning isn't so bad, when you're not planning to point guns at peaceful people and tell them what to do.

  • Brett L||

    Right. There was an article yesterday about a guy who had been on the pointy end of implementations talking about a conference where everybody knew the game and its rules and the theories, and failed terribly at price-setting/price-signaling. But when there's no guns to back that up, you go out of business, and in America at least, may get another shot. Government programs fail big because they aren't allowed to fail small.

  • James Anderson Merritt||

    "Government programs fail big because they aren't allowed to fail small." But at least that was one of the alleged virtues of Federalism. Government programs could be tried out in the "laboratories of democracy" provided by the several States, before being considered for large-scale, national implementation. A big problem with that approach, however, is allowing huge States into the Union. California and Texas are big and populous enough to be separate nations. So when they try something and fail, the suffering caused is great, as opposed to Rhode Island or Vermont (or even geographically huge but small in population) Alaska trying something and failing. Still, even trying and failing in California, New York, or Texas is better than trying and failing in the US as a whole.

  • EDG reppin' LBC||

    Hahahaha! What a dumb fuck! I try not to respond to you Tony. But you really outdid yourself with this comment. It truly shows that you have no idea how capitalism works. Yet, you try to argue against a system you don't understand? Ignorant piece of shit, you are.

  • Brian||

    Tony:

    Similarly, the failure of Borders Group means all capitalism is bad at doing stuff.

    Capitalism is an economic system. It doesn't "do stuff."

    Government is a group of people who assume legitimate use of violence in a geographic area. It does stuff. You can have sensical discussions about whether or not such organizations are good or bad at doing stuff.

  • Francisco d Anconia||

    CNN's Top Headline

    Change the List: Income inequality

    Opinion: What does extreme income inequality do to a society -- and can it be reversed? This series looks for answers in the most unequal place in America.

    I'm quite certain that tomorrow the rebuttal to this will be their top story.

    How can the truth ever be known when those tasked with bringing you the truth are so willing to lie for their cause?

    We are doomed.

  • ||

    Nero fiddled while Rome burned. CNN reported on Anthony Weiner's cock, Occutard talking points, and pictures of cats on the internet.

  • Rufus J. Firefly||

    Serves Rome right for building homes out of wood so tightly together!

    Play it again, Nero!

  • Auric Demonocles||

    I care much more about how much the poorest people have than what the gap between the poorest and richest is.

  • ||

    But there's only a fixed amount of wealth! The rich only get richer by taking from the poor and making them poorer! You economically literate heartless bastard!

  • sarcasmic||

    Yeah! I mean, the poor don't have any wealth! That's what it means to be poor! Yet the rich still manage to transfer wealth from the poor to the rich, even though the poor have no wealth to transfer! And, and, and those wealth transfers by the government from the rich to the poor? Well, well, libertarians want to end them and that amounts to a transfer from the poor to the rich since not giving is taking and not taking is giving and libertarians hate the poor and, and, and...

  • Francisco d Anconia||

    When capitalism eliminates poverty...

    ...change the definition of poverty to discredit capitalism.

    /pick a prog

  • sarcasmic||

    Poor people are fat because evil capitalists are forcing them to eat junk food!

  • James Taggart||

    The only thing progressives hate more than poverty is affluence.

  • blcartwright||

    The author wants to make it appear that Gilmore doesn't have enough because others have more. Maybe Gilmore can do better by emulating the successful. Get an education, develop a skill, work hard.

    My quality of life is not determined by how many people make more or less than me - it's strictly a matter of if I have enough to satisfy my family.

    The "income gap" is a fallacy. In any period of economic expansion, those with more skills will tend to get the larger increases. The only way to close the gap is for the people making less to increase their income at a larger rate than those above them. Some individuals, especially those starting out, will. But for a large group of people it will never occur for a sustained period.

    If my income doubles over a period of time but someone else's triples, that does not mean that I am any poorer. It's like saying the Bush tax cuts that reduced the tax liabilities of moderate income people from $5000 to $0 was not fair to them because wealthier people got cuts of more than $5000.

  • Tim||

    If you like your currnet President-you can keep him!

  • Slammer||

    "The President's ultimately responsible, right?"

    Sebelius: "Whatever."

  • some guy||

    Maybe Sebelius was too incompetent to realize she was in over her head. Maybe she simply did not have the capacity to realize her failure was immenent. In such a case the fault would lie on her boss. But what if he was also too incompetent to realize she wasn't up to the task? Then the fault lies with his boss.

  • some guy||

    Clearly, his boss is also too incompetent to realize what the hell was going on and there is no higher boss in this country. Therefore, no one is to blame.

    \QED?

  • Brian||

    The Obama administration acts like there's some big government, somewhere, that's going to make everything they want happen, by command, without anyone doing anything. As if they can just pass Obamacare, claiming that healthcare costs will go down, premiums will go down, marketplaces will be selling insurance, more people will be getting insured, etc, and it all just gets done by their underlings.

    Then, they act shocked that someone wasn't making all of this magically happen.

  • Tonio||

    Obligatory: The red tape pictured is not the canonical red tape of the phrase "tied up in red tape." The historical red tape was a cotton string/ribbon type material used to keep large stacks of paper together.

    I'm going to keep posting this on every thread that uses that illo until Reason comes up with a better graphic.

  • ||

    The wikipedia image is creative commons, no?

  • Brian||

    That is bureaucratese for: “stop potential competitors from luring customers away from existing businesses.”


    It's so sad. Ostensibly, we can't have a free market, because corporations will collude, form cartels, and engage in unfair business practices. Therefore, we need regulation, to protest us.

    So, what exactly is it when corporations use state force to block competition? Is that not a government-ensconced cartel?

    A government ensconced cartel uses state force to keep competition out. Isn't that the worst-case scenario in a completely free market: corporations engaging in violence to hurt consumers?

    In fact, it's even worse with a government ensconced cartel. In a free market, a corporation would have to finance its own violence. In a government ensconced cartel, the violence is socialized and distributed across the taxpayers in a geographic area. The government prevents them from having to pay for the violence themselves.

    When you look at public choice theory, it's clear how our system incentivizes exactly the bad behavior that government is supposed to protect us from.

    I have no idea why adults seem to feel obligated to buy the ridiculous concept of government that is sold to children in social studies classes. I hope, at some point, it's judged by reality, instead of childish fantasies of a paternalistic government protecting us all from boogeymen.

  • ||

    The pure altruism of government infuses everything it touches. Therefore, government monopolies, oligopolies and cartels are righteous. Private monopolies, oligopolies and cartels, to the extent they could even theoretically exist long-term in a completely free market, are evil.

  • sarcasmic||

    Well, yeah. Government is us, the people!

    Corporations are them, the rich!

    Government cartels are for the good of the people!

    Corporate cartels are for the good of the rich!

    Oh, and profits!

  • Tonio||

    I have no idea why adults seem to feel obligated to buy the ridiculous concept of government that is sold to children in social studies classes.

    Because many adults also continue to believe in other myths are on a par with Santa Claus. Some people like comforting fantasies, or are incapable of facing life without them.

  • C. S. P. Schofield||

    "Because many adults also continue to believe in other myths are on a par with Santa Claus."

    Come now. There is one hell of a lot more evidence for the existence of Santa Clause than there is to support the notion that central planning works.

  • ||

    Why won't Obama fire Sebelius? Because they're such pals. Isn't that fucking great?

    How is this not a scandal on a Mike Brown level?

    http://www.nationaljournal.com.....s-20131029

  • Fatty Bolger||

    Because Bush hates black people. Duh.

  • triclops||

    you're doing a heck of a job, Sebby!

  • Lar Gand||

    Valarie Jarrett hasn't given him permission yet. Still waiting on orders from Soros.

  • prolefeed||

    Separate regulatory agencies make sure doctors are trained and hospitals are clean.

    I am skeptical that that is the actual outcome of said bureaucracies interacting with doctors and hospitals.

    For example, the requirement that doctors are "trained" in real life means that doctors get to take vacations in exotic resorts, attend a few meetings, and write the vacation off as a business expense, which may or may not result in better outcomes for patients.

  • CLamb||

    My favorite example of this is the construction of the continental railroad. Congress gave the Union Pacific and Central Pacific railroads incentives per mile of track laid. So when the two lines approached each other instead of joining they laid track right past each other and kept building to obtain the incentives. Congress realized it's mistake and forced them to join up a particular location. Some the partially constructed railroad beds which were never used are visible to this day.

  • scotchleaf@gmail.com||

    My favorites are WWII the Marshall Plan and every Western European health system.

  • Sevo||

    How long did it take? 30 days to officially blame the GOP:
    "In the Texas appearance, Sebelius also pointed to a more likely reason behind the urgency to launch: politics, and in particular a government shutdown over the issue.
    "A political atmosphere where the majority party, at least in the House, was determined to stop this anyway they possibly could ... was not an ideal atmosphere," she said."

    The rethugs made 'em do it!
    http://www.sfgate.com/news/pol.....932861.php

  • optimusratiostultum||

    yeah sebellius sure is incompetent she should have begun to blame the GOP from the start. Obama oughta replace her with a parrot trained to say "blame the Tea party racists!". It's not like it would do any worse at managing healthcare.

  • carminakaka||

    my friend's aunt makes $73/hr on the computer. She has been without a job for 10 months but last month her pay was $14848 just working on the computer for a few hours. view it
    =========================

    http://www.works23.com
    =========================

  • kiyajeena||

    Only seriously interested people will be warmly welcomed,Thanks­,,you have to work using a computer and internet.if you can do that and dedicate some time each day then you can do this with no problem. I have been working with this for a month and have made over $➥➠➥­➠➥17,000 already. let me know if you need more here you go

    ➥➠➥➠➥➠➥➠➥➠➥➠➥➠➥­➠➥
    http://www.works23.com

  • scotchleaf@gmail.com||

    And how have the much more centrally planned health systems of EVERY other civilized nation failed? (other than failing to make many millionaire physicians or insurance executives?)

    "Our health care costs are completely out of control. Do you realize what health care spending is as a percentage of the GDP in Israel? 8 percent! You spend 8 percent of GDP on health care, and you’re a pretty healthy nation”... Mitt Romney, in Israel, 7/30/12 (Israel has socialized health care) We spend 17.6%

    "It doesn't make a lot of sense for us to have millions of people without health insurance who can go to the ER and get free care, particularly if they are people who could pay. . They get free care paid for by you and me. If that's not a form of socialism, I don't know what is, so my plan did something quite different. It said, you know what? If people can afford to buy insurance ... or if they can pay their own way, then they either buy that insurance or pay their own way, but they no longer look to government to hand out free care. That is ultimate conservativism."
    -- Mitt Romney, 60 Minutes, 09/23/2012

    If we adopted a system similar to Israel we could save around $1.449 trillion per year from private and government health spending.
    Here is my reasoning:
    US Spends 17.6% of GDP on Health
    Israel spends 8%
    Difference is 9.6%
    US GDP, 2012: 15,094 billion
    .096 x 15,094 = $ 1449.024 billion
    That is more than the twice 2013 DOD budget of 672.9 billion

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement