One of our orthopedic partners brought me this article recently.  Some comments.

The author’s conclusion is that Medicare’s pay cuts for orthopedic surgeons performing total knee replacements has paradoxically resulted in more of these surgeries being performed and an overall increase in cost to Medicare.  The authors correctly surmise that the surgeons are attempting to achieve “income homeostasis.”  But then they gloss over their own punch line.  This increase in the number of total knee replacements caused an increase in the total expense exclusively due to the large facility fees paid by Medicare to the big hospitals.  

Did you catch that?  Remember Eli Lehrer’s claim that exorbitant physician salaries were the reason that medical care was so expensive in this country?  This is no exception to the law of supply as the authors state, but rather, the equivalent of someone eating more slices of pizza once they are sliced thinner.  The authors also arrogantly pontificate about what the “right” number of total knee replacements should be and what the “right” charge for this should be.  These guys have never heard of Murray Rothbard, I’ll bet.

This is an example of the failure of the central planners trying to control a market by deliberately lowering the payment to the surgeons to an amount below what is believed to be the market clearing price, a deliberate attempt to cause a shortage of supply…rationing, in other words.  But the policy dunces in D.C. got it wrong once again, with the hospital charges busting the budget.  

I can just hear the folks at CMS (Medicare):  ”Let’s cut these surgeons to the bone but leave our hospital pals alone.”  ”We’ll save bundles off the backs of these surgeons and they’ll see fewer of the patients needing this surgery, too!”

This is no failure of the free market.  This is the absence of a free market.  This is one of many examples of the unintended consequences of the central health planners, a failed attempt at deliberate rationing.  I expect their future attempts to ration care to the elderly to be more overt in the future.  Perhaps even those who are saying “Don’t touch my Medicare!” and even some supporters of the Unaffordable Care Act will come around to the idea that we should give the free market a real chance in the delivery of healthcare, a service upon which people’s lives depend.

G. Keith Smith, M.D.