Economists do not like price controls. Whether they are liberal Democrats, conservative Republicans or anything in between they recognize the counterproductive nature of attempting to set prices bureaucratically or legally. Unfortunately, price controls are rampant in the U.S. health system. Medicare has price control schemes for paying hospitals and doctors. Medicaid does the same thing all the particular method varies from state to state. Unfortunately, many private insurers copy Medicare’s payment schemes or at least use them as a starting point in determining appropriate medical fees. This system represents an enormous impediment to the efficient, low cost delivery of health care in America.

How much do price controls sandbag us? Suppose supply and demand schedules have slopes of one and negative one and the market price and quantity was $100 and 100 units. The net benefit of the market is $10,000 split evenly between consumers and providers. Now presume the government imposes a price control of $80. The deadweight loss of the price control, assuming the above slopes and intercepts, is $400. So there is a 4% deadweight loss from the control. If the price was controlled at $60 then the deadweight loss becomes $1,600. Any reform to make health care more affordable must start by eliminating price controls in the U.S.