I have found a nice little trick that can be used by the socialized medicine crowd to sneak in pretty strict rationing without seeming to do anything nasty. It was inspired by the inaccurately named National Institute for Health and Clinical Excellence, the British organization which determines allowable procedures and medications.

Here is how we could work it in the US. Let us suppose congress argues that medical costs are being driven up by ultra-costly procedures. They could tack on the usual "spending a fortune in the last days of life" nonsense to justify it. It is a logic which has worked before, allowing them to stupidly limit hospital purchases of medical imaging devices or to prevent hospitals from opening "unnecessary" new departments. So we know it will work. (See "Government Efficiency", "Medical Reform, An Overview")

Now, let us say the government decides they want to put a cap on medications for, say, cancer, prohibiting drugs or procedures that would cost $500,000 a year or more. In fact, they could probably draw up a schedule of maximum yearly costs of any given procedure for any given disease. It would probably take a bit of political wrangling, but if they set the numbers high enough, they could push it through with a mix of populist rhetoric, arguing about "greedy doctors and hospitals", "predatory pharmaceutical companies" and old people spending up their children's inheritance. (That last could be omitted for AARP speeches, as AARP seems founded on the inalienable right to spend up inheritance, yours and everyone else's via taxation.) Doing so they could probably manage to convince enough softheaded "pragmatists" that all our high costs are to be blamed on these "ultra-costly procedures and medications". It is nonsense ("High Cost of Medical Care"), but that has never been an impediment to passing bad laws. (Just look at the absurd antitrust laws to see how little reality has to do with legislation. Or the creation of the Fed, the crash of '29 and claims that gold is somehow MORE dangerous than managed money -- See "The Best Historical Example")

Now here is where the neat little trick comes in. It was the same trick Keynes hoped to pull to undercut union demands, but unions proved too smart. But in this case, without anyone pushing for protection of their rights, it is likely to work. You see, Keynes originally pushed inflation not just as a clever way to fund government without taxes, but as a way to reduce union wages, by keeping nominal wages high while eroding real wages. Unions soon noticed this and added COLAs and escalator clauses, making Keynes' "clever" theory pretty pointless, as we retained all the harm without the one dubious benefit.

But, in other areas, inflation has worked to lower numbers pretty effectively. For example, the AMT, because it was never indexed to inflation, has come to encompass ever more people thanks to inflation, turning what was once a tax on the "ultra-rich" into a tax rapidly encroaching on the middle class. Similarly, import quotas, when set by legislation are often not adjusted with time (especially as leaving them unchanged serves many special interests), and so move from preventing some small fraction of imports into near total bans, as the quantity demanded rises yearly. 

And the British NICE did something similar, by enacting a 30,000 pound cap on procedures and medication years ago and then never adjusting it. And the US could do the same. If they were to enact a $500,000 cap, and then manage to push inflation to 10% per year, in just over 7 years, the cap would be equivalent to a $250,000 cap. And that does not consider other, non-inflationary, pressures on medical costs.

Nor would formal prohibition be the only effect. As pharmaceutical makers and equipment manufacturers would know that high prices drugs or processes would not be allowed, they would likely limit research in directions likely to be high cost. They might pursue some in hopes of later reducing costs and coming in under the cap, but as such efforts would often fail and they would be left eating the costs, it is likely they would become ever more reluctant to pursue such research. And, as most new procedures start as ultraexpensive novelties that then come down in price until becoming commonplace, it is likely such caps would reduce all research to nothing but refinement of existing procedures and medicines, as true innovation is almost always expensive.

And so, by passing what would, at the time, be seen as nothing but a cap on the most "obscenely expensive" areas of medicine, the government could easily enact de facto rationing, even without any national health care plan. And that is why I am leery of any government involvement in medicine, even seemingly "innocuous" measures, such as hospital regulations. I know I go a lot farther in these beliefs than most ("Medical Regulations", "Medical Regulation II"), but even if you do not endorse ending licensing, you have to recognize that by telling hospitals what equipment they can buy, or what services they can offer, and by otherwise meddling in the medical market to such a degree, the government could easily take control of medicine even if we refuse to give them the power explicitly. It is only because most of the control is still exercised by the states, not the federal government, that such abuse has not yet taken place. But if they are thwarted in their nationalization designs, I would not be surprised to see a move toward national "standardization" of medical regulation, setting the stage for just such a coup.

POSTSCRIPT

Most of my writing on medical regulation can be found in the links following "Bad Economics Part 2", as well as the links contained in "Why Health Insurance Isn't Insurance and Related Topics" and "Cosmetic Surgery, Lasik, Dentistry and Health Care Reform". My overall arguments for the free market and against regulation can be found in "Bad Economics Part 2", "Bad Economics Part 3", "Bad Economics Part 5", "Bad Economics Part 6" and "Bad Economics Part 3".

And to please my 4 year old son, who told me again I never put "the end" at the bottom of my stories:

THE END

Correction: I just realized my last link in that list of pro-free market articles is a duplicate. I must have failed to copy the final entry. Unfortunately, I also don't recall what article I intended. It might have been "Greed Versus Evil", but as I am not sure, I will just leave the silly, repetitive list.