Who says markets don't work in medicine? For the last few years, employers have been cracking down on their health-care costs. And for the last few months, the Clintons have given market forces added impetus by jawboning the medical industrial complex into cutting back on its costs and prices.
These efforts are paying off. Since May, medical prices have risen at a 4.5% annual rate, down sharply from 1992's 7.4% rate. Given that the consumer price index doesn't capture discounting in hospitals and doctors' offices--and does a poor job measuring quality improvements--it's likely that medical prices are rising no faster than general inflation. That would be the first time that has happened since the 1960s.
The news comes in time for Washington to rethink the Clinton Administration's sweeping plan to overhaul American medicine. President Clinton's health-care reform plan is built around loose price controls and heavy government interference. Congress, however, should remake the Clinton plan to build on the market's recent advances, leveling the playing field for insurance buyers and encouraging private-sector purchasing cooperatives, not giant government-run purchasing alliances.
If Washington wants its health-care program to work, it will learn that private markets can rein in costs far better than bureaucrats ever will.