From Sunday's NY Times:

"Generous Medicare Payments Spur Specialty Hospital Boom" illustrates how
bureaucratic regulations, arbitrary pricing schemes and pressure-group politics
subvert a normal free market system's pricing mechanisms which optimally
auto-regulate supply and demand of goods and services, nstead working together
to create regional oversupplies and shortages of different medical services.

It describes a boom of 4 state- of-the-art dedicated cardiac care specialty
hospitals in the same region where "hospitals are laying off employees or
scaling back programs that are less generously reimbursed."

The article contains a few nonsensical economic non-sequiturs and vagaries....

"...The construction of so many new heart hospitals could create "excess demand"
(should be "supply") for treatment rather than produce better cardiac care"

and

"....Given these market conditions, provider competition could, alternatively,
result in higher use rates and "costs." (of what and to whom? are we talking
about overhead? prices? overall health care expenditures?)

The writer's conclusion seems to be *not* that bureaucrats can't possibly set
prices to meet needs as efficiently as the free market, but that the "particular
prices they set" are either "dated" or, by co-incidence, reflective of pressure
group politics.....

" With cuts in spending on cancer or heart disease politically unpalatable, they
tend, under lobbying pressure, to expand coverage or increase payments."

http://www.nytimes.com/2003/10/26/business/26HOSP.html?ex=1068204433&ei=1&en=a5b
e4a79066fe351