The ripple of unexpected consequences did not end there. To pry Medicareand Medicaid out of the Senate Finance Committee, Johnson had to agree to pay hospitalson a cost-plus basis, and doctors' fees that were "reasonable," "customary" and "prevailing"in their communities, thereby giving physicians the power to raise their own fees.When LBJ asked what that compromise would cost, he was told, "Half a billion dollars.""Only $ 500 million," Johnson snapped, "Get the bill out!" His single-minded focus onaccess for the poor and elderly led him to grossly underestimate the price of givinghospitals and doctors the keys to the federal Treasury.The next unpleasant surprise came from our well-intentioned effort to increase the number of physicians. We feared that with too few physicians to handle the increased demand fromthe new federal programs, the price of their scarce services would rise.Over the opposition of the American Medical Association, we rammed through legislationto increase competition by doubling the number of doctors graduating from medical schooleach year from 8,000 to 16,000. We have since discovered that more doctors only meanmore care and higher health care costs. Even our determination to democratize access tothe best medicine by training more specialists bit back, as we have learned that morespecialists mean more referrals to specialists and a spiraling medical bill.To arrest booming costs, LBJ and every president since have sought reform of the healthcare system, trying everything from price controls to promoting health maintenanceorganizations and managed care. To hold down doctors' fees, Medicare established a list of procedures for reimbursement, capping the amount to be paid for each one.That effort created gigantic insurance company bureaucracies to play catch-up withdoctors who simply created additional procedures and performed them more frequently.When the Johnson administration ended, there were 2,000 medical procedure paymentcodes. Today, there are about 7,000, most with subcategories.Stunned by the explosion in high-ticket technology and the expansion of hospitals well beyond necessary capacity (prompted by the Hill-Burton Act, which financed hospitalconstruction, and by Medicare, which reimbursed capital costs), in 1974 Congress passedthe Health Planning Act, requiring hospitals to obtain certificates of need before they couldincrease the number of beds, build new wings or buy new equipment.Surprised again! When the government tried to eliminate almost a half-million unnecessaryhospital beds, the cumbersome certificate-of-need program became an incentive for hospitals to resist. They feared that if circumstances changed (say, because of an AIDS or TB epidemic), they would never get permission to expand. Next came the attempt to hold down hospital costs by creating Diagnosis Related Groups(DRGs), to limit lengths of stay and intensity of care for Medicare hospitalizations. Theresult: Doctors ratcheted patients up to the highest-intensity care they could, and hospitalshiked up charges to private plans that don't have DRG limits in order to compensate for theMedicare shortfall.