How Should We Pay For Health Care: Government Or Markets?

John C. GoodmanJust about every good or service we buy involves bundling decisions. At MacDonald’s, for example, there is no extra charge for pickles, onions, catsup, salt and pepper. These are all included in a basic price. But there is an extra charge for a slice of cheese or an extra beef patty. Or more precisely, these extras are included in a different bundle. How did MacDonald’s decide what to bundle and how to bundle it? I have no idea. But I am very confident their judgment on how to maximize consumer satisfaction is far superior to any bureaucratic committee appointed by politicians would have been.

The same principle applies to medical care. Doctors are the only professionals in our society who are not free to repackage and re-price the services they offer to the market. Medicare, for example, has a list of about 7,500 tasks that it pays doctors to do. The list for all practical purposes doesn’t include talking to patients by phone, emailing, or doing many other useful things. The way Medicare pays, is the way most insurance companies pay and the way most employers pay.

It is wrong to believe that these are unbundled payments.  A payment for a “doctor’s visit,” for example, is a bundled payment. It includes not only the doctor’s time, but also the services of a nurse, a receptionist, the recording of medical records, and many other things.  The problem is that the bundles were chosen by bureaucrats, not by doctors and patients.

via How Should We Pay For Health Care: Government Or Markets?.

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