Doctors are the only professionals in our society who are not free to repackage and reprice their services. If demand changes, if technology changes, if new information becomes available, every other professional is free to offer a different bundle of services to the market and charge a different price. It is precisely this freedom that leads accountants, lawyers, engineers, architects — and, yes, even economists — to compete for customers based on price and quality.
In medicine, by contrast, no one ever sees a real price for anything. No patient. No doctor. No employee. No employer. Providers are paid based on rates negotiated in advance. And there can be a different payment rate for every third-party payer. Patients rarely see these rates. But even if they did see them, they are inconsequential to behavior, since the patient isn’t paying them anyway. Doctors, therefore, do not compete for patients based on price. And since they are not competing on price, they do not compete on quality either.
Everyone is left with perverse incentives. The patients’ incentive is to overuse and misuse the system, since they mainly pay for care with time and not money. The providers’ incentive is to maximize against the third party payment formulas. When everyone acts on these incentives, they do things that make costs higher, quality lower and access more difficult than would otherwise be the case.
So what can be done? Enter Zeke Emanuel, Don Berwick, Andy Stern, Uwe Reinhardt, Tom Daschle and other names you might recognize to offer the best thinking two dozen like-minded people the left can come up with in the latest issue of the New England Journal of Medicine (NEJM). Their answer: double down and give us more of the same. That is, doctors would be even less free to compete for patients based on price and quality, patients would be even less likely to ever face a real price for any service, and perverse incentives would become even more perverse than they are now.
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