The Myth Has No Clothes

Of course, fee-for-service medicine is one of the prime demons today. If physicians should be paid differently, then why shouldn't every working person be on a salary? Wouldn't this eliminate all potential conflicts of interest in the marketplace? Absurd! See www.MDWhistleblower.blogspot.com

The problem isn’t fee for service; it’s subsidized payments by third-parties.

Don, you nailed it. The third party payment system creates an artificial cost, removing any market discipline from the exchange.

As for the NYT author, I question how somebody who "studied applied mathematics at Yale", is qualified to offer an informed opinion on healthcare finance.

superheater: "I question how somebody who "studied applied mathematics at Yale", is qualified to offer an informed opinion on healthcare finance."

Just curious, superheater. Do you know what coursework Leonhardt pursued in receiving his B.S. in Applied Mathematics from Yale? Applied mathmatics at Yale would include standard courses such as numerical analysis, optimization, harmonic analysis, and differential equations. Applied mathematics at Yale might also include statistics, probability, financial mathematics, and econometrics.

Of course, Leonhardt has been paid to study and write about business for the past 15 years. It is likely he has acquired more general business knowledge than he possessed upon graduation in 1994.

I learned a long time ago, a degree offers the most superficial understanding of the world. On the other hand, as a former government healthcare auditor, a CPA, an MBA and holder of three professional insurance designations, I can tell you I've yet to use a differential equation of any order to understand healthcare finance.

There is, in the words of NN Taleb, a difference between computing and thinking.

“As long as doctors and hospitals are paid for each extra test and treatment..."

Doctors are not paid extra for ordering tests (unless they operate their own lab). They are not paid extra for prescribing medicines, physical therapy, or diets. They are not paid extra for ordering imaging studies, ultrasound exams, stress tests by a cardiologist, endoscopies by a gastroenterologist, biopsies by a surgeon, etc. They are paid for what they do; not for what others do at their request.

Hospitals get paid under a DRG (diagnosis-related group) system. For example, if a man comes in with acute pancreatitis, the hospital will be paid for the DRG. The incentive is to minimize costs, not to maximize tests and procedures. The incentive is to make the correct diagnosis as quickly as possible, administer the correct treatment as quickly as possible, and discharge the patient as quickly as possible. (But, not too quickly: if he's readmitted within a week, the hospital must treat him with no extra payment.)

So, not only is Mr. Leonhardt wrong economically, he also is wrong factually.

"Doctors ... are paid for what they do; not for what others do at their request."

A very important point, DrT1. A point I'm sure is routinely ignored by those who would demonize the medical profession.

If you are a medical professional, please remember that economists and some who comment on this blog are often out of touch with most consumers on this issue. Surveys have consistently revealed that:

- Americans trust nurses and doctors more than any other professionals;
- the 89% of Americans who possess some form of health insurance are satisfied with the medical care and coverage they are receiving.

It is true that customer satisfaction with insurers has declined almost in lockstep with attacks by politicians on the health insurance industry. Why the average American cannot see through the attempt by Democratic politicians to seize economic power is just amazing.

Thanks to government-run health care, the fat police have a tape measure and a ticket pad ready for you in Japan. What horrors will the Frankfurt School lobby for here once there's a government monopsony on health care purchases (Obama's vision). Anyone drive without a seat-belt on these days? Like making your own decisions about health risks? Too bad, "Citizen", you're in Keuhn's America, now!

>>>Concerned about rising rates of both in a graying nation, Japanese lawmakers last year set a maximum waistline size for anyone age 40 and older: 85 centimeters (33.5 inches) for men and 90 centimeters (35.4 inches) for women.

But I don't ever have to buy a necktie, and I wouldn't be caught dead in a "nightie". Yet I occasionally require the services of health care professionals who have no need to be extra especially friendly and courteous, let alone do their jobs better just because I'm paying for a pariticular service rather simply employing them to do the whole job well. Whether it's through "heavily subsidized third-parties" or through a private insurance company (a third-party that probably receives some indirect breaks from the taxpayer), doctors and hospitals could stand to live under the tighter budgetary conditions that the rest of us do -- particularly the fact that price signals should be a factor in determining how to proceed with a patient. It's not rationing any more than selecting what to put in your shopping cart is food rationing.

I once read that the ancient Chinese (you could probably substitute your own favorite infallably wise lost culture here) used to pay their doctors to keep them well, and when a person got sick he would stop paying until his doctor made him well again. I doubt there's any genuine historical truth to the story, though the idea behind it is pretty compelling. But I'm sure there has always been an ancient chinese haberdasher who placed a bunch of cheap accessories near the checkout counter, just to draw a few extra coins from his customer's pocket. A doctor's suggestive selling of a test here or a treatment there, simply because he knows it'll be covered and what patient would be without it -- you have to admit this adds something significant to the nation's health care bill.

Johndewey, I guess your point is lost somewhere in what you wrote.

Never in my life has something that my doctor wanted to do been denied by my insurance co and I believe you will find 97% of the rest of America is the same way. (never had a doctor suggest we test my triglycerides and my insurance company say, no) Unless you are arguing to Nuke 16% of our economy for 3 people in 100 that sometimes have claims denied, then your point is lost.

Crashed my bike, knew I was fine. "Of course I did" Don't know what this means either. Maybe I was the only person in the human race blessed with one of those "Nervous system" thingies that let me feel "Pain". Dear god, I'm a mutant.

I see your point now, patients need socialized medicine because they are incapable of making good, safe decisions for themselves and much like sheep, need a qualified sheppard. Maybe they also need a nutritionist to tell them what to eat, a trainer to help them exercise, an accountant to make sure the don't run out of money...

esoxlucius: "Never in my life has something that my doctor wanted to do been denied by my insurance co and I believe you will find 97% of the rest of America is the same way."

I'm fairly confident you do not have data to support your assertion about "the rest of America".

I have seen a report in the Los Angeles Times that 22% of all health insurance claims filed in the state of California since 2002 were denied. Some were denied for eligibility reasons, some for paperwork errors. But millions of claims were denied because the medical treatment was determined by the insurance company to be unnecessary.

esoxlucius: "I see your point now, patients need socialized medicine because they are incapable of making good, safe decisions for themselves and much like sheep, need a qualified sheppard."

You will find nothing in any comment of mine which advocates socialized medicine. I do advocate following the recommendation of well-trained experts when it comes to personal medical decisions. IMO, only fools believe they possess the knowledge necessary to evaluate one's own medical condition.

You sure are a passive guy, johndewey. And a good cu$tomer, too. I'm sure you're loved everywhere professional opinions are dispensed!

Clothes are a class of product that everyone has sufficient knowledge to judge what to spend and what to buy. Only highly trained medical practitioners can judge what tests are really necessary. Human nature allows all of us to justify feathering our own nests, and there is no market mechanism in medicine that equates either in principal or in practice with the market constraints that exist with goods and commonly understood services.

"Only highly trained medical practitioners can judge what tests are really necessary."

Oh, so medical consumers are so stupid that they must take the opinions of "highly trained medical practitioners" at face value? What a joke!

Actually, yes. If you go to a physician with pneumonia and tell him you want a PET scan, the doc will tell you no, you need a chest x-ray or a sputum culture. It's not about stupidity, it's about knowledge. I won't tell a plumber what schedule pipe to lay for my water supply, or a dentist what material to use in a prosthetic. People go to the doc routinely and ask for an antibiotic for viral infections.

But the consumer is always in the position of having the final say, and of getting other opinions. And it's not like 'highly trained' professionals are all in agreement about everything anyway. So, the market is a much better place to be even when there are knowledge asymmetries.

OK you have a point about choice, but I am beginning to think that either we use the term "market" in too broad a way, or that things like professional services do not have a market as the term applies to products like automobiles or food. Just the fact of choice doesn't make a market, there has to be a place to shop, to meaningfully compare, and some socially current information about the product differences.

We could be defining things differently.

When I'm thinking market, I'm thinking free people freely entering into transactions with each other. Some guy calls himself a doctor and tells me he knows what I need to do about some problem I'm having. I don't know that much about medical stuff so I'm definitely at a disadvantage when it comes to deciding if I should follow his recommendation. If we both know I can quickly and easily get second or third opinions (shop around, as it were) then at least the doctor (the highly trained specialist) has some incentive to make an accurate, truthful recommendation because he knows I can cross-check his story for veracity. That's what I meant about not having to take the highly technical specialist purely at face value. Just because one particular highly trained specialist makes a recommendation does not mean that I will or should automatically follow it.

I do agree with you that "Human nature allows all of us to justify feathering our own nests". The marketplace is there for competitors to keep each other honest. Unrestrained competition is the best way to keep human nature in check.

I agree that one should shop around and ask others about professional services, however, once you find one that suits, the shopping usually stops. Not with material products. On your other point, unrestrained competition, that is, truly free enterprise, means regulation of those with heavy concentrations of capital, as capital, which is a form of power, corrupts. As we have seen over the past 30 years, absolute capital power corrupts absolutely.

"once you find one that suits, the shopping usually stops"

True, but your if your provider knows you can drop him at any time, there is incentive to treat you right.

Those with heavy concentrations of capital need regulation? Are you saying that those people who have earned a lot of money need to be kept a close eye on? By whom? The good people down at the government? What evil things do they do that requires such restraint?

Instead of government, unbridled competition is the preferable way of keeping companies in line. What motivating force do you think caused Microsoft to address the grievances of Windows Vista by delivering Windows 7? Was it the Justice Department? The Better Business Bureau? Or might it Apple and Linux? Who is going to keep Google from getting fat and lazy when it comes to search? The Lord Obama? Or might it be Steve Ballmer and his highly capitalized (and thus suspect according to you) company Microsoft?

You confuse markets, which should always be free to be entered by anyone, including the so-called natural monopolies like electricity, gas etc. with the concentration of power both political and economic when capital is concentrated in few hands. As to the evil I wish to see stopped is the conduct by Goldman Sachs, Citibank, BankAmerica and the other "too big to fail" financial institutions whose accumulation of capital allowed them to buy many Congressmen, place their lieutenants in all of the regulatory agencies, and nearly brought the United States to its knees. What I would promote is a set of regulations that even the playing field, keep corporate money out of Congressional coffers, separate commercial banking from insurance and both from investment banking. Further I would argue that the dissolution of a corporation that commits the kind of fraud that Enron, abetted by Citibank, Global Crossings, Goldman Sachs with its selling and touting worthless securities while buying credit default swaps that bet on their lack of value should be mandatory. Any assets could then be sold on the open market to lawful businesses. The actual facts of history demonstrates that any time capital is concentrated into too few hands, the corruption of power held by both the capital accumulators and the governments that supposedly regulate them leads to disaster for all counterparties, and the citizenry in general.
Tulips, government bonds, Oil Domes, silver market capture, residential real estate,1978, 1982-5, 1987-91, 2003-2008, now commercial real estate coupled with trillions of dollars in derivative trades, a large part of which were bets against residential real estate based securities.
Finally, I would not regulate the accumulation of wealth, but the uses to which it could be put. Just as I conclude that the Second Amendment prohibits the Federal Government from prohibiting the possession of small arms, I also assert that use of such weapons to assault, maim, kill or terrorize can be strictly prohibited and punished with drastic penalties, the same applies to money, automobiles, forged checks or hamers.

Originally you didn't mention government, you just said "absolute capital power corrupts absolutely". You're arguing against yourself because in your comments above you had to bring in corrupt government in order to complete the picture. You need to state the full case up front. What a waste of time.

mark: "Oh, so medical consumers are so stupid that they must take the opinions of "highly trained medical practitioners" at face value? What a joke!
"

That Americans believe and trust their medical practitioners is not a joke, mark.

A 2008 Gallup poll reveals that nurses and medical doctors are among the most trusted of all professions. I've been following such polls for over a decade, mark. Medical practitioners have always been at the top.

Mark: "so medical consumers are so stupid that they must take the opinions of "highly trained medical practitioners" at face value?"

I would use the term "ignorant" rather than "stupid".

Alert - Daniel Kuehn is showing his nasty colors over at Megan McArdle's blog.

Damn - for the once-a-week or so comment I post on The Atlantic's blogs you discovered that one. Usually I agree with Megan. I'm sure you're going to read a lot into the one post I made today where I took issue with something she said.

Oh well.

We learn so much from you here. Can you keep us advised of your posts all about the internets?

What, Dan pollutes more than just this blog? I'm jealous!

Third party payment allows the impact of distortions to grow far beyond what they would be without it.

So I agree with Daniel that "information asymmetry" distorts the market for medical services (though I disagree that this is a fundamentally different situation than buying a tie - though my severely limited fashion sense plays a role here), and I agree that things like fear-of-tort distort it as well (but then, builders also fear lawsuits, and would prefer to be paid to overbuild to prevent them - yet they don't).

But the reason these distortions have very significant impacts in health care, but not in the market for ties or buildings, is third party payment.

Another example of the same issue: college education. Government subsidies are highly correlated with massive price increases over time. Very few students get zero aid or subsidized loans. Every year, universities raise their prices, leading to predictable clamoring for more government subsidies.

One thought on that - we've also seen wage premiums for college graduates increase over time.

It seems to me if tuition increases were primarily driven by subsidies, you wouldn't see this wage premium increase. I have no doubt at all the subsidies contribute, but I'm not sure why we would expect or how one would argue that the subsidies to dominate the change in demand for skills (and perhaps you aren't even arguing that the subsidies are the dominant factor).

"we've also seen wage premiums for college graduates increase over time"

What's the time frame?!! Inflation adjusted or not?! What variables are you controlling for in this analysis? Get more specific, Daniel Johnson!!!

An alternative possibility for the increased wage premium is the pathetic and declining quality of high school education.

True - and not just the slump in the skill quality at that end of the spectrum - we also suffer from a bimodal skills distribution in this country because we don't have a lot of the technical, apprenticeship, and middle-skill programs that some European countries have. A lot of the demand for college graduates is probably proxy demand for middle-skill workers.

"bimodal skills distribution"

You are the Michael Jordan of wonk. I am in awe.

but then, builders also fear lawsuits, and would prefer to be paid to overbuild to prevent them - yet they don't

Builders have been known to set up LLC's just to build a single house or subdivision and then declare bankruptcy when the buildings fall apart, become unsafe and lawsuits come. Since the contract was with the now bankrupt LLC, the builder's personal assets are not at risk.

Doctors, and most other professionals including lawyers, accountants and money managers cannot limit their personal liability if they are negligent. Hence, there is greater incentive to err on the side of too much rather than too little.

Just a note. I agree with your post.

There are two ways to build a house: variable quality and fixed price, or variable price and fixed quality. A house is too complicated a thing to create with fixed price and fixed quality.

Wait a minute, so you agree that builders are putting up shoddy developments that crumble to pieces within a few years? And they shouldn't be sued up the arse for that?

I made a positive statement. On what basis are you ascribing an opinion about it to me?

Never mind, I'm just generally pissed off about builders.

understandable. Don't even get me started on THAT subject.

morgan: "Third party payment allows the impact of distortions to grow far beyond what they would be without it."

How so? What distortions are you referring to?

Maybe you're objecting to the use of the word "distortions"? I'm referring to things that shift the quantity purchased away from the "I buy enough to maximize my own utility" baseline state - like information asymmetry between doctor and patient and lawsuit avoidance.

Can I get an AMEN? The "Fee for Service" problem vanishes when you get an HSA. I have one and I love it.

You don't pay fee for service with your HSA? How do you pay for care then? How do they bill you? I don't see how HSAs change this.

Well, much like anything else you buy, you start asking questions and making decisions for yourself. If the insurance company is paying, you will take whatever tests the doctor wants to give you. If you are paying yourself with an HSA, you ask what the test is for and what are the odds that it will help you. Then you decide to pay the money or not. It's kinda fun. It's even more fun when the doctor says you need to take a blood test and you ask his price, and he doesn't know because nobody ever asked before, then he finds out the price and you tell him that you will take the test but at a different facility because it is less expensive and you will have them email the results to him.

OK, but that's what your agent - the insurer - is presumably doing if you don't use HSA's. So yes, when you no longer utilize an agent you will doing those comparisons yourself, but that doesn't change the information asymmetries. That just changes who deals with the information asymmetry. Information doesn't become more accessible by virtue of the fact that you have an HSA - the same problem still applies.

That's not correct at all. My insurer has no capacity to deny something that my doctor says is good medicine. I do have that capacity. And asymmetrical information is a straw man. Everything we do has information asymmetries and we still survive. Consider when I crashed my motorcycle while racing it (my hobby) the doctor wanted to keep me overnight because he couldn't see how anyone could be "fine" after crashing at 80mph. Because I have crashed before while racing I knew I was fine and went home. If (strike "if") when I had the full monte health plan, I wouldn't care if I stayed 3 days and ran any tests because after my $25 co-pay, the only cost to me was my time. Doctors aren't gods and patients aren't morons, we can figure out what we need and when we need it and only pay for that which we use.

esoxlucius: "My insurer has no capacity to deny something that my doctor says is good medicine."

Really? I think most insurers can deny payment to physicians for treatments which are excluded by terms of the insurance contract.

esoxlucius: "Because I have crashed before while racing I knew I was fine"

Of course you did.

esoxlucius: "Doctors aren't gods and patients aren't morons, we can figure out what we need and when we need it"

I agree that doctors aren't gods, but I am highly skeptical of claims that patients can figure our what medical treatments they need. Physicians have spent many years learning their craft and many additional hours staying current. Non-physicians are fooling themselves - and risking their lives - when they think they possess such knowledge. But, hey, it's their lives.

johndewey: "I am highly skeptical of claims that patients can figure our what medical treatments they need."

I am highly skeptical that digital camera buyers can build their own cameras from scratch. That is best left up to the experts. But it is not only possible, but absolutely necessary for the system to work, that the digital camera buyers exercise the final decision about what camera to buy. Without that element the competitive system does not work, the superior camera makers (i.e. the better experts) are not rewarded for their superior expertise, and the inferior camera makers are not driven out of the economy. The end result is low-quality products typical of a communist state.

The same is true of an market sector, including health care. Not only can patients exercise the final decision, they must. The decision is not, of course, not the level of "what treatment should I take" any more than the decision of the camera buyer is on the level of "what shape should each glass lens element be". It is on the level of choosing products and providers - choosing a camera, or choosing a doctor.

There are currently many serious questions about the real expertise of doctors. Some commonly raised points: (a) different doctors have different levels of awareness of the latest research, (b) apparently getting doctors to do something as trivial as religiously wash their hands is even today a real concern, and (c) "evidence-based medicine" (the systematic study of medical practice) has uncovered a lot of ineffective practices. This does not mean, of course, that the patient is therefore superior to the doctor. What it means, however, is that some doctors are superior to others, and it is inevitably up to a third party to choose between the doctors - and we know from the rest of the market that it is not at all a bad idea to make that third party the customer - i.e., the patient. So in summary, yes, the patient really does, and must, have veto power over the doctor - in the way that I have described, though not in a treatment-by-treatment way.

constant: "yes, the patient really does, and must, have veto power over the doctor "

Of course he does. I have never argued otherwise. But only a fool would believe he knows as well as a physician what treatments are needed for his medical condition.

I was responding to Esoxlucius's assertion that:

"patients aren't morons, we can figure out what we need and when we need it"

As I said before, I am highly skeptical of claims that patients can figure our what medical treatments they need.

No, no, constant. If camera buyers aren't experts, they'll get fooled every time by the evil camera makers, who use their knowledge asymmetry to exploit the ignorant. Competition is no remedy for this. No market can address this conundrum. You simply must be a world authority on everything you buy in order to avoid being taken advantage of. Thanks to Dan for teaching me this. I was about to go get a soda out of the vending machine but I realized that I'm not an expert on carbonated beverages, so I opted out lest I get hoodwinked.

You've been warned, constant! Don't get fooled again! Wait, come to think of it, why are you reading this at all? The monitor you're using might just be a ripoff!!! How many years have you studied flat panel display technology? Are you sure you know enough to make an informed decision? I'd hold off if I were you!!!

;-)

John, insurance companies can deny to pay for a procedure, but they can't forbid you from receiving the treatment. Surely you see the difference.

Give me a little credit, methinks.

All the discussion above esoxlucius's assertion was about paying for medical treatments. When he wrote that:

"My insurer has no capacity to deny something that my doctor says is good medicine"

he was referring to denying payment. My response to him was about denying payment.

Sorry about that, John. I read esoxlucius' post differently.

Johndewey, I guess your point is lost somewhere in what you wrote.

Never in my life has something that my doctor wanted to do been denied by my insurance co and I believe you will find 97% of the rest of America is the same way. (never had a doctor suggest we test my triglycerides and my insurance company say, no) Unless you are arguing to Nuke 16% of our economy for 3 people in 100 that sometimes have claims denied, then your point is lost.

Crashed my bike, knew I was fine. "Of course I did" Don't know what this means either. Maybe I was the only person in the human race blessed with one of those "Nervous system" thingies that let me feel "Pain". Dear god, I'm a mutant.

I see your point now, patients need socialized medicine because they are incapable of making good, safe decisions for themselves and much like sheep, need a qualified sheppard. Maybe they also need a nutritionist to tell them what to eat, a trainer to help them exercise, an accountant to make sure the don't run out of money...

Actually evidenced by the rate of overweight and obese adults, most people are incapable of making the right choices in life...

Wow, what a pompous ass. Does it sound like freedom to you when they nominate ArrowSmith to be the obesity czar? A decision to eat whatever you want is a decision to weigh whatever you want, its kinda the essence of freedom, don't you think? It's clear that you don't approve of fat people but that doesn't make their decision wrong for them. That's why a smart guy like you can be so thin, and a smart guy like me can decide to race motorcycles. We have different things that we think make us free. The difference is that you don't like to be annoyed by other peoples choices.

Listen idiot - I said that their freedom to stuff their face full of french fries ends at my wallet. Inevitably face-stuffing leads to obesity, type II diabetes, gout, and many other health problems that is overloading the health care system. So, as a taxpayer who takes care of himself, how is it NOT my business?

It has been mentioned that because they die relatively quickly once they are past productive age (i.e. in retirement), the obese overall impose fewer costs on the system than the healthy. That being the case, maybe it is the thin who are the problem. Maybe they should be forced by the nanny state to fatten up.

Clearly, either the nanny state has to go or freedom has to go. I just choose the former and you choose the latter. When the government pays the bills the government controls the behavior. There is a name for that... what was it... oh, yeah, fascism.

It's not your business because it's not supposed to be your business because it's not supposed to be the government's business. It's that personal responsibility thing that is built into the constitution and currently being used as the liner for capitol gerbil cage.

When I race my motorcycle I crash about 4 times a year. Do you and your socialized medicine want to pay for that too or is racing now banned? I also sky dive, ride my motorcycle without a helmet and I smoke? Anything you want to ban now to save your pocketbook.

This one is always fun, I work with illiterate prison inmates in my spare time to help to teach them to read. Join me in thinking about your pocket book and what it costs to house one of those illiterate men. Now tell me what you would like to do to the kids that "graduate" from inner city schools and are functionally illiterate? There's some social costs to being illiterate, maybe we can have some nice fascist solutions from a guy that thinks it's his business.

Oh you really don't want to hear my views on inner cities. Really, you don't.

I rarely disagree with Professor Boudreaux. When I do, I feel uncomfortable and less confident in my thinking, so insights from Don or anyone else will be appreciated.

Don: "The problem isn’t fee for service; it’s subsidized payments by third-parties."

Are you meaning that the problem is third party payment of any sort? Or is your objection to the tax shield on health benefits granted to individuals?

I don't think most economists object to the economic role of catastrophic health insurance. Whether consumers pay for it directly or receive that benefit as part of their employment compensation seems a non-issue to me. That employers can help their employees determine what medical conditions should be covered and help their employees negotiate better deals with insurance companies seem to me obvious economic benefits to employer-provided health insurance.

The prepaid health care benefit included in health insurance packages - the coverage for non-catastrophic conditions and health maintenance options - seems to be a problem for some economists. I do not understand why prepaid health care is not a valid economic product. What is wrong with turning over cost control to a third party with whom we contract?

The real problem, as I see it, is that government restricts the ability of private insurance companies and consumers to construct health insurance and health maintenance contracts which allow for cost control.

johndewey,

"The real problem, as I see it, is that government restricts the ability of private insurance companies and consumers to construct health insurance and health maintenance contracts which allow for cost control."

It isn't that the government simply restricts the emergence of catastrophic insurance, they actively make it impossibly by requiring that all insurance plans cover certain conditions. Childbirth for example is something that is (usually) common and expected, as opposed to cancer (rare and unexpected). Insurance in the traditional sense is a hedge against something EXPENSIVE and INFREQUENT happening. Employer provided "Health Insurance" due to government mandates and it's tax advantage has turned insurance into a middle man that hides the cost of services from consumers. When the true cost of a procedure or test is hidden by a middleman, people demand more...

"I do not understand why prepaid health care is not a valid economic product. What is wrong with turning over cost control to a third party with whom we contract?"

1) It would be too expensive.

2) That is what HMOs tried to do in the 90s, when then started to contain costs, every got the panties in a bunch and the government stepped in to mandate things like extended hospital stays after childbirth and any other pet peeve of interest groups.

Think of it this way, why doesn't your Car Insurance company offer a plan that covers oil changes and brakes? The answer is in the EconTalk episode "Brady on Health Care Reform, Public Opinion, and Party Politics"

As much as I love Cafe Hayek and discussing these issues, I fear we are all doomed to an inevitable collectivist fate... Just listen to the EconTalk episode "Hanson on Health" from 2007, before "health care reform" became the legislative issue it is today... It is truly depressing.

methinks: "That is what HMOs tried to do in the 90s"

I'm pretty sure that UnitedHealthGroup. Signa, Aetna, and others are agressively controlling health care costs right now. I've seen no evidence that those insurors cannot exercise cost control on behalf of employers and on behalf of the total population of their insurees. We contract with health insurors for certain benefits and they provide them.

why doesn't your Car Insurance company offer a plan that covers oil changes and brakes?

Due to my hearing disability, I cannot get the answers from EconTalk, as you suggested.

My response is, so what? I choose not to prepay for a $20 oil change. That doesn't seem to me an argument for not prepaying my $150 semiannual diabetes checkups or my $100 annual eye exams.

My problem with the third party payment arguments is that some are seeming to damn an industry which freely developed prior to government intervention. IMO, it is not third party payment but rather government intervention and lack of tort reform which has driven up costs.

I'm pretty sure that UnitedHealthGroup. Signa, Aetna, and others are agressively controlling health care costs right now.

They're controlling spending, not costs. The cost of providing a service is not a function of what people are willing to pay for it. I don't dispute that the insurance companies are very effective at negotiating rates with providers on behalf of their members.

BTW, the quote you attributed to me is not mine. I think it's EDM.

Pardon me for the incorrect attribution.

Excellent points - I agree. There might be some minor psychological impact of third party payment, but you have to accept that workers aren't capable of efficiently negotiating their compensation to think this is somehow central to the problem. This seems crazy to me. People routinely distinguish between job offers based on the benefit packages offered. It seems to me that nobody is duped by third-party-payment - they're very attentive to the tradeoffs involved.

Oh, absolutely workers are capable of negotiating complex compensation packages which may require a level of computation beyond their skill level.

However, when that same genius is suddenly faced with the "authority" of a doctor, they become incapable of making basic decisions. Never mind that the only "authority" a doctor has is the one you give him. Very logical.

John Dewey,

After reading this blog for a long time, I doubt Don would be against people freely forming an insurance pool with whatever rules they want. However, whether it is voluntary or not, when a third party pays for your health care, your interests and the doctor's will rarely be completely aligned and inflation is pretty much guaranteed.

methinks: "when a third party pays for your health care, your interests and the doctor's will rarely be completely aligned and inflation is pretty much guaranteed"

Thanks for the reply.

Is inflation guaranteed? Third party payers are just as capable as individuals at exercising cost control in health care spending decisions. Perhaps they are even more capable given their emotional detachment and their superior buying power. Where third party payers deny coverage, consumers are still free to reach into their own pockets.

Government restrictions on insurance providers probably do prevent some cost controls. But that problem is government interference rather than third party payment, right?

Is inflation guaranteed? Third party payers are just as capable as individuals at exercising cost control in health care spending decisions.

I think inflation is inevitable with third party payer systems and exercising price controls (the cost cannot be controlled by the payer) does not prevent inflation. It's important to note that inflation can be expressed not only as a price increase but also as a shortage. That's what's causing all this hue and cry about denial of treatments by insurance companies. If people think that all of their medical expenses are covered by the insurer, then they demand more health care at no incremental cost to them.


When you control you own spending, you make the treatment trade-offs and you are likely to spend only on the level of treatment you really need. Of course, IMO, that doesn't mean that you should be prevented from entering a contract where someone else controls those decisions.

I agree that government distorts the whole process in a million different ways, including state mandates and tax treatment and makes the problem worse.

Sweeeet. Nice work on this one.

fee for service is not the only compensation structure currently in use - although, it is the one that is most demonized by government.

Capitation is a common reimbursement method for HMO's on the West Coast. Of course, it has its own incentive issues. Capitation reimbursement leads to non-treatment.

The doctors are paid a flat fee per patient seen. This provides incentive for doctors to pack their offices with as many patients in a day as they can humanly see. Each visit is short and there are so many patients that doctors often miss obvious symptoms.

Even when they don't miss the symptoms, there is incentive not to treat at all. Since they are paid one flat fee per patient, any procedures or testing performed on the patient serve to reduce the the doctor's compensation for that patient. Doctors are not eager to spend more time and energy to make less money.

The result is that patients are rarely treated until the condition becomes urgent, dangerous and expensive to treat. At that point, the condition is beyond the capability of the primary care physician and he can push them off his service and onto a specialist's for more expensive and painful procedures. Or the patient dies.

Sure HMO's save money. Not treating patients always does. Of course, the patients do end up paying. Just not in ways that are easily accounted for on a ledger.

Barack's "brilliant" idea of pay for performance is fraught with its own set of incentives issues. Basically, it incentivizes doctors to treat only the least sick patients and ignore the patients most in need of care.

More on that here: http://devilish-details.blogspot.com/2009/08/un...

When I pay for my own care, I decide whether I like the doctor and whether I get the care I want. I'm free to pay for and receive a second opinion and because my doctor knows that I'm paying out of pocket - not because I'm assigned to him by an HMO - he has the incentive to treat me in the way I wish to be treated.

I adduce what I call the Fundamental Capitalist Rule: You'll get what you pay for -- just as long as you insist on paying for what you get.

As usual, Don is right. Of course, the statists cry that buying a piece of cloth with which to tie a noose around your neck is entirely different than consuming health care.

Why, how badly can you hurt yourself with a colourful silk noose? Of course you and your doctor cannot be left to make important decisions about your medical care without the intervention of some petty bureaucrat. And God forbid that bureaucrat should be from your insurance company. After all, the insurance company is in the business of profit. Government foot soldiers, on the other hand, don't seek to profit from anything and are therefore altruistic souls deeply concerned about your well-being and are much more reliable in making decisions fro you than you and your doctor.

Of course the third party payer system is the problem. Whether you're on government insurance or on private insurance, when you don't bear the full cost of your decisions, some bureaucrat will make them for you. I simply prefer insurance bureaucrats because I can choose them from a list of 1300 companies who are competing for my business. With government, you are at the mercy of one.

So true! It shows just how far we, as a people, have drifted from the principles of personal responsibility and self governance that we are not only willing to accept interference by a third party in our most personal decisions, we are demanding it. How I miss the days when I could go to a doctor I trusted and accept or reject his suggestions and medical advice. The days when I could get the medication that was most effective for my unique physical make up and needs without interference from a third party. When I didn't have businesses contacting me to market their goods and services based on the "private" discussions I had with my Doctor in his office. I, personally, want to make my own healthcare decisions and choose the medical tests and procedures that treat my personal unique conditions on the advice of the doctor I have built a relationship with. The state of healthcare in this country is appaling but it has become so because of third party interference directed and regulated by government and individual freedoms are futher eroded.

I'm surprised that these ignorant fallacies about the market are on a "serious and influential paper."

I have to say, this argument, at least as far as quoted, relies on the same magical thinking that allows people to think they can have just as much free lunch from government as they want, at much lower cost, by merely eliminating "waste" and "fraud."

"Unnecessary tests" are the "waste and fraud" fantasy of the medical field, the way we bullshit ourselves into thinking if only we "cleaned it up" we could have the same level of super duper cautious medicine and have it cost as little as our grandfather's paid in Harry Truman's day.

Ha ha. Anyone who has a shred of intellectual honesty knows this is garbage. Have you personally experienced a huge raft of tests you felt to be unnecessary, pushed on you by your doctor, your insurance company, your HMO? Has your 70-year-old mother felt a lump in her breast, then called you to complain bitterly about all the damn ultrasounds and needle biopsies and MRIs with contrast they want to do -- why can't those idiots just wait a few months? Geez, if it really is breast cancer, we'll know soon enough, and heck, at my age, who cares anyway? It's probably just my time to go...

Er, no. I don't think any of us is, or knows personally someone to be, afflicted with huge amounts of diagnostic tests we feel are unnecessary. Quite the contrary. We generally want more tests. We are quite often less willing to wait and see, or live in semi-ignorance, than our physicians. We want to know. We aren't willing to roll the dice, even if the chances are good in our favor.

That's perfectly reasonable, of course. Who would take chances with heart disease, cancer, stroke? You definitely want to know your chest pain is not a heart attack, that grandmother's sudden loss of memory of last Thanksgiving is not a stroke. We're grateful and glad that modern technology lets us find those things out, for the comfort it provides us.

But we do like our little fantasy that "waste" and "fraud" make up 80% of our health-care costs -- not us, of course, but maybe those idiot neighbors or in-laws of ours, who insist on absurd levels of knowledge. So if he just eliminate the waste, it would make lunch nearly free.

What do you expect from the Times? It's more a Propaganda arm of the DNC than an actual news organization. Hell any Krugman article could tell you that!.

Clothing salesmen aren't scared that their lives and livlihoods might be ruined if they don't sell people more clothes than they need. Otherwise, you make a good point...at least insofar as refuting the argument you were targeting.

Once again, Don, why do you insist on this fiction that all markets are comparable? Why?

As a consumer of neckties I can tell a saleperson that I don't need anymore neckties (and certainly not at the price they're selling it for).

I know people loathe experts and "arguing from authority" on this blog, but how many people can second guess the authority of a doctor when their health or even their life is at stake? Can you seriously tell me the way you would interact with a necktie salesperson is the same way you would interact with your doctor?

Make sense? Of course not. Third-party payment certainly also has a moral hazard effect, but what is the alternative? If we could move towards catastrophic coverage by cutting regs and ending the tax priveleges, that would be great - but ultimately I think we want to insure against unexpected costs, and therefore we're stuck with some degree of moral hazard.

My own personal experience doesn't fit with your argument.

I've spent the last year without insurance and I've questioned my doctor on the cost of everything she's proposed.

The problem is, she doesn't know the cost of any of it. Can you imagine this occurring in any other market? Imagine going into Best Buy and asking a salesperson how much something cost and they replied, "I don't know."

Why doesn't she know? Because her customers don't ask. Why don't her customers ask? Because they aren't paying for it.

Now I get where you are coming from and I think you are totally wrong. Check out what a HSA is and then take one for a test drive and see how it changes your behavior. A HSA is a way better plan than any third party payment scheme could ever be at both keeping a lid on pricing and rationing care (in a healthy way).

I'm saying it DOES change your behavior - it just doesn't change the information asymmetry. I have an HSA. I think they should be relied on more heavily. It doesn't make the asymmetric information problem associated with health care disappear.

Because all markets are comparable? If your insurance company was paying for your neckties, of course you would trust the salesman when he said "you need this necktie." But when you're paying for the medical testing, and a doctor says "you need this test", you're for damned sure going to ask "and what part of your diagnosis will change based on the results of this test" and if the doctor can't answer that question, you don't bother buying the test.

What doctor won't be able to answer that question?

It's not like they suggest random, unrelated tests Russ. They suggest relevant tests and they can provide excellent reasons for having the test, and they will give you that excellent reason and a lot of consumers aren't going to be able to accurately assess that reason.

What exactly do you have in mind when you say "and if the doctor can't answer that question"? Do you honestly think that if you say "why do I need this test" they'll stand theredumbfounded? Get serious.

Let me guess: everything you know about doctors you learned from muirgeo.

LMAO!

He didn't say "all", Daniel. Hyperbolizer!

<in Arnold voice...> It's not a fiction.

"Can you seriously tell me the way you would interact with a necktie salesperson is the same way you would interact with your doctor?"

Yes. Duh. Of course. Don't you? Only stupid people don't "second-guess" their doctor - ever heard of a second opinion? A doctor is a hired consultant whose expertise is valuable. The vast majority of doctor interactions are not in life-threatening situations, so your point is kinda, well, pointless.

Thank you for pointing out the obvious to everyone.

Of course we question them and seek out second opinions. The question is whether you are as confident in second guessing your doctor's opinion on what you need as you are in second guessing your necktie salesman's opinion on what you need.

My confidence??????? That's not the question at all - it's so irrelevant I have no idea why you would think that. I question doctors to gain information to make better decisions. If they cannot explain things to me clearly, I seek a different doctor.

Daniel,

"ultimately I think we want to insure against unexpected costs."

I do have insurance policies for extreme unexpected costs, but not for simple unexpected costs. I've had plumbers and electricians try to sell me policies, and of course appliance salesmen always try to sell me a warranty. So should the government force me to pay insurance to a plumber, electrician, appliance salesman, etc.? I think the problem word in your statement is the "we". What does any "we" have to do with the risks that I am willing to take? - aside from the political advantages of course.

And by the way, Daniel, what's wrong with bankruptcy? I mean, say I underestimate my risks and get in way over my head. So I declare bankruptcy. That's what its for. So maybe lenders and providers don't want to take the risk of lending/providing to me if I don't have insurance? So they sell me a policy at the door or tell me to go elsewhere. But its still between me and them. No politicians involved.

Nothing's wrong with bankruptcy. Thank God we have bankruptcy - it's a profit and loss system. I'd prefer to insure against unexpected costs that might lead to bankruptcy, personally.

They absolutely shouldn't force you to have plumbers insurance - nor should they ever force you to have health insurance.

I said "I think we want" because I think many millions of people will want this, regardless of what the government does. Millions is plural - hence "we".

I have no problem with a bunch of people getting together and forming a voluntary cooperative. And if there truly are "millions" they should easily be able to do so. I do have a problem with involving politicians, that is, bringing in thugs to force me to pay for it.

Good - we agree on the thugs. Mandates are bad things.

DanielKuehn,

Your stance on differences in markets is perplexing. There is one aspect of markets that is constant across all of them: you, as a consumer, are in charge of your own decisions.

You are the authority. Always.

Besides prohibiting certain choices, and making you run through formal processes (e.g. the ridiculous hoops of medical insurance today), no manner of acculturation or intervention or regulation or socialization of care or payments can change that one fundamental aspect: you are in charge.

You are in charge of your health. You are in charge of your medical care.

Now, you may not want to be in charge, you may not believe you have the attitude or knowledge or leadership skills to be in charge of your health and medical care, but you are still in charge. The attitudes and goods and services you use to maintain your health -- from washing hands to food choices to aspirin and flu shots and MRIs -- must be managed by you. There is no way around you being in charge.

Someday, you might be unconscious -- or otherwise unable to made decisions for yourself -- but, for most of your life, you will be in charge.

Now, woe to your health if you never rise above the Standard American Diet; and woe to your medical care if you think a panel of doctor-experts will always make good decisions. Because, you really are in charge!

Whether you want to be or not, you are in charge of diets and doctors and drugs. I gather that most people don't look at it this way, and especially in emergency situations, when their lives are at stake, they stop making decisions, and stand around doing nothing waiting for somebody else to act. Many people have seem to have never learned that they are in charge of their health and medical care, and are certainly not reminded of that by physicians who'd rather not deal with "difficult" patients.

Obviously, nobody is required by nature to understand health and medical care, but I, for one, believe I have a responsibility to myself and my family to think hard, to probe, to ask questions, to confront -- and, this is key -- to refuse services from physicians I don't think are doing a good job (especially in the ER!).

I admit, it took the better part of a decade after becoming an adult, and several different medical problems with my family, to realize that many doctors are merely trained guessers with few solutions -- and that I was in charge of them -- any my own care. And I'm still not good at being aggressive, as I'm naturally laid back, but there's no excuse...

Well said - I couldn't agree more.

In terms of personal responsibility for our health, I'm with you. The world is as it is and we need to take the initiative in keeping ourselves healthy.

I'm just trying to think about the forces driving medical cost inflation in the United States. I think fee for service has a lot to do with it, and while Don points out another important factor, I think he does an unconvincing job explaining why fee for service isn't a problem.

How about: a lack of competition? How about occupational licensing? How about torts? Sheesh, Daniel, you have an immense lack of imagination and understanding. Go away and come back when you're smarter, because you're surely not soaking up the smarts we're trying to give you here.

Torts? When did I say I was against tort reform? Do I have to provide an anotated list of what I think on ever facet of health reform every time I comment on one part of it? Give me a break, whoever you are.

Lawds. Okay, how about: a lack of competition? How about occupational licensing? How about hospitals that only work with *some* doctors? These are some of the factors driving the high cost of doctoring.

This is belied by the fact that many people decline the flu shot when told they have to pay for it out of pocket. They're clearly second-guessing the authority of medical professionals, when balanced against the costs of the treatment.

Sometimes people will make bad choices. They'll decline treatment that would've saved their lives. But that's no different from declining advice in any other situation, from people who don't floss every day to people who live in a dangerous neighborhood. You can't insulate people from making bad choices.

Nor should you.

I simply asked if you would second guess a doctor as much as a necktie salesman - not if you would second guess them at all. The fact that information isn't completely asymmetric doesn't mean that there aren't important information asymmetries. You're thinking in absolute terms when I was talking in relative terms.

Of course I would, and do. I am much more intense when questioning my doctor because the cost of getting it wrong are so much greater than spending a day or two wearing an ugly tie. I'm sure I would be even more pushy if I was paying the bill.

Well of course we question the doctor intensely. But when it comes down to it, if a doctor and even a doctor with a second opinion tell you something you put more trust in them than a retailer that says "I think you need another red tie". I don't see why this is such an affront to claim or to accept.

Because ultimately it's a question of knowledge - you know if you need a certain tie better than you know if you need a certain test. Of course you ask questions and push back. Of course, of course, of course. You're still at a knowledge disadvantage that is magnitudes more extreme than the case of the necktie salesman.

Sorry. Some dope wrote "I simply asked if you would second guess a doctor as much as a necktie salesman..." and I thought I was answering them.

And I'm not sure I agree with your assessment regarding relative knowledge disadvantage. I have never had a significant medical procedure in my adult life where I didn't thoroughly understand the basis for the diagnosis, the proscribed course of action, the alternatives, and the prognosis. I once walked out of an emergency room after being told I had suffered a stroke because I found the diagnosis faulty. If was actually paying the bill I would just add cost the list of issues I examine.

Why one tie looks better than another, on the other hand, is a complete mystery to me.

I would second guess a doctor MUCH more than a necktie salesman because my health is much more important than a tie. I doubt I'm unique in that.

You just let retailers pick out your clothes for you, but you second guess a trained professional on the off chance that you can figure out what is wrong with your body better than he can? As I've said several times now, it's not a question of whether consumers are unquestioning. It never was. And yet even when you keep engaging that straw-man you're still making nonsensical arguments.

Does your response have anything to do with what I said? I'm not sure how you got to the conclusion that I "just let retailers pick out" my clothes. I also don't know where the nonsense "off chance that you can figure out what is wrong with your body better than he can" statement comes from. It certainly has nothing to do with what I said (I’m seeing your reading comprehension problem pop up again – you really oughtta work on that.)

I use doctors precisely because they have expertise I do not (duh). That is why I question them more than a tie salesman. I would also question an auto mechanic more than a tie salesman for similar reasons. In both cases, they are a consultant working for me. The decisions are mine. It’s really very simple, so don’t read more into it that there is.

Your condescension notwithstanding, you asked "how many people can second guess the authority of a doctor when their health or even their life is at stake?" That sounds a bit different that what you’re saying now, so lose the false strawman stupidity. I’ll take your clarification for what it is and go from there.

Oh - well when I talk in relative terms you interpret it in absolutes - I figured you wanted people to interpret what you write in the same way.

RE: "I use doctors precisely because they have expertise I do not (duh)."

Yes, and more expertise in your health than necktie salesman have in your fashion. That's the whole point.

RE: "Your condescension notwithstanding"

MY condescension? Oh that's rich.

Obviously you think I'm condescending to you. I would agree with blunt, sarcastic, snarky at times, etc but I (seriously) intend no condescension. I do try to keep my posts simple and direct, but writing is not what I’m best at, so maybe something gets lost in transmission.

The other end of the spectrum is the possibility that you're being hyper-sensitive, perhaps because I criticized you (particularly your reading comprehension since you seem to frequently miss the point, and not just from me). Having seen your reactions to several others here at the Cafe (including Don), hyper-sensitivity seems likely to me. I have no idea if you are like this (and truly hope you’re not), but in many of your posts you sound like a pompous little know-it-all whose oh so frustrated with those who just don’t get it. All your fence-sitting conditionals don’t blunt that impression. Thus my condescension remark

I’m saying all this with the intent of constructive criticism because I’m willing to consider the possibility that something gets lost in transmission from you as well. I didn’t jump in recently when several others were directly criticizing you (sometimes not so nicely) but hidden in the sarcasm were a number of valid criticisms. You’re obviously reasonably intelligent, so maybe you can benefit from an outside perspective. If so, great

OTOH, if you truly are pompous, then I hope I have offended you, and very much.

What is pompous? That I'm confident in my ideas despite the fact that they're different from yours, and that you've never really swayed me? Sorry if that comes across as pompous to you - you're just going to have to learn to live with it. After all, you and I seem to be in the same boat in that respect - I've never really made much headway in swaying you.

I don't accuse people who disagree with me of hating liberty. I don't accuse them of being stupid. But I can't sugar-coat it more than that, and if you still find that "pompous" I can't do much more for you. I'm not going to suddenly become demur or anything.

That’s utterly ridiculous - you being confident and un-swayed is not pompous even if your ideas are completely stupid and wrong,. You’ve obviously missed yet another point..... completely. Of course that doesn’t surprise me. What you do with what I (and others) have said is your business, but don’t be surprised when people think you’re obnoxious and treat you accordingly.

"I don't accuse people who disagree with me of hating liberty. "

That's because they love liberty.

Well said, YAD. What you say has been pointed out countless times before, hence the sarcasm. That tactic didn't work either.

Just as long as your understand that condescension is the domain of the DK (which used to stand for "don't know" at the AMEX before it was acquired by NYSE and there was a whole room called the "DK room". Coincidence?). If you dare mistake self-righteous fence sitting for an actual position you will be called a jerk who deeply misunderstands our DK and tries to pick fights with him.

"MY condescension?"

You are the biggest condescender on this board. A true boor. But you can't see it. You've never been aware of it, even though you dimly perceive the effects of it.

There are always information asymmetries. For example, a good necktie salesman probably has a better fashion sense than I do and I disregard his advice at my peril. I also know next to nothing about cars, but I second-guess my mechanic. Even if that second-guessing simply means a second or third opinion from other mechanics.

Just because information asymmetries exist doesn't justify third-party payment and the huge price distortions that result.

Economiser,

You have to understand one simple thing: if there is information asymmetry, a government bureaucrat must be called in to impose a decision on you. You cannot be trusted to inform yourself. The government is here to save you. Drop to your knees and be grateful.

hahahh yeah. It's not like you know anything more about your health than the bureaucrats in the white building with the dome on top! Even if you did, there's no way that you care more about your own health than they do. No possible way. The government loves you so much!

What do bureaucrats have to do with anything? The question that was raised that Don was responding to is whether fee for service is the most appropriate payment mechanism or unit of payment. Where do the bureaucrats come into that???

The most prominent alternative is the capitation system and independent practice associations. These are private companies. It has nothing to do with bureaucrats. You all are too trigger-happy when it comes to seeing government everywhere.

Yeah yeah, Danny. I wrote a whole post about the capitation system on this very thread. I also wrote the exact same thing as a response to you when we were having this very discussion in August. Obviously, you learned nothing from that exchange. But then, you are here to bestow your wisdom on us, not the other way around, so I'm not surprised.

Please do not take this as an invitation to violate your refreshing new policy of not responding to my posts. I'm rather enjoying it.

Well right - that's my point. I'm no more saying that information asymmetries don't exist in the necktie industry than I am saying that information is completely asymmetric in health care. I'm saying that they are substantially greater in the health care industry than in the necktie industry.

What does information asymmetry have to do with the argument for third party payment - could you explain for me? My impression was that third party payment was just another form of compensation that emerged as a result of the way the tax code was structured. I didn't think it had anything to do with the information asymmetries.

I thought the argument by some (and apologies if this isn't what you were arguing) is that information asymmetries mean that people will make "wrong" choices in health care if left to their own devices, so you have to have pre-paid health insurance that covers nearly everything so that people don't make "wrong" choices because of things like price. For example, if people pay the full cost of routine physicals, they won't get them enough.

That's not an argument I've ever heard - but perhaps some people are making it. That doesn't make sense to me.

Third party payment is just common as a compensation scheme because of the tax priveleges associated with health benefits.

"how many people can second guess the authority of a doctor when their health or even their life is at stake?"

More than you think. Doctors are not the all wise, all knowing altruistic saints that maybe you trying to allude to. I've called my doctors and my wife's doctors out on bullshit plenty of times. All it takes is a little knowledge.
The problem is people spend more time and effort in pursuit of "fashion" knowledge than they do about their own bodies. Most of their knowledge comes from ER, or (we are all screwed) Gray's Anatomy, where no test is spared. They see it on TV, think it's true then go into the Doctor demanding tests. Not to mention the perverse nature of webMD in making everyone a armchair surgeon, even though they can't tell you the function of ATP in the human cell.

Your right all markets are not comparable, but your wrong when you think that you can't compare health care with other markets. I know you don't like it, but the Health care market is very comparable with the food market. Both provide life saving and life taking products. And both, when you introduce third party payments like subsidies, end up screwing the consumer. Remember the million pigs, slaughtered while millions starved in the streets. All in the name of helping out a special interest group? Look at Sugar subsidies and how they screw the consumers.

"how many people can second guess the authority of a doctor when their health or even their life is at stake?"

How many detached government bureaucrats can second guess the authority of a doctor?

This is an old meme from the left - if we can't achieve perfection in the market, then lets mess everything up beyond recognition.

And even given all that that I agree with you on - even if many people would second-guess a doctor. Would you really second guess them as readily as a necktie salesman? Even if on the margin we would push back against the doctor in many instances, that doesn't change the fact that important information asymmetries are still in play.

You keep claiming that important information asymmetries are in play, but what you're ignoring is that people aren't buying their health care in a free market. Restore a free market, and *it* will draw out that information.

There are information asymmetries EVERYWHERE and yet we manage to buy things and be happy with the results all the time. You have no idea if your Dell computer is using real chips or fake knock-offs. HP knows, though.

Through what mechanism? How does the market change the information asymmetries at all? As others have pointed out here, information asymmetries are in play in the auto mechanic market and that's a free market. We don't care because it's not as important has health care, but it's there. Also the market for used automobiles. The list goes on. Since when has a free market been a remedy for information asymmetry? Get more specific, "russnelson".

FFS! I've never had an economics class in my life, but I understood Russ Nelson perfectly. These sentences, "You have no idea if your Dell computer is using real chips or fake knock-offs. HP knows, though. perfectly explained by what mechanism asymmetry is pointed out.

I got it. Russ gave a great example. I've bought three Dell computers over the past six years. I'll bet HP bought that many Dell computers yesterday. I wonder why they'd do that?

Oh, and "danielkuehn", you can stop putting russnelson in quotes as if I might not be whom I say I am. Just google for "russ". I'm a little bit famous.

It's amazingly frustrating to argue with you, because you're intelligent, but you're a fool. Everything has to be spelled out for you. Okay, so here's the thing about information asymmetries in free markets: they don't exist. Okay, well, they *do* exist, but not in any significant way. Yes, you don't know everything about product X (nevermind what X is). There are two parties selling X: Y and Z. Y and Z are both experts in every aspect of X, and pay strict and close attention to what the other is saying. If either tries to lie or bamboozle a customer, they start ringing the alarm bells.

So yes, information asymmetry between you and X. Zero information asymmetry between Y and Z -- and *they* are the ones who matter. At least, in a free market. In the government-hampered markets that you seem careful to always leave room for, either or both Y and Z are always seeking an advantage -- NOT with the customer, but with the government. So they could give a rat's ass about guaranteeing that the customer gets a good deal. They just need to make sure that they get the best deal out of the government, and customers be damned.

Understand now?

"Since when has a free market been a remedy for information asymmetry?"

OMG people. The old cliche that "an informed customer is the best customer" is a cliche because it's generally true. The more competitive companies have great incentive to reduce "information asymmetry" as a means of inducing people to use the service. Tech companies for example expend great amounts of resources making their products understandable and usable in order to facilitate adoption.

Is Daniel arguing just to argue? I think so!

Mental masturbation.

If I don't respond later, It's because I'm off for two days and Modern Warfare 2 comes out today. =)

Enjoy! Glad to hear you're contributing to aggregate demand. I now know that I can't attribute it all to Obama :)

"Glad to hear you're contributing to aggregate demand"

Vomit.

To bad it goes to an industry that needs no additional support.
I'm not against AD, I'm just against those policies and those economists that only think in the AD (KEYNES in big RED letters).

Come to think of it, imagine if the Gov subsidized the video game industry, how screwed up would our economy be then?

"I'm not against AD, I'm just against those policies and those economists that only think in the AD (KEYNES in big RED letters)."

Note to Self: When Daniel expresses a nuanced view, hedging a bit about throwing all his eggs in one basket, he is being "irrational" and that is why people on this blog "get frustrated" with him. When others express a nuanced view, it's all good.

We agree on the asymmetries, but there are a ton of asymmetries in the neck tie market as well...at least for me, that is until I got married.
Still though, don't third party subsidies only exacerbate the knowledge problem? If people had more skin in the game, money wise, they might be more apt to learn more and at least make the knowledge problem not as bad as it is. More people challenging their doctors is a good thing. Could you imagine how much better our doctors would be compared to other countries if our populace engaged in Socratic debates with their doctors?

Definitely in the necktie industry - I was only speaking in relative terms (at least I thought I was!). I can't think of a market where there isn't some asymmetry.

As I said in my post, I definitely think third parties can pose problems. Definitely. I'm never sure what to make of this though - I'm torn by how much of an impact that they have. Health benefits are just another kind of compensation. I could have had a better salary job, but I chose this one because of the benefits package. People think of these benefits like compensation. So I'd certainly believe there's some psychological impact of not having "skin in the game", but it seems to me if you think that third party payment is a large factor, you'd have to argue that there are major inefficiencies in the labor market, and that people can't arbitrate between compensation in the form of benefits and compensation in the form of salary. I don't see any reason to think they would have such problems.

Think of it this way - if your employer offered to pay you in (1.) health benefits, (2.) salary, or (3.) food, would that make you purchase more food with the salary portion of your compensation than you otherwise would? Probably not.

"you'd have to argue that there are major inefficiencies in the labor market"

There are, tons of them. The problem is that they are all masked by your pre-tax income. If you didn't get the benefits of a tax break for having employer health insurance, would you make the same choice or would you go out and try to find a better plan? But again this comes back to my/libertarians broader point. It's the Government that is creating the asymmetries and the bad incentives. More regulation on top of already bad regs will not change that. It will only create more asymmetries and more bad incentives...regs are not like math, you can't take two negatives and come out with a net positive.

Oh definitely - I pointed out the problem with the tax privelege for benefits in my first post in this thread. It was the best health reform suggestion in the whole 2008 campaign.

RE: "It's the Government that is creating the asymmetries and the bad incentives."

It is "creating THE asymmetries and THE bad incentives" or it is "creating asymmetries and bad incentives"? I would argue for the later, not the former language that you use.

I'm not sure the best way to move away from fee for service. I'm not advocating a government solution - I'm just identifying it as a problem. We may have some leverage with changing the Medicare payment system (ie - no additional "government intervention" than what we've been living with for four decades now). Or maybe it's a market solution - that would obviously be preferable. All I know is fee for service is a very real problem.

"All I know is fee for service is a very real problem." ... in that free people can't be trusted to solve health problems. Smart people like Danny need to intervene and analyze all the incentives and information asymmetries.

To which you may respond in the last paragraph "well aren't you just saying that food is the same as health insurance which is exactly what you're criticizing Don for".

I suppose I am. But the point still is that you are making decisions between different sorts of compensation and asking yourself "would I rather have $X or Y coverage?" I think that's a somewhat easier decision to make than "would I rather have my $X or would I rather spend it on a CLL sequencing analysis for mutated status of immunoglobulin?"

"CLL sequencing analysis for mutated status of immunoglobulin"

It's a leukemia test. It's all very technical, you'd probably be better to put your faith in the experts! =)

Aha - "globulin" - makes sense :)

It's all about opportunity costs. More information would be better, but would you agree that putting the decision making into the hands of politicians would only make the problem worse?

For the most part, definitely. I like Medicare so I suppose I'd put a portion of the first hypothetical question in the hands of government, but aside from that I wouldn't put either of those hypothetical questions in the hands of politicians.

Ha ha, see this is why people get frustrated with you.

So you agree that putting it in the hands of politicians will make it worse off. Yet because you like (very subjective) Medicare, your going to hedge. Ha ha ha. I'd say your putting your irrational mind ahead of your rational mind but that's just my opinion.

Why is that frustrating? I'm not denying that Medicare introduces problems.

A rational mind recognizes the very real government failures, recognizes the very real market failures, consults it's philosophy, values, and ethics, and decides how it will subjectively strike the balance. It's only frustrating if you think I'm saying government involvement via Medicare is costless. I've never felt that way. I just think it's worth the costs.

What would you say is rational? Rejecting a government solution if there are any associated costs and inefficiencies, but accepting all the costs and inefficiencies associated with a private solution? Why is that necessarily the rational route?

Of course danny thinks the costs are worth it. At his ripe old age, I doubt he's paying any of the costs, so they're completely worth it to him.

"Why is that necessarily the rational route?"

Because liberty is important too, Danny.

I googled it... it's a real test. No clue WTF it is. Which is sort of my point :)

Re: "More than you think. Doctors are not the all wise, all knowing altruistic saints that maybe you trying to allude to."

Of course they're not. In fact, my whole point is they're not altruistic any more than the average consumer is. They do have a knowledge advantage in terms of medicine, though. I hope you're not denying that. You can know more than someone about something and not be "all knowing". No one is "all knowing". And as I said to Carl Pham above - I mentioned the supply-side information asymmetries because that's what Don was talking about. There's no doubt at all those asymmetries impact demand behavior as well. I don't see why those two have to be mutually exclusive.

Your TV examples are far too tame - think of it this way. We COULD all demand the "House" method of testing and treatment. If you look at it that way, we're really not as bad off as we could be!

"We COULD all demand the "House" method of testing and treatment."
That's a scary thought indeed. But shows like House do push the margin for more and more tests. But why not right? We do have the tech and the know how...but prices are distorted by third parties so much that the knowledge and signals that prices give consumers are meaningless in health care. It's the subsidies in the Health care market that causes the knowledge problem, shows like House etc...only exacerbate that problem created by subsidies.
The Health Care field is the same as any other market, when you subsidize you get over use.

Daniel, you've got it exactly backwards. It's not the poor ignorant patients who are unable to dissuade their doctors from ordering rafts of tests. It's the poor harried doctors who are unable to dissuade their patients from demanding tests that promise very little, or zero, useful information, from sheer paranoia and control-freakism.

Here's how it goes. Mother comes into the ER with a sick child: vomiting, 103 fever, lymph nodes swollen, red throat. Doctors says ah yes, the seasonal virus, takes a throat culture to rule out strep, prescribes Tylenol and fluids.

So far so good. No "unnecessary" tests. But wait. Mother says hold on there a minute. I just saw this show on the cable about this poor boy who fell and hit his head hard, and then he got up and thought he was fine, but then 3 hours later he started vomiting, siezing, collapsed and died! Because he had a brain bleed that no one realized! A simple CAT scan could have saved him! Now, little Rosemary here fell down recently and I think she bumped her head. Now she's vomiting! Shouldn't you be ordering a CAT scan?

Doc thinks a moment. Uh, when did Rose fall down? Three days ago? Hmm. Did she lose consciousness? No? Felt fine that night, the next day? Yes doctor but remember these things take time to develop! Her life could be in danger right now! She's got a headache!

Now he thinks again. On the one hand, he knows the tot doesn't have a brain bleed. The timing is all wrong, and the vomiting and headache is plainly explained by the obvious signs of infection -- the swollen nodes, the fever. But what if the infection gets much worse, and the child dies? It can happen. Then comes the lawsuit. Even if he can prove to 12 horror-struck retired schoolteachers and policemen on the jury that a brain bleed didn't kill little Rosie, it will be ruinously expensive, and his contract with the hospital will most definitely not be renewed.

Against this he sets the $2000 the insurance company is going to get billed if he orders a CAT scan. It's no contest at all. Off goes the little girl to the CAT scan machine.

Multiply by 100 million anxious patients, and there you go. We are asking for the tests. We're the addicts of Total Medical Information Right Now, unwilling to wait and see, take a small chance, not know precisely the extent of things. It ain't the doctors.

I have no doubt the information asymmetry works to aritificially raise demand in both directions. But I don't see why the fact that patients will demand more tests and treatments than they would if they were better informed (or as Don alludes to, had less third-payer coverage) negates the fact that doctors will push more tests and treatments. I'm not arguing that the information asymmetry that doctors and hospitals benefit from is to the exclusion of patient paranoia.

I'm not sure why these are mutually exclusive.

Information asymmetry pervades the market for health care and it impacts behavior on the supply and the demand side - it's not comparable to the market for neckties, or food, or many other products. I only highlighted the supply side because that is the issue that Don addressed. Certainly that's not the only thing going on in this market.

No, sorry, you're nuts. Give me data -- any data -- to suggest that in a non-negligible fraction of cases a doctor "pushes more tests and treatments" on an unwilling patient.

You can't. It simply doesn't happen. It's the other way around: patients routinely push the doctor to order tests that add very little useful information, and to order treatments that have very little chance of success, in perhaps no small part because they are not bearing the cost of these choices up front.,

A doctor has anyway no interest in "pushing" for more tests and treatments on Patient A, because it's not like he sits on his hands, with nothing to do, not earning money, once Patient A leaves. Quite the contrary. No physician fails to have his entire schedule jammed full with as many patients as can possible fit. If the doc sees Patient A for two hours, and bills $200 for an extended office visit with lots of tests, or instead sees Patients A through D for 15 minutes each, and bills for a routine office visit of $50 each, there's zero difference in his income.

But it doesn't matter. The scenario is ludicrous. Walk into any physican's or specialist's waiting room and do a survey of the patients. How many of them would love to just go home, but are waiting because the doctor browbeat them into more "tests and procedures" then they want? The answer will be nobody. They're all sitting there hoping to get more tests and procedures, more attention and careful, technologically-magnified inspection by the physician.

Stop thinking theoretically and metaphorically and just take a look at how people actually behave. It's plain as can be.

RE: "Give me data -- any data -- to suggest that in a non-negligible fraction of cases a doctor "pushes more tests and treatments" on an unwilling patient."

First - this is something that happens on the margin. You have to talk about the margin. This is an incentive structure that operates for all doctors, so the percentage of cases is 100%... the real question is how many doctors do it 0.1% more than they would in the absence of FFS, how many would do it 0.5% more than they would in the absence of FFS, and how many doctors double their profits compared to what they would do in the absence of FFS and asymmetric information. But the incentive exists for all doctors, and people respond to incentives.

To repeat, I fully agree patients routinely push their doctors to to order unnecessary tests.

When you invent numbers the way you do, of course you can make it work out. Which is exactly why this is likely to be a bigger problem for more expensive tests, and not simply for extended, 2 hour consultations that displace eight 15 minute consultations.

My mother in law is one person with a bad immune condition that nobody can completely explain. She does push back, has done research, has tried different supplements on her own, etc. - but she's also been passed off between different specialists and has tried out many kinds of medication, none of which have really solved the problem. If your experiences are such that you think this is just a myth, then count yourself as very lucky Carl. But it happens. We aren't buying neckties here and people don't just stop responding to economic incentives because we find it ideologically convenient to think they do.

Bravo, Dan! You said nothing but sounded really intelligent doing it!

Okay then, how about auto mechanics.

“As long as auto mechanics are paid for each problem they find and fix, they will err on the side of more finding and not always better fixing. No single mechanic change that. It requires action by the government.”

This actually rings a bell, does it not? Aren't we all familiar with the legendary unscrupulous auto mechanic who manages to find mysterious problems with your car which may or may not have been present when you placed your car into his care and who then charges you an arm and a leg to fix them?

Nevertheless, somehow, we manage. We find ways of overcoming this potential problem.

Sure - no doubt about it. When the auto mechanic industry becomes (1.) a life and death issue, (2.) the single greatest threat to the solvency of the federal government, and (3.) 1/6th of the national economy, I'm sure we'd pay more attention to it.

Since it's not any of those things, as yo usay "we manage". But we manage by just living with higher prices than we would have had without the information asymmetry. AND we manage by developing market solutions to get around the fee-for-service problem: like warranties! The very existence of warranties for cars is a recognition that information asymmetries combined with fee-for-service payment structures can lead to cost inflation. I don't know the industry, so I'm not sure how successful warranties are at getting around this problem, but ultimately this is all I'm suggesting might help in health care - moving away from fee for service - ideally through the market, but I'm willing to consider other mechanisms for getting there as well.

"ideally through the market, but I'm willing to consider other mechanisms for getting there as well."

Oh, you sure are Dan. You smart people, always coming up with 'other' ways that don't involve economic liberty!

Thanks, from the rest of us!

Of course you're willing to consider mechanisms other than markets ... because you consistently fail to understand how markets work in spite of the best efforts of people to teach you.

I just found your web page - very interesting.

Well I'm glad you have your picture up to distinguish yourself now. Your sniping isn't exactly up to Cafe Hayek Russ Nelson standards, so it's good we can distinguish you two.

Do you mean Russ Roberts?

Daniel Kuehn has spent a couple of years on this blog, with out ever looking up the names of the two professors who blog here. However, Daniel's word is always final.

"The final word" twice now - I see you've adopted a catch-phrase too. Very nice.

Hey, when you're wonking at his high level, a little name confusion is forgivable. If you only knew what it was like to be responsible for a Dan-level intellect. You and I are just single-celled organisms compared to him.

Hahaha - I'll break my rule about not responding to you just this once. Good catch... well... really obvious catch for everyone but me apparently. I was posting quickly this afternoon and apparently latched on to "Russ" :)

Please - enjoy reading a great deal into my mistake and refer to it in later posts, as I'm sure you'll do. Have fun with that - I won't respond again, I promise (unless I pull the same sort of dumb mistake with Don's name, in which case I promise I'll thank you for correcting me again!)

I'm beginning to understand why he thinks he can't be allowed to make his own health care decisions.

LMAO

LMAO

very funny...

Are you related to our other Methinks?

You might want to clarify that.

And who is this? That picture next to your name sure doesn't look like Russ. Considering the extremely inappropriate things you've said in the past I think the people who appreciate the service that Russ (and Don) provide here might appreciate knowing who you really are, or even just that you use a different name.

I know that all of us 'russ's look alike to you, but please PAY MORE ATTENTION, IDIOT. Sheesh, and you wonder why people are always disputing what you say. Maybe it's because you're fricking autistic!

"The very existence of warranties for cars is a recognition that information asymmetries combined with fee-for-service payment structures can lead to cost inflation."

Doubtful - much more likely is that warrantees are a market response to people wanting to avoid large unexpected expenses.

Sure - that makes sense too. But since it eliminates the whole fee-for-service system, why would you conclude that it's "doubtful" that it has something to do with the fee-for-service structure?

I don't think it even puts a dent in "the whole fee-for-service system" so I don't see a connection. Those with vehicle warrantees probably spend more on repairs than they otherwise would have, so the warrantees cause inflation. Even with that, the majority spends more for the warrantee than the repair expenses would have cost them, so it's inflationary twice. The parallels to healthcare are striking.

I think it’s very clear that fee-for-service is not a problem with either auto repair or health care costs.

David Leonhardt's article, what I read of it because of my short time at home this morning, is just chock full of nonsense, most of which come because of his lack of knowledge of markets and reality.

For instance, I selected this tidbit to focus on before I go to my morning shoot.

"The health care debate of 2009 has had so many moving parts that it has sometimes seemed impossible to follow. The crisis behind the debate, though, is about one thingabove all: the scattershot nature of American medicine. The fee-for-service payment system — combined with our own instincts as patients — encourages ever more testing and treatments. We’re not sure which ones make a difference, but we keep on getting them, and costs keep rising."

That is pure ignorance writing. First off, the price of the tests are driven up by government regulations that begin with the very conception of an idea for a new drug, device, or surgical technique; and on top of that the number of tests ordered by a doctor more often directly relate to his fear of being sued if he hasn't crossed every T and dotted every I that a scum sucking attorney can find to try and hang a malpractice case on.

Why is it possible for scum sucking attorneys to create this kind of atmosphere in the realm of medicine? Government in the form of liberal courts and ACLU legal practices.

Prior to tart reform here in Texas, I sat through deposition after deposition that had details that could have been from a cookie cutter.

Woman 5 ft tall, 380lbs, pregnant, given written instructions, by her doctor, to lose weight on the diet he provided; instructions including warnings of the possibilities of damage to the child (and her) if she did not. Instructions and doctor ignored totally by obese woman. At time of labor refuses Caesarian delivery, child born with birth defects due to difficulties in extraction from that mountain of blubber.

And, of course the ever present lurking scum sucking attorney there to tell the mountain of blubber that it wasn't her fault the kid was scrunched in birth, it was the doctor, and a law suit is filed for millions. Either it goes to court or is settled by the insurance company. Attorney makes millions, mountain of blubber makes a few hundred grand, and the doctor does everything he can to avoid the mountains of blubber that walk into his office but finds that government is there to authorize a laws suit in favor of the mountain of blubber because of discrimination.

Government is the problem. It insulates people from the consequences of their own stupidity and irresponsibility, and passes the costs on to those of us who work and behave responsibly.

I agree that there are injustices in the current tort system. But I think that has more to do with the jury pool (read: eaducation system) than anything. I too live in Texas and don't support tort reform because I don't think I should have to have my life's value limited by the goons in Austin. I believe the limit on medical tort damages in Texas is $750,000. A paltry sum for many Texans that do experience real malpractice. Tort reform was pushed by doctors and the insurance industry but has done nothing to lower medical costs; it's just another example of rent seeking.

Yes, lawsuit abuse stinks. I would have liked to think that if I die or am unable to properly function due to a doctor's incompetence or neglect, that I (or my family) will be compenstated for my loss. It's a shame that the State has severely limited that right, and has cost me dearly in life insurance premiums to compensate.

So in essence you're saying you prefer the system that drives up costs in a ridiculous fashion. Hey doctors, order numerous tests done just to cover your ass because if you don't that is just another hook an attorney will try to hang a case on. Oh yeah, good idea.

Part, a small part, of the current mess is indeed ignorance in a jury pool; but, that pales besides the greed shown by "victims" and lawyers. Let's not talk about the extremes to which a scum sucking attorney will go in order to find some tiny little something a jury might be sympathetic to.

Now sir, if you haven't been privy to seeing that work then you may think what you want, but in all likelihood you don't have a real clue. Ask me about videoing the depositions in which two attorneys play shuttlecock with the "expert" doctor for endless hours trying to get him to commit in such a way to a ridiculous question they ask that might give them a leg up in front of the jury.

Now let's address tort reform. I am absolutely in favor of tort reform. What was done in Texas recently was an improvement, but it is also (as you said) restrictive in those rare instances where there is an actual case of incompetence. This subject has come up before but maybe you missed it, so I will reiterate: Total effective tort reform that allows justice where justice is deserved is to revert to "loser pays" on all lawsuits. We used to have it before plaintiff attorneys dominated the legislatures of all states and the federal government, England has it today and suffers almost none of the ill effects we do with our screwed up legal system. Loser pays, if you have a valid suit and a decent lawyer then you go to trial and win most likely....because while juries can be questionable, it is difficult to gather at random 12 stupid people in one room.

Next, obtaining a decent lawyer who knows his shit will be the indicator on whether you have a case or not. If a good knowledgable, reputable, and competent attorney will not take your case on contingency he is telling you something you need to listen to, and that is shut up and go home because in his best judgment he does not believe he can win the case on the facts you present. Heed his unspoken advice and save money.

Medicine is just not perfect, no doctor has a magic wand, and every patient responds different to any single treatment or procedure offered, Americans have been enculturated to think that all doctors are God and imperfection of results is simply not allowed. Sue them sue them sue them if they don't deliver God like perfection. Bah humbug and bullshit on top of it, it is socialist enculturation, no more no less.

5 ft tall, 380 lbs, refuses Caesarean, and thinks God could deliver her child without damage? Give me a freaking break. (BTW this kind of stuff is not isolated or unique by any means.)

Let's see, Kevin S., tort reform in Texas is two years old and it hasn't dropped your medical bills yet? You expected miracles in two years? There are still numerous cases in the system that are grandfathered and will probably cost insurance a tidy sum when settled or tried. I would also say to you, while prices may not have dropped, have the prices been more stable? My prices today are the same as they were two or three years ago, how about yours? Still with the same carrier? Your statement that tort reform has cost you dearly in life insurance premiums tells me that likely that is your fault. Term life can be had relatively cheap to cover your butt for life insurance; but what does life insurance have to do with medical insurance and tort reform?

Last sir, but not least, if you do not want to suffer a doctor's incompetence then choose a good doctor. There are ways of checking out a doctor's credibility. Attorneys do it all the time. How many times have they been sued, how many of those suits were dismissed for lack of evidence, how many of those suits were settled because of murk, how many actually were taken to court and proven? If you don't check this stuff out and just walk-in expecting that socialist perfection of results that the state has told you YOU DESERVE, then in my book you get what you get.

Loser pays is the only solution out of the mess we are in. Yes, I'd lose a twilight career but trust me I'd willing shift into something else in a heart beat.

We are in complete agreement on the issue of frivolous lawsuits, scum sucking attorneys, greedy (non) "victims", my personal responsibility for choosing the best care I can, and acceptance of negative outcomes where there is little hope of positive outcomes.

There are undeniably instances of incompetence and negligence in the medical profession, regardless of how small the percentage of lawsuits they represent (a quick search showed that 86% of medical lawsuits in TX found no fault on the part of the defendant). It is the other 14% that I am speaking of. When someone is under anesthesia and the wrong dose of medication is given, or contraindicated drugs are administered, foreign objects left behind in one's body, etc. that result in death or disability, I think those are potential grounds for a lawsuit. In those instances, I don't think that the limits on liability should be capped. Some people's losses can easily exceed $750,000. That's the only point I was trying to make.

BTW, Texas' tort reform legislation was passed in 2003 and went into effect in September 2003, I believe, so it's been in effect for 6 years, not 2.

Also, you only need 7 out of 12 jurors in a civil case to rule in your favor. So yes, I do think that Jury ignorance/symapathy play a major roll in the ease it is for the bottom feeding attorney's to get large awards. It is not by accident that the Plaintiff in these frivolous cases ALWAYS demand a jury trial.

Reforms like "loser pays," and a mediation/arbitration requirement prior to trial could be effective in weeding out the frivolous lawsuits. I suppose it is the one-size-fits-all cap on awards that I am most opposed to.

There are few scum sucking attorneys specializing in malpractice litigation, and the studies show that the vast majority of those significantly harmed by medical negligence never even make a claim. While caps on punitive damages may make some sense, there should be no caps on compensatory damages, even when the compensation is for pain, suffering and loss of pleasure. For your information, pre-suit review or arbitration has been tried, and in some cases is a success. The 7 out of ten rule only applies in a few states. Finally, the attempt by the insurance companies to selectively limit liability to certain segments of the working population, whether physicians, gun owners or chemical companies has nothing to do with justice or reform, but is clearly just special interest lobbying.

Not sure who the practioners of medical practice are but, if I remember correctly, vidyohs is a videographer for depositions and other legal documentation, so I am not questioning his experiences with the bottom feeders. I am just surprised and confused by his call for gov't intervention that cuases price distoritions, limits the freedoms of the injured, and is clearly results from rent-seeking.

Caps on punitive damages have the same problem as caps on compensatory damages, they don't allow for large awards in the most egregious cases of negligence, regardless of how small their occurrence is.

I think that there are other ways to limit abuse without trampling on the only means to make "whole" those who are truly injured.

And let's not forget the role of an overly litigious society in providing incentives for "the next test" or "the next procedure."

Also, yeah I'm just excited as you are!