Bad Medicine
10 June 2009
Editor, The New York Times
620 Eighth Avenue
New York, NY 10018
To the Editor:
Geoff Berg blames the high price of medical care on fee-for-service: "The problem with fee-for-service is not merely that it pays providers to provide service; it pays them to create service as well" (Letters, June 10).
This explanation cannot be correct. If it were, we would see, say, the prices of consumer electronics rising ever higher as consumers mindlessly purchase each new gadget marketed by the likes of Sony, Apple, and Dell. These producers, after all, are paid according to the quantities and qualities they supply, and they have incentives to keep creating new gadgets. And yet, the real prices of consumer electronics - as well as of many of the other products supplied according to fee-for-service (which is the vast majority of the economy) - continue to fall.
A better explanation for the high and rising price of medical care is found in Americans' heavy reliance on tax-subsidized third-party payments.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The New York Times
620 Eighth Avenue
New York, NY 10018
To the Editor:
Geoff Berg blames the high price of medical care on fee-for-service: "The problem with fee-for-service is not merely that it pays providers to provide service; it pays them to create service as well" (Letters, June 10).
This explanation cannot be correct. If it were, we would see, say, the prices of consumer electronics rising ever higher as consumers mindlessly purchase each new gadget marketed by the likes of Sony, Apple, and Dell. These producers, after all, are paid according to the quantities and qualities they supply, and they have incentives to keep creating new gadgets. And yet, the real prices of consumer electronics - as well as of many of the other products supplied according to fee-for-service (which is the vast majority of the economy) - continue to fall.
A better explanation for the high and rising price of medical care is found in Americans' heavy reliance on tax-subsidized third-party payments.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Tuesday October 27, 2009 at 11:24am