We don’t write much about health care economics here, but in many respects it does raise some of the same issues that I find fascinating in electricity, telecom, and technology industries. David Zetland has a good post today about how third-party payer health care rules lead to cost increases and overconsumption of health care. I heartily endorse his conclusion:
My main suggestion on medical care is that we cut out the employer. The employer will instead transfer insurance payment money to employees, who are then required to buy insurance.* The patient can buy high or low deductible insurance.** …
Bottom Line: Incentives matter, even with incomplete and asymmetric information. The way to improve your health care is by putting you in charge of it.
[You’ll have to click through to his post to see what his asterisks signify 🙂 …] I could say the same about electricity consumption, information technology, and dynamic pricing — the way to improve your value for money from electricity consumption is by enabling you to make the decisions, not leaving the decisions in the hands of regulators or a regulated utility in the form of regulated pricing.