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Sunday, July 10, 2005

Go Under The Knife and Get Money!

The NYT reports a new type of fraud in the medical industry: MDs paying patients to actually undergo surgical procedures that are not medically needed in order to bill insurers.

In Sowell's Applied Economics, he has a chapter on national healthcare. We learn the basic economic lesson that third-party payments and government price controls result in reduced production, increased consumption, shortages and quality deterioration. No wonder wealthy Canadians come to the U.S. for needed medical services.

However, many facets of national healthcare are present in America and we see some of the above problems.

Reduced Production: Where were the flu vaccines last year?
Shortages: Pregnant women cannot find available OBGYNs;
Increased Consumption: More prescription eyeglasses are sold in December to get the bill in before the year ends on tax-exempt health accounts;
Quality Deterioration: Shorter visits to the doctors (though more often).

The weighing of costs against benefits that we consider in all other purchases is removed from healthcare purchases. Why not have people decide what they need and pay for it out of personal funds? The price will go down for medical services and the quality and availability would increase.

If not, explain why economic principles do not apply to medicine.

And why was this fraud scheme in Southern California? California has a "speedy payment" law that forced insurers to make payments before they could investigate the claims. When people pay their own bills, they tend to examine their bills a bit closer and delay payments when suspicious. Hmmn...

2 Comments:

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