How Much Do You Want to Pay for Medical Care?

There's a good reason why some patients are willing to pay more

Commentary by John C Goodman

Source: Psychology Today

The title above is not a misprint. I want you to think about choosing your own price.

Suppose you could magically pay any fee you want to health care providers and they can't refuse. You can't control the fee others are paying. But you can select your own. What fee would you choose?

Your first inclination might be to select a fee of zero, or at least something close to it. So let's try that out in a thought experiment. When you call for a doctor's appointment, you would discover increasing difficulty getting one. You would be put on hold for long periods of time. The number you are asked to call might be answered by a voice recorder, not a real person. When you are given an appointment, it would be weeks (perhaps months) away. When you arrive at the doctor's office you would discover that others in the waiting room are seen before you are ― even patients who arrive after you have arrived.

BTW, I'm not making any of this up. I'm more or less describing the difference in how patients are treated by dermatologists if they need a Medicare-covered service versus a service for which payment will be out of pocket; how Medicaid patients are treated vis-à-vis non-Medicaid patients; and how I have observed that HMO patients are treated versus patients who pay market prices.

Choosing a fee below the fee everyone else is paying means you will be the least desirable patient to doctors from a financial point of view. It means you will be the last patient doctors will want to see. It doesn't mean you will never get care. It means you are likely to be the last to get care.

So let's consider a completely different choice. What if you choose to pay a fee higher than everyone else is paying? In that case, you are more likely to get a same-day or next-day appointment. If there are patients in a room waiting to be seen, you are likely to be one of the first. Indeed, the doctor may even call you and talk to you about your health needs on a phone. She may email you. This is why (surprise!) given the opportunity to pay any fee you choose, you might actually volunteer to pay more than what others are paying.

Again, I'm not making any of this up. This is precisely what "concierge care" is all about. People pay more to concierge doctors so that they can get more care and better care.

Now if you are inclined to think this is all fanciful, you are completely wrong. What I have just described (in less than 500 words) summarizes the principal difference in how the left and the right think about health care. It also describes the principal difference in what the left and the right expects to happen under ObamaCare.

If you go back over the health policy literature of the past 60 years, you will find almost without exception that writers who are left of center either explicitly or implicitly endorse two propositions:

  1. In health care, prices don't matter (if you artificially change them nothing bad will happen); and
  2. The way to make health care more accessible (especially to poor people) is to make it free at the point of delivery.

For the past half-century we have had a grand test of these ideas in the contrasting ways we subsidize medical care and food for the poor.

With food stamps, low-income families pay the same market prices you and I pay. They are free to add cash to their food stamps and make just about any supermarket choice you and I can make. And you never hear of a supermarket refusing to take any more food stamp customers. In the market for medical care, however, low-income families are not allowed to supplement Medicaid's fee with cash. If a nurse at a Minute Clinic accepts cash in addition to Medicaid's fee, she would probably be committing a criminal offense! So most walk-in clinics don't accept Medicaid patients (despite the fact that the care is convenient, low-cost and high-quality) and the patients must endure long waits instead at community health centers and the emergency rooms of safety net hospitals.

With ObamaCare it's going to be déjà vu all over again. We are about to see a huge increase in the demand for care, but no increase in the number of physicians available to deliver it. As higher income patients pull doctors out of mainstream medicine and into the realm of concierge practice, the shortages will get increasingly severe and the waiting times will grow.

What will happen to the newly insured? About half of them will enroll in Medicaid and the other half will acquire insurance in the health insurance exchanges ― in most cases with taxpayer subsidies. But pressure to keep premiums down is forcing the carriers to offer narrow networks that promise below-market fees to providers. In fact, early indications are that many of the exchange plans are little more than "Medicaid Plus."

Massachusetts is a likely precedent for what is about to happen. In that state, the newly insured are in subsidized plans that pay only about 10% more than what Medicaid pays doctors. And early indications are that people in these subsidized plans have less access to care than patients on Medicaid.

And what will people on the left say when these things happen. They will blame the bad outcomes on greed, selfishness, avarice... ― on anything other than their own inability to accept reality.

For more on the relationship between healthcare pricing and healthcare quality, please see my Independent Institute book, Priceless: Curing the Healthcare Crisis.