NCPA - National Center for Policy Analysis


March 12, 2007

Long before a patient enters a doctor's office, third-party bureaucracies have determined which medical services they will pay for, which ones they will not and how much they will pay.  The result is a highly artificial market which departs in many ways from how other markets function, say Devon Herrick and John C. Goodman, both with the National Center for Policy Analysis.

Among the services insurers typically do not pay for are:

  • Integrated Care: Doctors offer fragmented services to diabetics, for example, but no one offers diabetic care as such -- taking responsibility for the treatment of a patient's case from beginning to end.
  • Patient Education: Diabetics, asthmatics and other patients with chronic conditions could manage much of their own care, if someone taught them how to do it.
  • Telephone and E-Mail Consultations: Potentially, the chronically ill could have more care, better care and less-costly care through modern communication devices -- but few doctors consult by phone, and only one-in-four uses e-mail.
  • Electronic Medical Records: Despite studies showing that electronic medical records can reduce costs and improve quality (by reducing errors, for example), only one-in-five physicians stores medical records electronically.

Although the medical marketplace is changing, legal, regulatory and cultural barriers to competition, innovation and transparency remain, say Herrick and Goodman.  For example:

  • Medical societies and hospital trade associations have long tried to discourage price competition among their members; as a result, there is a cultural bias against advertising prices or competing on the basis of quality.
  • Laws in many states restrict the practice of medicine to face-to-face encounters between physicians and patients, discouraging the use of the phone, e-mail and other innovative medical services. 
  • Potential lawsuits discourage physicians and hospitals from sharing information on medical errors and other quality indicators.

Source: Devon M. Herrick and John C. Goodman, "The Market for Medical Care: Why You Don't Know the Price; Why You Don't Know about Quality; And What Can Be Done about It," National Center for Policy Analysis, Policy Report No. 296, February 2007.

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