by Kevin J. Browne

Created on: August 01, 2009   Last Updated: August 04, 2009

President Obama's comments about a visit to the doctor where the course of treatment is dictated by insurance reimbursement, raises some serious issues and illustrates some misconceptions about health care delivery.

For my wife's patients (she runs a family practice) it goes without saying that she does not decide a course of treatment by consulting insurance reimbursements. I suspect that most doctors do not do this either. But, having said this, it is clear that health insurance does distort the health care market by distorting the relationships between price and cost as well as supply and demand.

One of the worst effects of health insurance is that it causes people to demand hundreds of dollars of service while only wanting to pay pennies on the dollar for this care. In virtually no other area of our economic life does this presumption exist. Think about it. If you take your car to get gas or an oil change you look upon this as routine service for your car and would not expect car insurance to cover the cost.

Because car insurance doesn't cover the cost the market is able to operate here and the vast majority of people are able to purchase gas and oil changes at reasonable rates while the companies which provide these services are able to make a profit doing so. What most people demand of car insurance is catastrophic coverage. Because insurance is mainly used for this purpose it is reasonably affordable for most people. But, since this is not how health insurance works, it is in most cases more expensive.

What would be so bad about altering health insurance to more closely resemble car insurance? At the very least we could have an option where health insurance is used to cover major medical problems while individuals pay for routine health care.

You might respond that this would be too expensive since the cost of a doctor's visit is too expensive. But, in a free market, doctors could only charge prices that the market would bear. This would be the case for all health care services not covered by insurance. Doctors or companies which tried to charge more would lose patients who would vote with their pocketbook by going elsewhere.

Another benefit of this approach would be to alter the culture of payment that now seems to exist now in health care. Think about it. Would you go to the grocery, load your cart up with groceries and expect to leave the store without paying? Would you take your car to have the oil changed and expect to drive away without paying? Of course not!

But, some patients seem to expect to be able to go to the doctor's office, avail themselves of services and leave without paying their bill! I think much of this would change if doctors could state up front what their fees for services were (as do most other service providers in the economy) and be able to collect these fees when services are rendered.

In other words, operate without the burden of insurance. What to do about patients who truly cannot pay? Most doctors are willing to work with people on a case by case basis. Solving this problem does not entail a wholesale overhaul of the health care system. And no, my wife won't try to take your tonsils out just to earn some extra fees!

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