It All Sounds So Simple

Richard Thaler writes,

To me, the ideal health care delivery system would include…A fee for health rather than fee for service model. Doctors and hospitals should be paid for keeping their patients well. Paying them for doing more tests and surgeries creates bad incentives.

Pointer from Tyler Cowen and Mark Thoma.

When Thaler plays chess, does he think even one move ahead? I am sure that my readers do not need me to tell them how doctors would respond to a “fee for health” incentive system, do I?

To be fair, Thaler has some reasonable ideas in the column. But this particular gambit was so weak that he was “dead out of the opening” as far as I was concerned.

5 thoughts on “It All Sounds So Simple

  1. The way around this that I often come back to is the bundling of health insurance with life insurance. If you have a large enough life insurance policy, then keeping you healthy saves the insurance company money. This concept can get even more granular with quality-of-life insurance.

  2. Thaler writes:

    Unfortunately, no single change will transform our health care delivery system into one that we can afford.

    He’s right. It requires two changes.

    1. Remove the (mostly tax) incentives that drive health insurance into employer-organized groups.

    2. Formally recognize a two-tier health care system, where all government spending on health care must be solely for the least expensive treatment option for the particular condition from the last 30 years.