In the aftermath of the senseless murder of the CEO of UnitedHealthcare, responsible commentators were quick to condemn the act.

“Murder is bad, and so are murderers,” wrote the liberal economist Paul Krugman. “Neither should be celebrated.”

But then Krugman went on to offer an admittedly “somewhat … caricatured” view of U.S. health care: “It’s a system in which taxpayers bear the cost of major medical care, but this taxpayer money flows through private companies that take a cut, spend a lot on administration, and do their best to deny care to people who need it.”

What service do private insurers provide in return for the fees they collect? Americans, Krugman wrote, “may not realize the extent to which they are exposing themselves to the delay-and-deny strategy private insurers often use to avoid paying for care.”

For many years, Krugman has been an advocate of single-payer health insurance—often pointing to Canada as a model to be emulated. In Canada, there are no health insurance companies. When Canadians get health care, the cost is paid by the government—often with few questions asked.

If Canadians can get by without health insurance companies, could something like that work in the United States? Not in a way people would find desirable.

There are three problems with the doctor-patient relationship in all developed countries—regardless of the way the payment system is organized.

First, when a third party is paying the bill, neither the doctor nor the patient has any incentive to apply the kind of cost/benefit analysis that is normal in the purchase of any other good or service. In considering whether to obtain an expensive test (an MRI scan, e.g.), the incentive is to consider only the benefit. Since cost is irrelevant to the patient, a tiny benefit—no matter what the cost—is viewed as desirable.

Second, in a fee-for-service arrangement (such as exists in both the U.S. and Canada), the more services doctors perform, the higher their incomes. So, just as patients have an incentive to over-consume, doctors have an incentive to over-provide.

Third, there is malpractice liability, which is especially a problem in the U.S. A doctor........

© Eurasia Review