Actually, David Goldhill made a similar point last summer at http://www.theatlantic.com/doc/200909/health-care. He recommends that insurance only be used for its traditional purpose: handling catastrophic losses. Normal life events would be paid for from health spending accounts. The idea is to create a competitive market for health care so consumers can compare price, reputation, and other factors as we do when buying any other commodity.

His also points out that health insurance is not the same as health care, and health care is not the same as health. So if our goal is to get the biggest improvement in the nation’s health for the least dollars, we might be better off spending on environmental and lifestyle programs instead of health care. Worthwhile reading.

Cheers,
Ken

Doctors acting in a cost-plus environment will always perform unnecessary tests and treatments. Doctors who are employed by the ultimate payer will try to do as little as possible.

The best diagnostic decisions would be made by well-salaried doctors who would have no incentives for extra procedures. On the other hand, the procedures would be performed best by professionals who had no incentives for keeping down costs.

Thus, what if there were government-employed doctors for diagnostics and privately employed doctors for procedures? The procedures would be paid by private insurance. On the other hand, the private insurance would be obligated to pay for all treatments deemed necessary by the government-employed doctor who made the diagnosis.

In such a system only necessary procedures would be performed, but those procedures would be performed as well as possible.

Of course in the real world diagnostics and procedures can not be cleanly separated. For this reason, some of the procedures would have to be performed on a non-profit basis by the government-run clinics, but would be paid for by the private insurance.

Any other ideas?