How Much Do You Want to Pay for Medical Care?

The title above is not a misprint. I want you to think about choosing your own price.

Suppose you could magically pay any fee you want to health care providers and they can’t refuse. You can’t control the fee others are paying. But you can select your own. What fee would you choose?

Your first inclination might be to select a fee of zero, or at least something close to it. So let’s try that out in a thought experiment. When you call for a doctor’s appointment, you would discover increasing difficulty getting one. You would be put on hold for long periods of time. The number you are asked to call might be answered by a voice recorder, not a real person. When you are given an appointment, it would be weeks (perhaps months) away. When you arrive at the doctor’s office you would discover that others in the waiting room are seen before you are ― even patients who arrive after you have arrived.

BTW, I’m not making any of this up. I’m more or less describing the difference in how patients are treated by dermatologists if they need a Medicare-covered service versus a service for which payment will be out of pocket; how Medicaid patients are treated vis-à-vis non-Medicaid patients; and how I have observed that HMO patients are treated versus patients who pay market prices.

Choosing a fee below the fee everyone else is paying means you will be the least desirable patient to doctors from a financial point of view. It means you will be the last patient doctors will want to see. It doesn’t mean you will never get care. It means you are likely to be the last to get care.

So let’s consider a completely different choice. What if you choose to pay a fee higher than everyone else is paying? In that case, you are more likely to get a same-day or next-day appointment. If there are patients in a room waiting to be seen, you are likely to be one of the first. Indeed, the doctor may even call you and talk to you about your health needs on a phone. She may email you. This is why (surprise!) given the opportunity to pay any fee you choose, you might actually volunteer to pay more than what others are paying.

Again, I’m not making any of this up. This is precisely what “concierge care” is all about. People pay more to concierge doctors so that they can get more care and better care.

This gun’s for hire

Now if you are inclined to think this is all fanciful, you are completely wrong. What I have just described (in less than 500 words) summarizes the principal difference in how the left and the right think about health care. It also describes the principal difference in what the left and the right expects to happen under ObamaCare.

If you go back over the health policy literature of the past 60 years, you will find almost without exception that writers who are left of center either explicitly or implicitly endorse two propositions:

1.     In health care, prices don’t matter (if you artificially change them nothing bad will happen); and

2.     The way to make health care more accessible (especially to poor people) is to make it free at the point of delivery.

For the past half-century we have had a grand test of these ideas in the contrasting ways we subsidize medical care and food for the poor.

With food stamps, low-income families pay the same market prices you and I pay. They are free to add cash to their food stamps and make just about any supermarket choice you and I can make. And you never hear of a supermarket refusing to take any more food stamp customers. In the market for medical care, however, low-income families are not allowed to supplement Medicaid’s fee with cash. If a nurse at a Minute Clinic accepts cash in addition to Medicaid’s fee, she would probably be committing a criminal offense! So most walk-in clinics don’t accept Medicaid patients (despite the fact that the care is convenient, low-cost and high-quality) and the patients must endure long waits instead at community health centers and the emergency rooms of safety net hospitals.

With ObamaCare it’s going to be déjà vu all over again. We are about to see a huge increase in the demand for care, but no increase in the number of physicians available to deliver it. As higher income patients pull doctors out of mainstream medicine and into the realm of concierge practice, the shortages will get increasingly severe and the waiting times will grow.

What will happen to the newly insured? About half of them will enroll in Medicaid and the other half will acquire insurance in the health insurance exchanges ― in most cases with taxpayer subsidies. But pressure to keep premiums down is forcing the carriers to offer narrow networks that promise below-market fees to providers. In fact, early indications are that many of the exchange plans are little more than “Medicaid Plus.”

Massachusetts is a likely precedent for what is about to happen. In that state, the newly insured are in subsidized plans that pay only about 10% more than what Medicaid pays doctors. And early indications are that people in these subsidized plans have less access to care than patients on Medicaid.

And what will people on the left say when these things happen. They will blame the bad outcomes on greed, selfishness, avarice… ― on anything other than their own inability to accept reality.

Comments (24)

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  1. Roger Waters says:


    Very good article, and your analogies to Medicaid and Medicare are “spot on,” having been in the position of making this choice as a clinician.

    What may not be as clear, however, is the assertion “…get more care and better care.” Given the way we practice medicine in this country, you would certainly get more care. However, due in part to variations in clinical practice patterns, more care does not always equate to better care. In fact, some studies have shown the more volume of certain kinds of care the lower the care. Yes, that is not always true, especially where greater volume means greater experience. But we really need to reduce practice variation in this country and get better at evidence based medicine (and not “evidence-based guidelines” which are consensus standards that are obsolete the day after they are published); IMHO

    • James R Chaillet, JR. MD says:

      You are correct that more care does not equal better care. HOwever, in a concierge practice it is likely the physician will offer better care not more. By which I mean the physician will be able to act more as a consultant to the patient and advise the patient as to what care – medications, procedures, other specialists and the like – makes sense and what care doesn’t make sense.

      In the current environment for most primary care physicians there is neither the time nor the financial incentive to be a true advisor or consultant to the patient.

      • Chris says:

        Right. Most concierge practices here in New York work like gym memberships. You pay a monthly fee and get to use them as much as you want.

        It’s in the doctor’s best interest to give you the right amount of care, because he’s not getting a co-pay every time you show up.

        And he’s going to lose you as a customer if he doesn’t do a good job.

        I hate common-sense. It’s too easy for liberals to attack using big words and Ivey-League University research done by mindless drones who got in because their dad went there.

    • Wanda J. Jones says:

      Doctor, I believe it is a dangerous time bomb that Medicare is planning to be the fount of evidence-based guidelines. it would be good to have practicing physicians be a bulwark against these, as they will be obsolete the day they are published.

      Perhaps the checklist movement, which includes optional steps, may fill some need for consistency without having the heavy weight of forced regulation on it.

      Hang in there…

      Wanda Jones

  2. Joe Barnett says:

    Market prices provide essential information that would otherwise be difficult or impossible to obtain. That’s why government bureaucracies are so inefficient. They don’t have the information necessary to improve their operations.

  3. Perry Williams says:

    You are describing precisely what is going to happen in this country with Obamacare. What most people don’t realize is that primary care physicians (while they make decent money) do not do what they do because they want to make a lot of money. When you break down the fee per hour, it is really pretty small considering the multitude of tasks they perform. With government mandates on EHR, coding and various other regulations, it is not going to be profitable to continue in private practice. Therefore, most will either become employed by large entities or engage in concierge medicine to stay afloat.

  4. Devon Herrick says:

    Americans have become accustomed to not having to reach for their wallets when they seek medical care. As implausible as it sounds, this is not good for the health care sector or for patients. As Joe points out, prices signify the value of a given service. Prices also encourage efficiency through price competition.

    Prices are used to ration goods and services in most other sectors of the economy. Economics posits that if prices are set to zero, there will be a shortage of goods provided at that price. If the government forces health care providers to accept prices lower than the market price, many patients will not get the care they need. However, if government is a sole payer, it can dictate which services its willing to pay for. It is also able to ration care by limiting equipment to reduce the number of services provided.

    Most economist believe the price system (i.e. the market system) is the most efficient way to allocate goods and services. Medical care has largely been insulated from these forces. Patients miss out on beneficial aspects of price competition because they don’t control more of the resources they we all ultimately pay.

    • Wanda J. Jones says:

      We are in the early stages of a macro experiment where the economics of medical care are being skewed. The effect will be gradual and diffuse, until it becomes seriously deficient, to the extent of backing up production of physicians from medical schools, so less qualified people are accepted. (Almost at 1 applicant per place, now.) We all should think of a monitoring and reporting system that tracks the changes in the healthcare system from the advent of Obamacare, through its various effects. It is really past time to do outcomes studies on the work of regulators and legislators. There are many deluded people who choose to ignore the poor work of legislators and bureaucrats so say with confidence: “We should just go straight into single payer.” What? And give those incompetents even more power?

      Wanda Jones, President
      New Century Healthcare Institute.

  5. Andrew Thorby says:

    As always an interesting article with excellent points. There is little question that the pricing mechanism within the free market is the most efficient means for allocating scarce resources yet devised. That said there are complications to that when applied to healthcare.

    Firstly, the assumption that there will be a dramatic increase in aggregate demand ignores the fact that we already socialized healthcare by passing EMTALA. Unfortunately we turned the nation’s emergency departments into “free” clinics when doing so and conveniently forgot to fund the treatment mandate. Secondly, and equally unfortunately, conditions like an upper respiratory infection that could have been treated for a $60 office visit are instead allowed to go untreated until they turn into pneumonia and then we have a $1,200 unpaid ED visit. People don’t magically get better because they can’t afford to see a physician. They just end up waiting way too late and seeking care in the most expensive setting possible.

    Either we repeal EMTALA and let the uninsured die on the streets, create a two tiered system where care is rationed in the public delivery system, or cover the cost of care for those that cannot pay for it themselves. There is no fourth choice. The ACA opted for the third choice because the GOP wouldn’t support the second and nobody seriously thinks we should let uninsured kids die on the streets. One can argue with the selected mechanism but not the economic logic.

    It’s OK to be against something like the ACA but only if you have actionable alternatives that make sense. I like the idea of vouchers instead expanded Medicaid and would have liked to see more details on how this might work. We might not have too few physicians however we definitely have too few PCPs for an industry moving toward population health management.

    • Tommy says:

      Good points. I also haven’t really seen good alternative solutions thrown out by the GOP.

    • Wanda J. Jones says:

      You are right about EMTALA: It has trained people to consume care that they can consider “free.” And yet these are candidates for Obamacare solutions that require them to apply, to select a plan, to manage the paperwork, and to comply with all the rules about where to go other than the ER. Obamacare might go faster if EMTALA were repealed. Or if the law permitted the ER to bill a patient it considered to be there for purely primary care=-=no emergency.

      The public does not know how this law distorts hospital prices.

      Wanda Jones

  6. Timmy says:

    I had decent experiences at the Minute Clinics and no “surprise” costs that you would get in a doctor’s visit or, of course, a hospital visit.

  7. Vicki says:

    Excellent post.

  8. Greg Scandlen says:

    There is an adjunct to this in Obamacare. That is, that people should only have to pay what they can afford to pay (as measured by the government). So there will be no “prices” for buying health insurance, there will only be a consumption fee based on a sliding percentage of income.

    Applying the same reasoning to other sectors would lead to a very curious world — everyone gets the same house, but the poor pay 5% of their income while the rich pay 50% of their income. Or bread, or movie tickets, or dry cleaning — why should the poor pay the same prices as the rich?!

    • Allan (formerly Al) says:

      Price discrimination I believe disliked by economists is a partial way of voluntarily leveling out the playing field in health care. Years ago it was done quite frequently. The frequency generally made the additional cost for the well off minor. The one on one decision making process with regard to cost also made the gap to be filled smaller. Since everything was voluntary I doubt many were deeply unhappy about the process.

  9. Marcy Zwelling says:

    Thank you for this.

  10. steve says:

    Gotta love this. We docs should be paid more for everything we do. This is the key to reducing health care spending.


  11. Rich Osness says:

    Good illustration of the value of prices. Two thoughts.

    I don’t think the right is much, if any, better. I am thinking of the drive to “repeal and replace”. How about just repeal and then start looking for other programs messing up medical care to repeal? I have a list.

    One of the neat things about this country once was that we didn’t let people “die in the streets”. If all government programs for the poor were ended I don’t think it would happen now. Governments let people die. (The FDA holding up drug approval.) People don’t.

    Any government program is corrupt at it’s inception or will soon become so. Food stamps are an excellent illustration. That program is a national disgrace and should hardly be held out as anything but a bad example.

  12. Dr. Mike says:

    Concierge is not always more expensive – it depends on which type of insurance policy you have to go along with it. Many so called “Cadillac” insurance policies have much higher premiums than what a person would pay for a HDHP/HSA + Concierge fee. In this case the person is paying less to get better care. Some Concierge plans are rather affordable – $80/mo or even less. Our local FQHC offers a concierge option…

  13. Allan (formerly Al) says:

    @Andrew:”We might not have too few physicians however we definitely have too few PCPs”

    You just reiterated John G’s underlying point.

    Additionally you created three choices of health care systems when there are a lot more so called choices, but the truth is there are only two.

    Market based solutions and non market based solutions.

    The rest are hybrids. The ACA is a hybrid created by using different brands of Lego’s that don’t fit together and is controlled by anti market people that are more interested in power than in health care.

  14. Charlie Bond says:

    Hi John,
    This article is only made possible because we have no cost-based pricing in health care. Were the wonks to start singing the same chorus, with perhaps the addition of a few ivory tower sopranos, this country might begin to listen and insist that pricing be uniform, transparent and rooted in the fundamental market realities of cost plus reasonable mark-up. That’s how we, as an economy, generally agree to pay for virtually everything else.
    If we believe that a “bubble” is defined as a sector of the economy not tethered to reality, health care is by far the largest bubble in history. And when it pops, we will all be in it.

  15. Clairetta Anderson says:

    Folks, food stamps are of the by age. No one uses them anymore. We have EBT cards now. It was decided to use these rather than food stamps to help us low income people to not have to be embarrassed at check out. It also stopped paper being delivered to homes.

    They had a place, on the back of the book, where the recipient had to sign it. This way, supposedly, people who were not on food stamps could not use them. That, of course, was a complete failure.

    To say that food stamps, themselves, were a failure, is simply not true as they put food on the tables of the less fortunate of our citizens, who, without it being their fault, had to have them to feed their children and themselves.

    Now, about this Obamacare, I discovered it is not going to be any benefit for my daughter, who, desperately, needs health care. She and her husband live on less than $1200 a month. He is a taxi driver. She is a student and unemployed. Many times we have discussed how she is suffering due to not being able to see a Dr.

    Two years ago, she was refused life-saving surgery for four days because they didn’t have $1100 to pay up front. She was made to do without food or water those four days. It was only when a friend called a hospital executive that she was finally allowed to have her surgery.

    From that point, again, she could not follow up to see her physician.

    Where she lives, in N.C., Medicaid is not being expanded to cover low income adults. According to what I have read, so far, there aren’t any programs they can afford. So she still won’t be any better off than she is now.

    I do not see where Obamacare is going to benefit those who truly need it. Where will this all end?

    I believe the insurance companies will figure out a way to charge more and more as time goes by. They will, in the end, still be the big time winners while the low income American citizens will be the losers.

    In other words, nothing will change for them.