Now you might say: Ah, but the fact that this patient looks so sick should be recorded on the day he shows up. The problem is that there might be a lot of things that are clear to a doctor’s instinct but hard to state precisely on an official form.

If you go in with strep throat, you walk out with a prescription for antibiotics 30 minutes later and it’s a cheap visit. If you go in with cancer, the cost is substantially higher.

The hospital looks at the average cost of treating that type and stage of cancer. You don’t get unnecessary procedures, and the doctor doesn’t have an incentive to cherry-pick patients.

The doctor scorecard keeps doctors from shoving each patient out the door, and you know exactly what the doctor was treating when something went wrong – if they have a high-risk patient, it impacts their score less when they die and more when they’re cured.

It leaves some questions unanswered, but it covers a lot of the problems with other payment methods (and creates new ones, I’m sure).

And yet, does this actually happen in the places in the US that pay flat rate? I think it doesn't, though I'm not sure. That's another thing worth looking at.

In theory, I can easily see ways that the law could prevent that. In most single-payer systems, for example, doctors neither get to choose which patients they'll treat, nor do they have to pay extra for medical procedures on those patients, so they don't even have the incentive to turn anyone away. But in China, there's even a concept of paying the doctor to keep you well – if you're sick, you don't pay until you get better, then you resume payment. I wonder how that stacks up.

I think I already covered this in my earlier comment, but I'll repeat the two key points relevant to this comment:

1. Private companies only risk losing those customers if they're significantly worse than other private companies. If all of them have similar levels of abuse of power, nobody will notice. Unless, of course, there's a public option that has a *different* level of abuse of power. So part of what you need to demonstrate is that a public option would necessarily have *more* abuse of power than the average level at private companies (I find that unlikely), and…

2. Since we're talking about a public *option* that would compete with private companies, you also need to demonstrated why that very incentive (loss of customers) that you say is sufficient to curb the problem in private companies, is insufficient when it comes to the public option.

Now, you try to do that by saying "whereas politicians can pass costs off to taxpayers generally", which brings me to point three (which I also made in my earlier comment):

3. The public option as proposed by Obama, in the House bill, and in the Senate HELP committee bill – that is, the universal consensus of all of the forms of this public option under consideration – would be financially segregated from the rest of government. It would have a separate budget of its own, and after an initial startup, would be self-supporting. If any of its costs were to be passed on to the taxpayer, that would have to be done very openly, through legislation transferring more money to the public option. It would be very transparent (and you could lobby against it). The public option could not pass on these costs to the taxpayer in some hidden non-obvious way.

>> I am inclined to believe that Professor Cutler is correct that we have too many of these elaborate expensive procedures, largely because we are overinsured. <<

Is it largely because we're overinsured, or is it largely because doctors and hospitals are effectively paid on commission, so they make more money the more expensive procedures they do?

For example, look at some places in the US that pay doctors and hospitals a flat rate (a doctor gets a fixed salary). Their patients are probably just as over- or under-insured as the rest of the country, so you could see what the influence of pay-per-procedure vs. flat rate is.

Have you looked at that? Have you weighed the relative effects of what you refer to as overinsurance, vs. the payment structure?

This is even more pertinent in context: We’re not talking about *replacing* private companies with the public option, we’re talking about a public *option* that would have a significant share of the market but would likely (at least at first) be well behind several of the private insurers. So it, too, would be competing with them, and if it suffers from disproportionate abuse of influence then some of the private companies would deliver better results for the money, and the public option would lose market share.

However, the public option, it seems to me, would probably suffer from this problem *less* than the private companies. It would be managed independently of the politicians unless it fell into crisis (the government does know how to set up mostly independent entities, like the Federal Reserve, and that’s the idea with the public option as well), yet it would still be governed by rules mandating much greater transparency than private companies. And if it did better than private companies – for this or any other reason – it would pressure them to do better so as not to lose customers to it.