Who pays

One of the big distortions in the discussion of things such as medical care involves the matter of who really pays. Better care, pay less: Some communities find a way illustrates this confusion. The example provides is that of a warranty and the error is in the idea that whoever provides the warranty pays for warranty service. It is an error because any warranty is a simple insurance policy. Anyone who warrants a service or product must include the cost of that insurance in their fees. This sort of business can be a lucrative business which is why nearly every electronics retailer will offer to double a manufacturer’s warranty for a fee.

The basic thesis of this article is also one being bandied about in the current health care debate. The idea is that health care costs can be improved while improving service. This is a necessary thesis for one side of the debate because it is the only way to be able to assure everyone of continuing quality of care while still promising to reduce cost. Trying to rationalize this these is where distortions like the warranty being free come in.

The real issue, about which the article provides several examples, is that of how to achieve increased efficiency and productivity in medical care. That leads to matters of incentives. That, in turn, leads to matters of fostering innovation in both product and management. When the chain gets to management, the argument tends to get dishonest because history and experience start to speak against idealism and fantasy.

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