Recently, CMS introduced its latest payment reform proposal, titled the “Primary Care Initiative.” This is the latest in a long line of federal schemes to try to rein in the cost of medical care and introduce appropriate incentives.
Sadly, despite its many efforts, CMS and federal lawmakers have continued to miss the elephant in the room: Regardless of the model CMS imposes, whenever third parties manage transactions, as health insurance companies and governments currently do throughout our health-care system, many normal market forces are hopelessly distorted.
This is because third-party transactions can never replicate the normal free-market incentives that occur viscerally and free of charge when a patient controls the resources devoted to his or her own care.
Many of the principal problems with the current health-care system started in the 1960s, when health insurance and then government became the primary payers for medical services. After the advent of Medicare, there was a veritable price explosion, as providers took advantage of the blank check that had been written by CMS. Patients were no longer incentivized to pay close attention to the cost of care and in most cases, they stopped caring about health-care prices altogether.