In recent posts I've explained the folly of Medicare's reliance on a predetermined fee schedule. Is there a better way?

Here’s one idea, which I develop at length in my book Priceless: Curing the Healthcare Crisis and elsewhere.[1] Instead of having Medicare fix millions of prices for predetermined packages of care, we should allow providers the opportunity to produce better care and cheaper care by repackaging and repricing their services. Everyone on the provider side should be encouraged to make Medicare a better offer.

Medicare should accept these offers provided that (1) the total cost to government does not increase, (2) patient quality of care does not decrease, and (3) the provider proposes a reasonable method of assuring that (1) and (2) have been satisfied.

Instead of maximizing against payment formulas, doctors and hospitals would be encouraged to discover more efficient ways of providing care. They would be able to make more money for themselves as long as they save taxpayers money and patients don’t suffer.

Notes:

1. John C. Goodman, “Markets and Medicare,” Wall Street Journal, February 23, 2008, http://online.wsj.com/article/SB120373015283387491.html; John C. Goodman, “A Framework for Medicare Reform,” National Center for Policy Analysis, Policy Report No. 315, September 2008, http://www.ncpa.org/pdfs/st315.pdf; John C. Goodman, “Reforming Medicare the Right Way,” John Goodman's Health Policy Blog, June 13, 2011, http://healthblog.ncpa.org/the-only-way/.

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