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September 15, 2009

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Eminence Grise

Looks like we know one place where that $12.2 trillion in household net worth went:

http://www.calculatedriskblog.com/2009/09/fed-household-net-worth-off-122.html

TM Lutas

I would take that bet and you would lose. The care is different. We have mispriced compensation between specialists and primary care physicians since at least 1965 with the Medicare program's pricing dominance. This has led to incentives for more expensive specialists and fewer primary care doctors (who coordinate care and do important work in keeping costs down). Ten years ago, we still had a significant chunk of doctors who made their career choices under the old regime so the problem wasn't quite as bad.

When bad incentives are put in by government fiat in a partially socialist system, there is still a great deal of inertia. People don't immediately take full advantage of the mispricing. As time goes on, that changes and all the players from doctors to hospital administrators to insurance companies to lawyers modify their behavior. The care given changes as the old system is forgotten and institutional memory turns over.

Today you will have more defensive medicine (grey area tests that simply wouldn't be run under a more sane legal regime) and you have a worse shortage of primary care (increasing the chances of expensive, uncoordinated or poorly coordinated care), and the ongoing deterioration of medical ethics will lead to different, and more expensive, choices being made.

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