The third-party reimbursement model drives up medical costs because patients miss out on the price signals that in a normal market would cause them to seek less costly alternatives and avoid wasteful spending. Various types of cost-sharing approaches –co-payments, deductibles, tiered networks, consumer directed health plans– have been tried, but they have limited effectiveness. A major shortcoming is the assumption that patients actually want more health care services, just like they would presumably go wild in the Apple store or Nordstrom if you set them loose there with...
