Now that The One has been elected, we’re facing the prospect–again–of the government taking over all of health care. The problem is, socializing medicine will not solve one of the most fundamental problems with the current healthcare system–costs.

There is very little ability for consumers to cost-compare in the current system. Think about it… when you get your oil changed, you know the cost up front and can shop around. When you buy a new pair of shoes you know the cost up front and can shop around. When you buy a sack of potatoes you know the cost up front and can shop around. But when you go to the doctor you most often don’t know the cost up front, and would have a lot of trouble shopping around.

Here’s a quick (and very simplified) example: In a fictional city, there’s a doctor, say, Dr. Adams, who charges $150 for a typical office visit. In the medical office building next door, there’s Dr. Brooks, who has qualifications equal to Dr. Adams, who charges $100 for a typical office visit. Now, let’s say that the Acme Health Plan (Wile E. Coyote, CEO) has 10 members, all of whom visit Dr. Adams. And the Road Runner Health Plan also has 10 members, all of whom use Dr. Brooks. Assume further that both health plans have identical costs, benefits, etc. Which health plan do you think will have the lower premiums?

However, now we run into the problem. Dr. Adams’ patients have no easy way to determine what Dr. Brooks charges, and even if they did, they probably don’t understand the benefit–specifically, lower premiums–that they’d get if they started visiting Dr. Brooks. If they did, they’d probably switch, and that might even get Dr. Adams to lower his fees.

Proponents of socialized medicine say that their system will reduce costs. However, there’s no evidence of that. What happens is that an insurance company establishes what is usually called a “reasonable and customary” (R&C) fee, and that’s what the doctor is paid. It doesn’t matter if the doctor bills the plan $10,000 for a procedure that the R&C fee is $100 for; he’s gonna get paid $100 and no more. And, most doctors sign agreements with insurance companies not to bill the patient for anything over R&C (that’s what your insurance company means when they talk about “participating” or “in-network” doctors). So Dr. Fair and Dr. Greedy, who both practice in Fictitious Town, both get paid the same amount by the Acme Health Plan for the same procedure. In short, what the proponents of socialized medicine say will reduce costs is already in place. Have costs gone down?

What we need is a two-step process to introduce market forces into health care. Step 1 is to make it easy and convenient for patients to determine which doctor is the best value… which one charges less for a standard office visit, or, alternatively, which doctor gives the most for the fee she charges. Step 2 is educating the consumer (patient) that visiting doctors that give better value for each dollar helps keep their premiums low (this shouldn’t be a hard sell). This process has become known as “Transparency,” after the idea of making it clear to the consumer (patient) just how much the doctor is charging for something.

Once both steps are done, the doctor that charges $200 for an office visit will find that he’s losing patients to the doctor that charges $100 for the identical office visit. Or, the doctor who spends 20 minutes with the patient on a $100 office visit will pick up patients from the one that only spends 15 minutes with the patient for his $100.

If you don’t think this will work, just consider what you do when you shop for anything else. You generally either choose solely based on price or, if one store (restaurant, hotel, gas station) is much friendlier than another, you don’t mind paying a little extra for those little extra touches. The important part is, you have made an informed choice to pay more for what you feel is more value. You can’t do that in the current health care system, because there’s no way to compare.

Let people shop for a doctor the same way they shop for the latest Toby Keith CD, and costs will go down.

For more information, see here, here, and here (this one is a .PDF file).