Can consumer choice reward quality and economy? Towards a test of economic competition

Article Abstract:

Thomas Rice, Lyle Nelson and David C. Colby failed to prove that Medicare beneficiaries are unresponsive to the unit prices charged by physicians and that increased economic competition is therefore unlikely to curtail rising Medicare costs. The three overemphasized unit price and ignored the questions that must be asked if competition is to be properly evaluated such as whether consumers will opt for less expensive health care if cost-awareness is mandatory. Trimming the number of Medigap offerings would help the Health Care Financing Administration to control costs.

Rice, Thomas, Nelson, Lyle, Colby, David C.

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Response to Richard Kronick

Article Abstract:

Richard Kronick, in trying to refute the argument that economic competition is unlikely to control Medicare costs, failed to explain away the finding that more than 1,600 surveyed Medicare recipients paid no attention to unit price when changing physicians. In addition, Kronick's criticism of unit price as a test of competition ignored the importance of preference for low-cost physicians as a means of containing Medicare expenses. Kronick gave little reason for thinking that competition will be more effective than a supply-side approach to cost containment.

Supply-side economics, Kronick, Richard

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Will Medicare beneficiaries switch physicians? A test of economic competition

Article Abstract:

A survey of Medicare beneficiaries indicated that few change physicians due to the price of care and that increased economic competition will therefore do little to reduce Medicare-related expenses. Advocates of the free market have argued that more competition among physicians will help contain rising costs. However, the Nov, 1988 survey of 1,647 Medicare recipients found that fewer than 1/2 of one percent had switched doctors for economic reasons during the preceding year.

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