Is Fee-For-Service the Problem?

Almost everyone involved in health care will tell you that the greatest problem in our system is that we pay on a fee-for-service basis. Almost everyone is wrong.

The logic is obvious – paying a fee for a service encourages providers to get more fees by providing more services. Ergo, we consume too much and spend too much. Ipso facto, getting rid of fee-for-service would result in fewer services and less spending. Case closed.

Well, maybe not.

In fact, almost everything we do in the course of our economic lives, we do on a fee-for-service basis. When we go to the movies, get our oil changed, have our roof replaced, buy a computer, get a haircut, hire a baby sitter, buy a steak dinner, get someone to do our taxes or defend us in a suit, we do it on a fee-for-service basis. None of it is particularly inflationary.

The graph below shows the CPI broken into components. Food, housing transportation, apparel – all are paid fee-for-service and all have a lower rate of inflation than health care.

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3 Responses to Is Fee-For-Service the Problem?

  1. Fee for service is the only fair way to go FOR ANYTHING. I know you know this, nothing personal. The problem is third party payor. There’s a doctor not too far from here who’ll treat you (for cash only, no credit cards, nothing) An office call is 25 bucks. He has some sample drugs but normally writes prescriptions. He may be the best doctor in the county but, doesn’t like interference in how he runs his practice.

    That’s what having insurance for normal maintenance health care has done to us.


    • a12iggymom says:

      WOW! Wish I lived near you, I pay CASH for my office visits, NO CO-PAY! (where medical insurance went straight to hell on the fast track) of $82.50. We need to get government OUt of healthcare and most insurance companies too for that matter! Pay-for-service til you meet a HIGH deductable, say $5000 a year then insurance would kick in and help pay a percentage, it used to be 80%…for straticofic illness or accinents ect, Major Medical would cover you at 80% but still leave some responsability on the individual…this horse crap notion that insurance should cover very sniffle start with HMO’s and snow balled…it is now so out of control. We also should be able to go across state lines to get the cooverage we desire…not just for medical but all insurances, home, auto ect…


      • I haven’t done any research (don’t have a clue where to even start) but I suspect there quite a few scattered around and I am very sure that there will be more as the horsemanure from Washington kicks in.

        I haven’t talked to him for a couple of years but he said then he was making a decent living, which I believe, he even lives on the lake, which is pricey out here.

        For contrast, a office call in town is about $125 last I heard.

        You are absolutely correct on all points.


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