Conservatives have lambasted President Obama for a press interview in which the president intimated that it is routine for money grubbing doctors to do unnecessary surgery to take advantage of a fee schedule.
President Obama was correct to note that the fee schedule published by the government or by an insurer has an immediate and direct effect on the services provided by doctors.
The fundamental flaw of all third party payment systems is that the person paying the bill is the one in charge.
The way an economy works is that people pay for things and get what they receive.
Medicare (and to a lesser extent insurance companies) publish fee schedules. As these third parties are the buyer, decisions will be made by the fee schedule.
This is not necessarily an evil. There may be times when the government wants to pay doctors for a service. For example, if the medical community was seeking to eradicate a disease, they could pay doctors to administer a vaccine.
In the vaccine example there is a clear public need and the government is paying doctors to fulfill that need.
Most health care decisions are driven by private needs. When a third party pays for private needs, they are likely to end up muffing things up.
If you really wanted the decisions to be made in the best interest of the patient; then you would redesign the health care funding system so that the patient was the buyer who negotiates with the doctor.
The Medical Savings Account is the one reform on the table that makes the patient the buyer.
Conservatives are wrong for framing the video below as an attack on doctors. In the video, Obama points out a fundamental flaw of all third party payment systems including the reform currently debated in Congress.