Austin Frakt at The Incidental Economist:

Let’s make a deal. You shell out just $500 and I’ll pick up the tab for any automobile you care to buy. I’d better protect myself a little, so the deal is only good for Honda, Toyota, and Hyundai. Are you going to get the base model Yaris ($14k)? I seriously doubt it. You’ll probably get something nicer, maybe a souped up Land Cruiser ($80k+). I’m going to pay an awful lot.

Having learned my lesson, let me make a smarter deal. I’ll give you $15k toward a car, any car on the planet. If you want something more expensive, you pay the difference.

Which deal will lead to more prudent shopping, less wasteful car spending? Which will incentivize the market to be more efficient and consumer friendly?

I can think of a few reasons why we don’t see the latter deal in health care, known as reference pricing. I bet you can too. But I’m not convinced those reasons outweigh all the problems we have with conventional copayments, akin to the first deal…

Dean Baker, Pundits’ Misconceptions About U.S. Health Care Costs Make Them More Anxious to Trim Benefits:

The United States pays more than twice as much per person for its health care as the average for other wealthy countries. If it paid the same amount as Germany, Canada, or any other wealthy country with comparable health care outcomes, most or all of the gap between taxes and benefits would disappear.

This enormous gap in expenditures is not associated with better care, it is the result of the fact that doctors, hospitals, medical equipment suppliers and other providers get paid far more in the United States than in other countries…

…It is hard to see why Medicare beneficiaries should feel guilty because the specialists who treat them can make $500,000-$600,000 a year. The more obvious response would be to force doctors and other providers to accept compensation that is more in line with world standards. (We could also give beneficiaries the option to buy into lower cost systems in other countries and split the savings.)

Of course the route of cutting payment to providers would mean confronting powerful interest groups. Many policy experts are reluctant to pursue this path.

UPDATE:  Dean Baker is a great analyst but I think his “$500-600k/year specialists” comment is over the top.  It has a “welfare queens driving Cadillacs” ring to it.  My guess is that doctors making >$500k/year are few and far between.  I’m more inclined to think the problem is overtesting and inflated costs for routine procedures.  Whatever the source, we do pay a heck of a lot more for our health care than in other advanced countries.  For example, Ezra Klein has a story of a $1206 toenail clipping and another on other inflated prices.  Related:  We got a bill from the lab for my son’s lead test a few weeks ago.  (It was just a routine test.)   The lab didn’t have our insurance info so they sent us a bill:  $89.  I sent them our insurance info.  The other day I received an updated bill.   They gave us an “insurance discount”.  NB:  According to the new bill our insurance hadn’t paid any of it, the lab just gave us a discount for belonging to the plan.  New bill amount:  $12.  How does that work?  They gave us an 86% discount just for belonging to the health plan?  That makes no sense unless the original $89 bill was a gouge – which it may well have been.  Something’s got to give.