In a privately run health care system, the opportunity cost for doctors of any time they spend not rendering services will vary according to the equipment and time they have available. It would appear that US doctors are paid depending on the treatments they provide and because the equipment they have available is often a fixed cost, in order to secure profit, the incentive is for doctors to overprescribe. This is not to say that they do this, such an assumption would be unfair. However if we were to embark upon a program to improve efficiency, we might employ more doctors per surgery in order to spread to fixed costs and decrease average total cost. Marginal cost is low, however potential marginal revenue can be quite high and thus the suggestion that doctors may be accused of providing unnecessary services in order to increase their pay (which as mentioned before is variable according to the number / type of service provided).
In the UK, the system is quite the reverse. Each region is given a budget and the responsibility to spend it according to the needs of the population. E.g. if there is a high propensity for COPD, then the necessary equipment would be prioritised over, say, a maternity ward (assuming here that COPD is high because of an older than average population, thus lower than average birth rates). The UK system is designed to ensure investing in equipment and distribution of spacialisations are in line with local variations. With regards to GPs (doctors), they are paid according to the number of patients on their register, not according to the quantity / complexity of procedures they undertake. Thus the salary of the GP is a fixed cost. Furthermore, in the UK the majority of healthcare is public and health organisations do not seek a profit. Incentive therefore lies in achieving the quality, innovation, productivity and performance targets set by the regulatory authorities. Meeting these would increase the budget for subsequent years, and targets are set such that year on year improvements are recognised. This gives health organisations who have a history of below average performance an incentive to provide better quality care because they are able to measure their progress and not feel consistently judged against their national peers.
In comparing the two systems at this high level, it appears that while a system that pays on a fee-for-service basis represents an incentive for doctors to provide excessive or unnecessary treatment in order to secure additional fees and thus higher revenue, focusing on quality and innovation ensures that resources are not wasted and patients receive the level of treatment they require. I would certainly be keen to investigate this further and do a comparative study of health care systems across the world.
