The efficiency model has proven very effective, and as a result has been adopted by more and more other localities. And, as Leonhardt indicated (in the article Yglesias mentioned in his article), there are also examples in the health care industry who employ a variation of the efficiency model to great effect — places like Mayo Clinic and Cleveland Clinic. My understanding is that the VA health care system has worked hard to transition to a similar model. And it was working very well until the wars in Iraq and Afghanistan dramatically increased their patient load. Unfortunately, their funding didn’t increase proportionately, so now the VA system has again come under fire.

Anyway, these revelations have changed the way I think about the health care problem. It seems to me that unless the business model is modified no other reform — including a public option — is likely to work.

Under the real market based system, the customer makes the choices, determines the level of quality and quantity, seeks out competitive prices and has the incentive to do everything possible to save money.

This type of healthcare system was proposed by the Bush administration under HSAs (health savings accounts) and created controversy because the Democrats refused to even come to the table if this was an option. Liberals realized that if the public ever was empowered by having the ability to make their own decisions on healthcare, Democrats would loose the issue forever.

Contrast that with office-based. Imagine Doctor A who is capable, well-liked, stays late during flu season to make sure everyone is seen, tries to see last-minute problems and walk-ins, and manages problems and refers appropriately. Imagine Doctor B who is rude, doesn't listen to patients, sends anything complicated to a specialist because he doesn't want to deal with it, never stays late and refuses to see more than 25 patients a day since that is the national average.

Which of these doctors deserves to be reimbursed better? How can you justify giving them the same salary? Currently Doctor A will do better since more patients will want to go to him, plus he has increased availability and sees more patients. This is where market forces work in medicine. Putting Doctor A and Doctor B on the same salary rewards the bad doctor and punishes the good doctor. The end result is Doctor A will become more like Doctor B since you have removed his incentive not to be.