The Analytical Economist; July 1993; Scientific American Magazine; by Paul Wallich and Marguerite Holloway; 1 Page(s)

To traditional economists, the U.S. health care system looks as if it had been designed to produce market failure. Customers have relatively little information about the product they are buying and must rely largely on sellers for advice. Sellers are paid according to how many procedures they perform, regardless of their effectiveness.

The price consumers pay for services bears only a distant connection to the amount they use. The middle and upper classes effectively buy their health care in prepaid annual chunks, either directly or as part of their compensation at work; the elderly and the poor have theirs paid for out of tax revenues. In all cases, the sum at stake when people decide whether to see a doctor is only a small fraction of the actual cost.