I'm skeptical of blaming middlemen because middlemen (in our case insurance companies) perform a service for both sellers and buyers: they take on the search costs of connecting would-be buyers and sellers.

Let's say that patients have the ability for shop for their own doctor (IOW sellers). They then have to take the time to research what kind of specialist they need, the doctor's performance record, and the price of hiring that specialist. Searching for the right specialist comes at the cost of the next-highest valued use of the patient's time. In addition, if a doctor wants to stay in business, she'll need to find patients. The costs of the doctor searching for patients (IOW buyers) is the next-highest valued use of her time.

Insurance companies (albeit far from perfect) take on the search costs of finding doctors for patients and vice versa. Of course insurance companies aren't benevolent (in the Smithian sense), but middlemen do not have to be benevolent. They simply have to be alert to entrepreneurial opportunities.

Before we call to "eliminate the middleman," consider the costs of doing so and compare it the alternatives.

This is by no means an endorsement of the status quo. I support regulatory reforms to increase competition in the healthcare market and lower costs for consumers. As mentioned by Liam Sigaud, there are many regulations (especially ones on insurance companies) that contribute to the rising costs of healthcare in the U.S.

Expand full comment

Definitely need to lose the middlemen in medicine.

Expand full comment

Typical of healthcare - conduct a study showing significant ramifications on measuring care quality and steering health policy, bury it behind a paywall to limit public availability.

Expand full comment