Does fee-for-service medicine create incentives for “excessive care”? An  article in the New York Times says so. Massachusetts legislators are

working toward a plan that would encourage flat “global payments” to networks of providers for keeping patients well, replacing the fee-for-service system that creates incentives for excessive care by paying for each visit and procedure. …

[Massachusetts health reform in 2006] did little to slow the growth of health costs that already were among the highest in the nation. A state report last year found that per capita health spending in Massachusetts was 15 percent above the national average. And from 2007 to 2009, private health insurance premiums rose between 5 and 10 percent annually …

It’s not fee-for-service that creates incentives for excessive care. As John Goodman explains, fee-for-service works fine for lawyers and restaurants, as well as countless other services. The problem is that, as Goodman writes:

what is it that makes health care different? There are three things: (1) third-party payment of the bill, (2) rationing by time and not money, and (3) an inability on the part of providers to repackage and reprice their services.

Bottom line: The fundamental problem in health care is not that we are using too much of one payment mechanism and too little of another. The problem is that the person who benefits from the service is not the same as the person who pays the bill.

Read his whole post: Is Fee-for-Service Payment the Problem?