Fee guidelines still effective in keeping a lid on costs

Assistant Professor Chiu Yu Ko's commentary ("Fee guidelines for healthcare helpful, but won't curb costs"; Nov 9) provided some valuable insight.

However, I have a different take.

On the issue of search friction, Prof Chiu said that if consumers think every store charges the same price under a regime of fee guidelines, they will figure there is no point in visiting another store.

I would argue that consumers treat healthcare very differently from most other goods.

In addition to studying prices, many give special consideration to the quality of care that they will receive, in terms of different diagnostic methods, treatments and medications.

The fact that many patients actively seek a second opinion following a difficult diagnosis or prognosis demonstrates their willingness and ability to overcome search friction when their well-being is at stake.

Consumers treat healthcare very differently from most other goods.

In addition to studying prices, many give special consideration to the quality of care that they will receive, in terms of different diagnostic methods, treatments and medications.

Second, regarding the "hold-up problem", Prof Chiu was correct to point out that patients are heavily dependent on doctors to provide them with the information necessary to make comparisons and arrive at a decision.

However, medical practitioners have an obligation to prioritise the welfare of their patients over their own profit motive, by setting fair prices and providing full disclosure of any possible alternatives.

In any case, individuals see their health as a matter of grave importance, making it more likely that they will make the extra effort to research their condition and the options available to them.

This helps to bridge their knowledge gap.

Third, with sufficiently strong fee guidelines, costs can be kept at a reasonable level, rather than reverting to monopoly pricing or tacit collusion, as Prof Chiu suggests.

The key is ample enforcement from the authorities.

In conclusion, if Prof Chiu asserts that fee guidelines can be helpful in highlighting excessive bills, surely, this justifies their use as one of many tools to curb healthcare costs.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on November 17, 2016, with the headline 'Fee guidelines still effective in keeping a lid on costs'. Print Edition | Subscribe