Yesterday I sent this letter to The Economist in response to this leader:

SIR -- In your leader on American health care ("What a waste", October 17th) you opine that the "worst flaw in the Finance Committee's bill is its failure to address the ["fee-for-service"] way that providers of health care are paid."

You misdiagnose the problem. Every day, millions of "fee-for-service" transactions occur for hair cuts, auto repairs, and other services, and all of these markets function reasonbly well. Health care is different, however, because the "fee-for-service" is paid by a third party such as Medicare or a health insurance company. Hence, both buyers and sellers are, as you say, "unconstrained either by medical necessity or value for money." With neither side of the health care market directly bearing the cost of the services provided, both are willing to exchange the medical equivalent of filet mignon when they'd exchange only a sirloin in the absence of a third party payer.

E. Frank Stephenson
Professor of Economics
Berry College
Rome, Ga.

Don Boudreaux makes the same point in this column; see also Vernon Smith's piece in the WSJ. The steak metaphor comes from Russ Roberts.