Socialized medicine and the "principal-agent" problem.

Richard Fernandez (read the whole thing)

Britain’s Dr George Hibbert was working as a public health care provider. You might think he was working for his patients, but that would not be strictly correct. He was more precisely working for the government, and that is not quite the same thing.

A leading psychiatrist faces extraordinary claims he deliberately misdiagnosed parents with mental disorders – decisions which meant their children were taken away from them …

He was paid hundreds of thousands of pounds by social services for the reports which tore children from their parents – many of them young mothers. He is now being investigated over shocking suggestions he distorted the assessments to fit the view of social services.

If true, it is a textbook example of what economists call the principal-agent problem, which is a fancy way of describing a situation when someone (the agent) who is supposed to be working for you (the principal) is really working for someone else.

...

The question is who Dr. Hibbert was really working for. It is an issue of more than academic interest since it turns out there was a demand by government agencies to supply children for adoptions. One way to meet that need was to take away children from unworthy parents. But first they had to be unworthy. And this is where assessments come in.

The allegation is that the doctor could make more money satisfying the agenda of the authorities than serving the needs of his patients. In the language of economists, the agent’s duty to his patients would be “costly to observe” since it would mean a lost “sale” to the government. Lawyers for the patients say, “we believe this distressing case may be the tip of a very big iceberg.”

This is a very big problem with socialized medicine. The patient may think he is the principal, but the doctor is really working for the government who's paying the bill and calling the tune. The relationship between patient and doctor today is one of absolute trust. If my doctor tells me that I have a disease that is incurable I may ask for a second opinion, but I am confident that he’s not deliberately lying to me because I’m the one paying him. When the doctor stops working for me and starts working for the government eventually he’s going to get told by the government that my disease is “incurable” because a “death panel” has determined that the medical budget won’t support my care. And he’s going to tell me that I have a terminal disease, take a pain pill, and go away.

When you take control of the agent what recourse is the principal left with?

Indeed.