More on the Insanity of the Medicare Payment System

I can’t move on from the previous post without noting a fascinating article in the weekend Wall Street Journal: “Assembling the Global Baby,” by Tamara Audi & Arlene Chang (December 11-12, 2010).

The article is about the international market of surrogate mothers. The first example is a Bulgarian woman living in Greece, who is about to deliver a baby from an anonymous European egg donor, whose father is Italian. The mother who raises the baby will be the Italian man’s infertile Italian wife.

The man who brought it all together is a Canadian who lives in California and started this business after a career in software. Other clients include a couple of gay men from Quebec (where, remember, the government guarantees “universal” access to health care that results in a shortage of primary-care doctors) whose baby will be born in India.

The list goes on. It all sound pretty complex to me. How can people figure out how much this service is worth without vast government or health-insurance bureaucracies?

Lo and behold, the WSJ journalists report a price of between $32,000 and $68,000. Somehow, I don’t think that the Canadian immigrant software entrepreneur who founded the service needed a report from the RWJ Foundation on “bundled payments” to figure out how much to charge.

As the report makes clear, the service requires a sort of legal arbitrage around various countries’ rules about donating eggs. I think that this is the future of health care: Every country will have increasingly useless health “systems” that satisfy the needs of government bureaucracies, but this will be countered by more medical tourism whereby entrepreneurs will satisfy the actual needs of real patients.

(I should add a disclaimer: I put my comment forward only to demonstrate that free markets result in easily observed transaction prices. This observation takes no stance on the ethics of the procedure, which results in the destruction of fertilized eggs.)