The Best Health Care Plans

That is eminently sensible, except that doctors may have no idea how much the services they offer will cost the patient or his insurer, because the answer depends on carrier-specific negotiations, the details of the patient's policy, and his prior covered expenses. Patients may not find out how much a treatment costs until months after they buy it, when they get an "explanation of benefits" in the mail. Even then the answser may not be final, because there is room for dispute about exactly what is covered. Furthermore, out-of-pocket costs may be negotiable, since hospitals are accustomed to receiving only partial payment of the bills they issue (and presumably inflate them with that in mind). The upshot is price signals that are late and faint, if not utterly obscured.

The major exceptions are medical services, such as dental care, vision correction, and plastic surgery, that consumers typically buy with their own money. You can easily get a price quote for a tooth implant, Lasik surgery, or a nose job. It is almost impossible to get a clear idea of how much an MRI or a tonsillectomy will cost. In my experience, such questions usually elicit blank stares, as if they've never been asked before. Imagine how well the car repair market would function if customers had no way of knowing how much a new transmission would cost until months after agreeing to buy one.

Obamacare, Lazear notes, compounds this problem by requiring people to buy more coverage than they would otherwise choose:

Health economists, notably Daniel Kessler at Stanford, have demonstrated that the failure by the consumer to pay for health care on the margin induces high and in many cases over usage. 

Plans that have low co-pays, first-dollar coverage, and insure routine predictable health care events induce high and excessive use of care.

By contrast, those like catastrophic care plans that do not insure the routine and cover only unpredictable high cost events induce consumers to behave more efficiently.

Banning such "substandard" plans makes no sense from a cost-control perspective. Last month I compared Obamacare's minimum coverage requirements to the federal ban on incandescent light bulbs, which likewise overrides consumers' assessments of their own interests. But while the light bulb requirement was defended in the name of efficiency, Obamacare mandates inefficiency.