By Lee Wei Ling

MOST developed countries believe that the free market is the best system for allocating scarce commodities. The right price for such commodities, they believe, is best determined by allowing the forces of supply and demand to operate freely.

But a free market can work efficiently only if sellers and buyers have roughly equal knowledge about the commodities changing hands. Such a condition does not always exist. Medical care, especially, cannot be priced like any other commodity because the seller (the doctor) has much more information than the buyer (the patient).

The patient is therefore at the mercy of the doctor, not only in terms of what he is charged but also in terms of what he needs to 'buy'. For example, procedures that may be unnecessary, such as blood tests and radiological examinations, may be ordered by a doctor, and the patient would be in no position to refuse.

One could argue, of course, that patients can shop around to find doctors who would offer them the cheapest package. But this is impractical: Patients with urgent medical problems do not have time to shop around. Patients from foreign countries would want to get their medical problems attended to quickly so that they can return home. Moreover, patients are usually informed of the medical procedures they require only after consultation with a doctor. They do not know beforehand what they would require in order to shop around effectively. This, together with the time constraint, makes it impossible for most patients to make an informed choice among doctors.

Prior to 2006, the Singapore Medical Association (SMA) had a 'Guidelines on Fees' (GOF) for doctors in private practice. The GOF recommended a range of fees for various medical procedures. It was only a guideline, so doctors could deviate from the quoted fees if they wished. However, if they did so, they were expected to inform patients in advance.

This enabled patients to know what was the 'premium' they were expected to pay for the exceptionally superior treatment their doctors were promising, and they could decide for themselves whether they wished to pay that premium.

Sometimes, patients discovered they were charged much more than what was recommended in the GOF only after they received their bills. Some complained to the SMA as a result.

In such cases, the SMA would request the relevant doctor to justify the extra charge, and if there was no reasonable explanation, it would advise the doctor to refund the difference. This advice was also transmitted to the patient who complained. Most doctors who overcharged without good reason followed the SMA's advice and refunded the money. The guideline worked, functioning both as a moral and practical rubric.

In 2006, the SMA abandoned the GOF because it was encouraged to believe that the guidelines might contravene the Competition Act. Ironically, the purpose of the Competition Act was to protect consumers from being overcharged by allowing free-market forces to determine prices. And the GOF was designed precisely to protect patients from being overcharged by private medical specialists - always a possibility given the asymmetry of information between doctors and patients.

To abandon the GOF on the grounds that it is anti-competitive is so illogical that I wonder whether anyone in the Competition Commission of Singapore understood that medical fees cannot be determined by free-market forces. The abandonment of the GOF has made patients the easy prey of unscrupulous private specialists.

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