Chapter 47 Question ○41

Why is it that the power plant is willing to hire high-priced external lawyers for a long time, even though it only costs half the price to hire an internal lawyer? In upstate New York, a home appliance company pays a Chicago law firm $1 million a year in exchange for the full-time services of its senior lawyers.The law firm paid the lawyer no more than half a million dollars a year.Why didn't the power plant just hire this lawyer and save half a million dollars? Like all government-regulated companies, electric companies employ large permanent staff of lawyers to handle their own cases before regulators step in.Since most of these cases are routine, in-house lawyers can usually be hired with a salary of less than US$100,000 a year.But the power plant also has a small number of highly risky legal battles.For these kinds of cases, small differences in the legal talent of the lawyers handling them can mean millions of dollars a year in fluctuations in shareholder dividends.Therefore, the power plant obviously needs to hire the top lawyers to handle such cases, even if they pay high salaries.

But hiring in-house lawyers at an annual salary of half a million dollars, those in-house lawyers who earn less will inevitably demand higher salaries.Considering the cost of responding to these requests, it might be more cost-effective to hire an outside consultant for $1 million. As a final example in this chapter, the payment for services of professionals may affect the advice they provide. If the patient has knee pain, if he uses traditional health insurance, compared with HMO insurance (Health Maintenance Organizations), that is, Yuekang Maintenance Organization is one of the common forms of medical insurance in the United States, and it is a type of managed medical care.The advantage is that the cost is cheap, and it is actually a kind of medical insurance for low- and middle-income groups.It is more likely that the doctor ordered him to undergo an MRI (magnetic resonance imaging).Why is this?

Under a traditional health insurance contract, doctors are paid according to a predetermined list of expenses for each service they provide to patients.The more services they provide, the more money they get. In a standard HMO, by contrast, physicians charge each patient a flat annual fee while committing to providing services that are in the patient's best interests.Under an HMO contract, doctors get paid the same no matter how many services a patient receives. There is no doubt that, regardless of the contract under which they work, most physicians will do their best to meet the needs of their patients according to their condition.But there will always be some ambiguous cases.For example, if a patient suffers from knee pain, simply making a brace for the knee joint and resting for a few weeks can significantly improve it.But expensive MRI examinations may reveal structural damage that urgently requires surgery.

In this case, HMO physicians have to bear the cost of the examination (if surgery is really needed, the cost of surgery must also be borne by the doctor), so they must prefer a wait-and-see strategy.Physicians working under traditional health insurance contracts, however, have a significantly stronger incentive to get an MRI right away when they encounter the same patients. A basic principle of a competitive labor market: Employee wages are roughly proportional to the value they create for the employer above the breakeven point. In the labor market, the salary for a particular job depends on its characteristics.

Professionals are paid for their services and may affect the advice they provide.