One part of the problem is that prosthetists are paid a flat rate for providing a leg/arm/whatever based on a set of standardized product encodings for the part

One part of the problem is that prosthetists are paid a flat rate for providing a leg/arm/whatever based on a set of standardized product encodings for the parts/labor. This leads to two incentives: 1. Pick the cheapest components that meet the category requirements. So, in each reimbursement category (micro-controller knee, etc.), its a race to the bottom as there's a financial incentive to choose the least expensive knee rather than the best one. Component providers race to reduce costs once a new category is assigned a reimbursement code (another problem altogether). 2. Pick the cheapest patients. An active person like me is much more demanding than a demented old guy in a nursing home. I make appointments to get things fixed if there's something wrong and demand a functional, comfortable leg. The old guy gets a leg because Medicare pays for it even though he may never actually walk more than a few feet on it! This is actually a common scenario. So, the old guy accepts whatever leg he's given and doesn't complain. Furthermore, since the amount reimbursed for labor increases with the complexity of the system (term used for bundle of parts that make up leg/arm), there's an incentive to provide too good of a system for a patient's needs (people in wheelchair don't need a $40K leg). Luckily, my prosthetist doesn't optimize for short-term financial gain. However, I'm told that practices like this are common. So, the insurance companies protect themselves in coarse-grained ways, often at the detriment of patients with real needs. I don't know what to do about this problem. I think it's part of a broader issue with healthcare in the US -- we are unwilling to accept the notion that human happiness might not be maximized by providing everyone with the "best" possible medical care. We provide life support to 90 year-old people who are unlikely to live much longer no matter what we do. We buy new wheelchairs when refurbished ones would be sufficient. Insurance companies spend money one people even when they might themselves choose to forgo the spending in lieu of the cash. We expect our insurance companies to pay for everything that's "medically necessary" and (I think) mandate such care by law. So, because market forces aren't allowed to throttle demand down to rational levels, the insurance company implements bad proxies.