Physicians’ fees and cost-containment
Ezra Klein has some neat charts about physician compensation rates (full package here [pdf]). It turns out – no great surprise here – that doctors and related medical services simply cost a great deal more here than in other countries. For instance:
Klein writes:
There is a simple explanation for why American health care costs so much more than health care in any other country: because we pay so much more for each unit of care. As Halvorson explained, andacademics and consultancies have repeatedly confirmed, if you leaveeverything else the same — the volume of procedures, the days we spend in the hospital, the number of surgeries we need — but plug in the prices Canadians pay, our health-care spending falls by about 50 percent.
In other countries, governments set the rates that will be paid for different treatments and drugs, even when private insurers are doing the actual purchasing. In our country, the government doesn’t set those rates for private insurers, which is why the prices paid by Medicare, as you’ll see on some of these graphs, are much lower than those paid by private insurers. You’ll also notice that the bit showing American prices is separated into blue and yellow: That shows the spread between the average price (the top of the blue) and the 90th percentile (the top of the yellow). Other countries don’t have nearly that much variation, again because their pricing is standard.
This is pretty revealing of Klein’s instinct toward central planning. If only government could set prices everything would be okay. And certainly there is a point in all of this – larger bargaining groups can get lower prices out of doctors and drug makers and other providers of medical services, and government is the biggest of the big with not only some serious bargaining power, but the full weight of the law on their side.
Of course that leads to a few problems. Government is quite often bought and paid-for by special interests. Relying on government to fix prices in favor of consumers is putting a lot of faith in our political class. That’s not the best demographic to put your faith in. There’s too much room for capture and simply far too much influence over government by private interests. Besides, central planning and price-fixing almost never works in the long term, especially in a country as big and diverse as the United States.
Another possible way to go about this would be to allow insurance companies to compete nationally and get bigger pools of customers. This would give them a good deal more bargaining power over doctors and drug makers and allow them to offer cheaper rates to consumers in turn. The current model – due to state-by-state regulations and the distorted nature of employer-provided benefits, really does skew prices, which invariably benefits the supply side.
There’s more to this, including the way specialists have taken over the role traditionally held by general practitioners, but we’ll get into that down the line.
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One missing item is the fact that physicians in this country must deal with 1400 insurance companies each one having a slightly different method of receiving a claim, therefore the physician must employ a staff of people just to get paid for their services. The insurance industry makes billing hard for physicians and patients therefore they keep the premium payments for longer or in many cases make it so difficult they never pay claims at all. The insurance industry should be forced to really compete for business because the current system gives them all kinds of legal protections that make the healthcare system extremely inefficient; not to mention the 34% overhead insurers run vs. about 4% for Medicare.
Very good point. This is why I’d like to see national competition amongst insurers. The field would thin out, leaving bigger, more competitive companies with better bargaining power and the rules of the game would simplify.
In response to another comment. See in context »So that is a reason to turn over America’s health care system to Obama…a guy who doesn’t have the courage to show you his birth certificate
This is Land of the Free and the Home of the Brave, and our freedom as been bought and paid for with the blood of our soldiers…..and we aren’t about to give it up to some weasel from the political dirty backrooms Chicago
Andy – I don’t care what political stripe you or anyone else come from. You should not refer to the President of the United States as a “weasel”. It wasn’t right to talk about President Bush that way either. You can disagree and be respectful at the same time.
In response to another comment. See in context »Oh that it were that simple.
What these numbers do not reveal are the differences in, for example, the costs of doctors becoming doctors. France pays a much lower rate to physicians than we do – but they pick up the costs of their medical education. This is not a small thing. There are other other benefits offered physicians in various nations that are not factored into this analysis.
In countries where he government has gone too far in holding down the payment rates to physicians, such as Japan, it is getting very hard to find a doctor or get into a hospital as the doctors are all bailing on the profession for better careers and a decent living.
In Canada the rates are lower, but there are problems with that system in terms of availability of medical equipment (well behind the international averages) and, of course, waiting periods and rationing.
The bottom line is that no system is perfect- and every system in the world is struggling with the rising costs of medicine. It is not just us.
The reality is – although nobody, understandably, likes to say it – the countries that appear to function the best are those with a two tiered system – one for everyone courtesy of the federal government and a private insurance system for those who can afford paying for it over and above what they pay for government coverage.
So far my favorite systems are in the Netherlands – whose government backs a robust private market with reinsurance and other balancing mechanisms – and Singapore, which combines single-payer with health savings accounts (to grossly simplify things). I think the German system is also pretty good. What I really don’t want to see would be something like the UK or Japanese systems which both attempt to control costs with far too strong a hand. Canada is better, but would benefit by taking a thing or two from the Singaporean playbook.
In response to another comment. See in context »Agreed. All good. You might want to also have a look at Australia. They appear to have done a good job of providing everyone with government offered coverage while incentivizing Australians to switch over to the private plan. The government actually offers sizable incentive payments to everyone, no matter what their financial status, to join the private plan.
In response to another comment. See in context »I also still like the French system. It is expensive but they do give people pretty good value for their money. They also have what I think is a very intelligent approach, things like first years of life clinics where the stay on top of new mothers and children, going so far as to call them to come in for check-ups and following up.
Sadly, the French system is also under attack from growing prices. This is showing up in a ’slow down’ in approving drugs that work. Because the system does not say no to the use of any drug – as England does- they have gone the route of dramatically slowing down the approval process so some of these expensive drugs remain unavailable. Everyone has problems.
I haven’t checked out the Australian system yet. I’ll look into that.
I know the French system is a mixed bag. I worry about modeling anything after the French, however. There unemployment rates have been at a steady 9 or 10% for years – the dreaded long-term unemployment rates that this recession is making me worry about. That may have more to do with labor laws and the strength of overly influential unions, but I wonder if it also has to do with how services are implemented there. Again, more digging needed.
In response to another comment. See in context »I agree re: medical school costs. I think more subsidies for doctors who work either in high-need areas, or who plan to become general practitioners would make sense.
Then again, I think the entire medical field has become a cartel of sorts. I think we need more “barefoot doctors” and other low-cost providers of care to do mundane and routine medical services like sew stitches, and run basic tests.
In response to another comment. See in context »You are in the same place I am on helping docs through medical school. I’ve been pushing a plan in California that would do what you are suggesting for primary care docs and create ‘tax free’ zones (state tax) for doctors who qualify.
By the way, I’m afraid Andy is a lost cause. I’ve never been able to entice him to behave better on my page.
In response to another comment. See in context »RE:What these numbers do not reveal are the differences in, for example, the costs of doctors becoming doctors. France pays a much lower rate to physicians than we do – but they pick up the costs of their medical education.
But we do pay the cost of educating doctors, if they are of certain skin pigment, or have a hispanic last name…..and if you are NOT a white male
Subsidized education is very racist and sexist orientated, designed to keep white males out of medical school
Andy – that’s just nonsense. Keep it to yourself. Plenty of white males, myself included, received either scholarships or grants of some kind to get through college.
In response to another comment. See in context »