Wednesday, September 23, 2009

Couldn't we fix the health care system by paying doctors less?

"There's no question that doctors in the United States make a lot of money, especially compared with their counterparts abroad. American doctors make, on average, four times what French doctors earn. And it's not just because everyone in America makes more money: The gap between doctors' incomes and those of professionals is far bigger in the United States than elsewhere. In the 1990s, the ratio of the average American doctor's income to the average American employee's income was about 5.5. In Germany, it was 3.4; Canada, 3.2; Australia, 2.2; Switzerland, 2.1; France, 1.9; Sweden, 1.5; the United Kingdom, 1.4."

"American doctors' salaries are high for several reasons. The first is the cost of education. In France and Great Britain, students go directly to medical school after high school, and their entire educations are free. In the United States, students must first get a bachelor's degree before attending medical school, and the average medical student's debt is $155,000. Then come at least three years of residency, which usually pays less than $50,000 a year. After all that, it's no wonder doctors feel entitled to six-figure salaries. Another reason U.S. doctors get paid a lot is market forces: In a single-payer system like Britain's, the government can bargain down the prices of treatments, which leads to lower income for doctors. No such entity exists in the United States—Medicare is big, but not that big."

"But none of this really matters, because doctors' salaries aren't a large enough chunk of health care spending in the United States to make a difference. According to Reinhardt, doctors' net take-home pay (that is, income minus expenses) amounts to only about 10 percent of overall health care spending.* So if you cut that by 10 percent in the name of cost savings, you'd only save about $26 billion. That's a drop in the ocean compared with overhead for insurance companies, billing expenses for doctors' offices, and advertising for drug companies. The real savings in health care will come from these expenses."

"That said, it appears that health care reform will have some leveling effect on doctors' salaries. Primary-care doctors, for example, make significantly less than specialists. While the median salary of a family doctor is $137,000, the median anesthesiologist makes $260,000. The House bill would boost Medicare payments to primary-care physicians by about 10 percent. The theory is that rejiggering payment incentives will attract more primary-care doctors—which would promote prevention and front-end treatment—and reduce the flow of patients to specialists."

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