Christopher Flavelle: Cut medical care costs by paying doctors less

By Christopher Flavelle

Bloomberg News

As Democrats and Republicans argue about how to spread the pain of health-care spending cuts, one group has been curiously excluded from the discussion: doctors. There's good reason to change that.

Everybody likes doctors. They deliver our babies, treat our ailments and often save our lives. In surveys of public trust, they rate higher than college teachers, police, even clergy, and vastly higher than journalists or politicians. Norman Rockwell painted doctors as kind, patient and wise. You probably hope your child marries one.

That public adulation is one reason why the 2010 health- care law, which imposed immediate and heavy cuts on hospitals, drugmakers and insurers, left doctors relatively untouched. A 1997 law that reduces doctors' Medicare payments is consistently overridden by Congress. And none of the proposals for entitlement reform now circulating around Washington calls for significant sacrifices from physicians.

It's worth asking whether doctors, who account for almost one-fifth of health spending, really need the special treatment.

After practicing for six years, the average U.S. family- medicine doctor makes $200,000; the average general surgeon, $350,000; and the average urologist, $400,000. (Spinal surgeons make $625,000.) Office- and clinic-based doctors are the most likely of any job category — except for securities and investment lawyers — to be in the top 1 percent of earners.

No other developed country pays doctors this much. In 2004, general practitioners in the United States were estimated to earn double — measured by purchasing power — the median for 21 nations in the Organization for Economic Cooperation and Development; for specialists, the difference was almost threefold.

Those earnings reflect higher payments per service. Last year, a routine visit to a U.S. doctor cost commercial insurers $89 on average, compared with $64 in Switzerland, $40 in Germany and $23 in France. For a normal birth in the U.S., doctors were paid an average of $3,390; in France they got $449. For a hip replacement, American doctors' average fee was $2,966, while in Spain it was $1,123.

What explains the higher pay in the U.S.? Muscular lobbying may help. Over the past 15 years, the American Medical Association has spent $278 million lobbying the federal government — more than any other group save the U.S. Chamber of Commerce and General Electric Co. That puts doctors ahead of the largest oil and defense companies in spending to influence policy makers.

Certainly, nobody should begrudge doctors a generous financial reward: They train for years, and we ask a lot of them. Even so, the arguments in support of maintaining their current levels of pay aren't as convincing as they might seem.

One such argument is the cost of their education. Of the medical students who graduated this year, 86 percent had loans, averaging $167,000. But 30 percent of those graduates said they planned to enter loan forgiveness or repayment programs. And for those who don't, a recent study in the Journal of the Association of American Medical Colleges found that even a primary-care physician with a starting salary of $145,000 can afford to pay off a $150,000 loan in 10 years.

Another argument is the cost of medical-malpractice insurance. Premiums vary by region and specialty: A doctor of internal medicine can pay anywhere from $6,000 a year in Arkansas to $46,000 in Miami, according to the Medical Liability Monitor, a trade publication. Specialists in higher-risk areas, such as obstetrics, pay more.

But average malpractice premiums have fallen for each of the past five years, and were flat the two years before that, driven by what the Medical Liability Monitor calls a "historically low" number of claims. And some states have begun capping malpractice awards.

A third argument is that the nation faces a doctor shortage, as older physicians retire, baby boomers require more care and the health-care law provides coverage to more Americans.

But that shortage is driven by a funding dispute between hospitals and the federal government, over whether Congress should increase subsidies, paid through the Medicare program, for medical residencies. It has nothing to do with people's desire to become doctors: The number of medical-school applicants this year exceeded 45,000, about 35 percent more than a decade ago.

So what's the answer? One option is to cut Medicare rates for specialists, using part of the savings to fund current rates or even gradual increases for primary-care physicians. That would ease some of the pressure on the broader economy, because Medicare rates affect payments by private insurers. It would also change the incentives that drive so many medical students away from family medicine toward more lucrative specialties.

Another option is to replace the current law on Medicare payment rates, which Congress consistently overrides, with legislation that would reduce payments by a smaller amount for all doctors and link them to the rate of economic growth. Congress has failed to stick to this approach before, but if lawmakers believe their own rhetoric about the dangers of rising Medicare costs, this is one way to act on it.

The government could also make an end run around doctors by allowing nurses and physicians' assistants to do more of the work. That possibility alone, which would reduce the role of doctors, and therefore their leverage, should give them an incentive to compromise.

The solutions aren't easy. But the question isn't whether doctors deserve to be paid less. It's whether they deserve a level of protection that's unlikely to be afforded hospitals, nursing homes or Medicare beneficiaries.

Excluding doctors from spending cuts means greater sacrifice from the rest of the health-care world — including their own patients. That's not a picture Norman Rockwell ever painted.

Christopher Flavelle is a health-care policy analyst for Bloomberg Government.

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Comments

MARK GRAVE's picture

I know two doctors who

I know two doctors who already stopped taking Medicare patients because the reimbursement rate does not cover treatment costs. Moreover, a doctor's salary is only a small fraction of the overall cost.

Perhaps more free market forces are necessary, not less. Take for example price erosion we saw in cosmetic and laser eye surgery. Perhaps free market competition served those disciplines well.

As long as the government or your health insurer funds every thing from A to Z, and not the individual, you'll do little to encourage the competition necessary to lower prices.

MARK GRAVE's picture

I know two doctors who

I know two doctors who already stopped taking Medicare patients because the reimbursement rate does not cover treatment costs. Moreover, a doctor's salary is only a small fraction of the overall cost.

Perhaps more free market forces are necessary, not less. Take for example price erosion we saw in cosmetic and laser eye surgery. Perhaps free market competition served those disciplines well.

As long as the government or your health insurer funds every thing from A to Z, and not the individual, you'll do little to encourage the competition necessary to lower prices.

Betty Davies's picture

Lousy logic

It's already extremely difficult to find clinicians who will accept Medicare patients. My husband and I are in our mid-60s and have Medicare, and one of our adult daughters was born with a disabling genetic disorder and has Medicare.

I work for a health-related organization that discourages clinicians from taking on people with Medicare as their primary insurance--and that's understandable, because if we did, we'd go broke fast. We mostly serve low-income folks to begin with, so we're not making big profits. But there's some irony in working in a place that wouldn't dare accept me or my family members as patients!

I'll agree to cut Medicare reimbursement the day all Senators and Representatives accept Medicare as their ONLY insurance.

Steve  Dosh's picture

Betty , l o l , per usual , i

Betty , l o l , per usual , i am 100% with you on this issue
Lousy logic ? 
Head lice . Hawai'ian call head lice , " uku , " and , as you may know , " lei - lei , " is dancing . Hence , " Ukulele " means " dancing head lice ."
Christopher Flavelle is just a dumb health-care policy analyst for Bloomberg Government
b t w - Chris ? Who is your doctor ? Just joking , /s , Dr. Dosh and ohana , Melé Kalikimaka • 

Medicare for all and not just the retirees ..increases MD income

Yes. Lower per visit costs, but keep the volume of patients steady or increase it by providing government provided, national health care.

Today, unlike every other country on earth, it seems, only the elderly are eligible for Medicare.

Pass a law making national health care available to All Americans. This would permit lowering of per visit payments to Doctors as these would be offset by increased patient visits per doctor, and, therefore, increased income for doctors.

Those generating / hoarding more than $250,000 would, of course, pay higher taxes to pay for this medical coverage for those of the other 98 percent who can not afford health care.

Then, to ensure a surplus exists to fund healthcare, military and social services, infrastructure, etc... slap the holy of holies onto the one percenters ...a windfall profits tax on current and future off-shore Swiss, Cayman and Bahama tax avoidance bank accounts.

In this way, doctors won't earn less even when they are paid less, per visit, under a comprehensive national health care system created by adjusting the eligibility age of the current Medicare to zero from age 62 plus...

Steve  Dosh's picture

†hanks Henry , It's being

†hanks Henry , It's being done , more - or - less , no thanks to the anal - retentive Republicans , ref : http://www.whitehouse.gov/healthreform h t h ( hope this helps ) , /s Steve http://www.pnhp.org/ows/index.php

Steve  Dosh's picture

Christopher Flavelle: Cut medical care costs by paying doctors

Chris ? 12.16.12 21:00 hst •
You must be a lawyer for Bloomberg government , Ever heard of pro bono work ? We have , dummy , and do it , for free
Oh , * snsp * Let's all go to cheap doctors who have no malpractice insurance that co$ts between US$60 - US$150k / yr after having spent 1/2 million US$ on the best education in the world
Better yet , let's - all - go to non - A M A certified doctors . Yeah that's the ticket , dipstick
What do you think doctors earn in Cube ? Go there for your treatments . It's only 80 miles away and cheap ?
/s Dr. Dosh and ohana

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