31 replies »

  1. Posted by: John Fembup
    “I understand that some/most members of Congress are whores on social issues.”
    No, just “whores” will do. The second original “Fee For Service” profession.
    John, the tax code is a political document that is created for special interests, not a need for income statement. Being able to deduct mortgage interest from your income is social engineering that does not help renters and also supports the building, real estate, develoment industry. The 50 cent per gallon subsidy on ethanol production allows money to be made on growing corn and giving ADM a good ROI but is I believe a waste of good land and energy for little effect. I have long opposed the inclusion of special targeted taxes in general revenues and believe in dedicated taxes that give the tax payer a better opportunity to judge their effectivness and see whether to change or abandon them.

  2. Barry, I think we generally agree on the directions in which we’d like to see our nation move, but it looks like we disagree on the means to get there. That seems to be the crux of my exchanges with Peter as well.
    “taxes can sometimes be used to make the price of a particular product more closely reflect the full social cost of producing it”
    If by “social cost” you mean a tangible and demonstrable expense (such as the cost of avoiding or cleaning up environmental pollutants), I have no objection. On the other hand if taxes are adjusted to favor or punish this or that ill-defined social preference that has little or no quantitative rationale but instead depends on emotion or moralizing – that is misuse of tax policy and I oppose it. The Maryland legislation or the Chicago ordinance that apply only to Wal-Mart or Target Stores are IMO misuses of the power to tax. I understand that some/most members of Congress are whores on social issues. That does not mean I must like what they do, or accept it.
    “or accomplish some other worthwhile objective.”
    It’s hard to oppose a worthwhile action. But what is worthwhile? If I and I alone were permitted to decide what is worthwhile, I might go along with this small part of your comment. Otherwise – no, I don’t. I just have an aversion to others deciding what is worthwhile for me. I believe others feel the same way. So I say let the true costs fall where they may, let the prices of products reflect their true costs, and let the government tax me according to the true cost of governance. Then let me decide. Not a lot to ask. Isn’t it sad that it’s way too much to expect?
    “For example, if we know that smoking is harmful and results in both higher medical costs and shorter lives, imposing high cigarette taxes to reduce demand and/or recover some of the medical costs incurred by society are both useful.”
    I disagree. If we know that smoking is harmful to smokers (and I think we do) then the objective should be to remove the dangerous product from the market, not just to reduce demand for it. But our esteemed Congress will not forgo the billions in tobacco tax revenues, and thus is willing to brush aside damage to public health in favor of getting money. Thus tax policy that is not uniformly linked to demonstrated, tangible costs will lead to perverted social engineering.
    “In the same vein, if we, collectively, believe it would be worthwhile to reduce energy consumption (and reliance on oil from politically unstable countries), higher taxes on energy could help to accomplish that”
    Is that what Al Gore meant when he so recently advocated the release of oil stocks from the strategic petroleum reserve?
    “as well as to create incentives to produce more energy efficient buildings, autos, appliances, etc.”
    There exist strong incentives already and as the price of energy in the US continues its rise to world price levels, the existing incentives will become overwhelming – not simply for producers of goods but also for consumers. Barry, I think what you are saying is that you do not believe markets create sufficient incentives. I guess we just disagree here. Again, I see our disagreement as not necessarily on ends, but on means.
    Regards,

  3. John,
    I agree with your primary thought regarding tax policy – that government’s objective should be to raise the revenue it needs in a way that does the least economic harm and without social engineering.
    Unfortunately, Congress cannot seem to resist social engineering, and the tax code is, as a result, riddled with provisions that attempt to encourage or discourage various behaviors.
    On the other hand, I also think taxes can sometimes be used to make the price of a particular product more closely reflect the full social cost of producing it or accomplish some other worthwhile objective. For example, if we know that smoking is harmful and results in both higher medical costs and shorter lives, imposing high cigarette taxes to reduce demand and/or recover some of the medical costs incurred by society are both useful. In the same vein, if we, collectively, believe it would be worthwhile to reduce energy consumption (and reliance on oil from politically unstable countries), higher taxes on energy could help to accomplish that as well as to create incentives to produce more energy efficient buildings, autos, appliances, etc. Charging higher insurance rates to smokers and people who are overweight could also create an incentive to change behavior in a positive direction.

  4. PS, Peter you nail this one:
    “if you visit the AMA’s web site, their issues are income protection, not healthcare. DUCK -Incoming!!”
    Regards,
    Fembup

  5. Peter, I am notoriously poor at reading a person’s intent instead of their words, and I apologize if I have misread your intent.
    “What we need to look at is shifting tax policy so that those making personel decisions are informed by a tax that there are consequences to society.”
    At the risk of again misreading your intent, may I say that I disagree with your view of tax policy.
    Taxes are the means by which governments raise money to operate. The more this simple goal is diluted by the addition of one after another social “messages” the less I like it. I do not believe as a general rule that taxes should be used to send messages about consequences to society. IMO, taxes should be used solely to send messages about the cost of governance.

  6. My point is not to recommend capitation per se, but to point out that insurers are unlikely to invest heavily in a cost-control approach unless employers are rewarding them for it. In the mid-1990s, employers rewarded HMOs for deploying an array of strict cost-control measures which included capitation. When the backlash hit, HMO market share dropped. No private insurer looking at the dramatic rise of PPO/POS market share could fail to catch the market signal: lay off of strict cost-control measures.
    Barry’s ideas for using retrospective utilization review mechanisms for catching unwarranted practice variation are interesting. I’d like to see an insurer try them out and report back on how they work. But I do see some preliminary problems.
    Individual variation: for an individual physician, the level of variation in patient age, demographics, comorbidities and such makes it virtually impossible to accuse any individual physician of overutilizing a particular procedure.
    Tradeoff between accountability and patient choice: One could theoretically do practice variation UR for a group practice, such as the cardiac practice in Elyria. But can you credibly threaten the only cardiac practice in Elyria with removal from your panel? Dropping providers and reducing patient choice is precisely what led to the managed care backlash. Insurers will never make that mistake again.
    Mixed motives: Retrospective utilization review has been done before – by HMOs, natch. For example, hospitals with long average lengths of stay became targets for cost-cutting, as did psychiatrists with numbers of visits per patient. But did the insurers come down on these providers to improve care or to cut costs at the expense of good care? That ambiguity damaged the credibility of managed care, and I’m not sure that what Barry proposes is immune to the same problem.
    On the other hand, I like the idea of tying compliance to P4P bonuses. That’s how you restructure incentives. Is it my imagination, however, or is the director of CMS considerably more aggressive about rolling out P4P than private insurers seem to be?

  7. John, I think you misinterpret my intent. I don’t want any body, gov or private, saying I or you can’t eat this or that. What we need to look at is shifting tax policy so that those making personel decisions are informed by a tax that there are consequences to society. I would also pay the tax as a person with more personal responsibility who chose to eat crap. People can then make their own decision. The money collected should then be invested in the health delivery system or more healthy food supplies, not general funds, as happens with liquor and tobacco taxes. I also didn’t say it was going to be easy, but it needs to be at least discussed. Right now you are seeing the effects of government subsidies (taxes) misdirected to one sector, AG Business, sent on down through the food chain, without regard to the consequences. We also need a change in marketing to children. In Europe marketing to children is much more controlled, what’s so “elite” about that?. The elite politicians and elite food and marketing corp. execs are now deciding public policy, which is costing us a bunch of money. You do say docs should take a larger leadership role, agreed, but could the docs say it’s the patient’s personal responsibility not theirs? Maybe that’s what they’re saying now? Certainely if you visit the AMA’s web site, their issues are income protection, not healthcare. DUCK -Incoming!!

  8. TomH,
    I don’t know how Wellpoint challenges practice variations, but I can envision a couple of approaches. First, in the c-section example, if a doc is performing c-sections on, say, 50% of his patients when the national average is 30%, he could be asked for an explanation. Assuming the practice does not specialize in high risk pregnancies, and there is no other valid explanation, the insurer could threaten to remove him from its network after giving him a reasonable chance to bring his practice pattern into closer alignment with peers. Just knowing that someone is looking at this and is prepared to challenge it or audit a random sample of case files could make a difference as compared to the insurer (either private or public) just blindly paying the bills no matter what.
    In the case of the cardiologist group in Elyria, Ohio doing angioplasties at four times the national average rate, suppose an audit of 100 files showed that 25 or 30 percent of those patients could have been just as effectively treated with drug therapy. I think publication of those results could make a difference in practice patterns going forward.
    It should be possible to incorporate compliance with the most cost-effective practice patterns into a P4P program. To earn the bonus, the docs would have to meet the practice and outcomes standards.
    Finally, regarding capitation, many people believe that it creates an incentive to undertreat. In addition, it would be hard to use this approach for a hospital that was not part of a closed network like Kaiser because the hospital has no control over all the tests, durgs and procedures ordered by doctors.

  9. > The private sector, is, in fact, making an effort to
    > identify significant vairances in practice patterns.
    What will insurers do once they “identify” these practice variances, which they could have easily identified 15 years ago? How will Wellpoint “challenge” a doctor with a higher-than-usual c-section rate? Each individual case will fall within the range of reasonable medical judgement. Jawboning is a low-yield approach to medical variance.
    Talk to me instead about how Wellpoint and other private insurers will shift payment policy to incentivize prudent clinical choices. As it happens, there used to be a payment policy that did this. It was called “capitation.” Trend data from Kaiser may serve as an epitaph to capitation:
    1996 HMO market share: 31%
    2005 HMO market share: 21%
    1996 PPO/POS market share: 42%
    2005 PPO/POS market share: 76%
    Insurers respond to employer demand, and employers are demanding employee choice along with higher cost-sharing. Until that changes, the likelihood that insurers will seriously confront practice variation seems small.
    Which brings us back to Medicare and Medicaid. Market enthusiasts need to consider the possibility that shifting payment structures within these two government programs may be the last best hope for reducing practice variation, safely constraining cost trends and improving outcomes. So what should the new structures be?

  10. Peter,
    The private sector, is, in fact, making an effort to identify significant vairances in practice patterns. Wellpoint, for example, if it finds an OBGYN performing C-Sections at a significantly higher rate than his or her peers, it will be challenged. There may be a legitimate reason for it like a practice that specializes in high risk pregnancies, but the insurer will not just blindly pay the bills. The software is gradually getting more sophisticated and probably has quite a way to go. However, at least there is an attempt being made to address it. If the government sector, through Medicare and Medicaid, is concerned aboout this at all, it certainly seems be a far lower priority.
    With respect to your desire to tax junk food, etc., as a free market type, I am actually in favor of this in theory. The problem is designing a system that could be administered objectively and fairly. It is a simple matter to tax a pack of cigarettes or a gallon of gas but not so simple to tax a cheeseburger vs a soda vs an ice cream sundae. What would you propose — to tax the number of fat grams or calories sold per year? It would make more sense to just charge higher insurance premiums if you smoke or have a BMI above 25, etc.

  11. “I don’t eat junk food, I watch my weight, I drink very little, I exercise . . . ”
    I see. Good for you. So I take it you view responsibility as voluntary for SOME people – those who are already responsible, like you – and involuntary for others, that is
    “. . . a whole bunch of other people . . . ”
    “. . . that sector of society . . . ”
    “. . . don’t have health insurance or much income . . .”
    whom you apparently consider irresponsible, and have no problem dragging them, kicking and screaming, into whatever paradigm may fit your standards.
    Thanks for the clarification. You’ve confirmed again for me some of the reasons I am so mistrustful of a national, single-payer health care system. I fear that such a system would be designed by a self-anointed elite who secure the regulatory right to decide these things for the benighted “other people”, and then use the power of the federal government to impose their decisions – any kicking and screaming notwithstanding. Is my fear rational? Maybe, maybe not. I can only tell you it’s real.
    BTW, my “pigs fly” wish is that there were much more constructive physician leadership in this whole issue. IMO, there has been far too little in my lifetime, and that is one reason we are where we are – including governmental policy. I still hope that physician leadership will emerge. As Mark Twain once said, I hope it – but I doubt it.

  12. Posted by: Barry Carol | Aug 24, 2006 12:09:11 PM
    “Instead, it seems that both Medicare and Medicaid are perfectly content to blindly and mechanically pay these bills and then brag about their low administrative costs as a percentage of outlays. We’re not even talking fraud here which is a significant but separate issue. It looks like government entitlement programs like Medicare and Medicaid are just checkwriting machines with precious little oversight. No wonder costs are out of control.”
    Barry, in my reading of Matt’s piece I didn’t see medicare/caid/government mentioned once althought I’m sure they are victims of the same practice. If the private insurance industry were on top of this you would see very little, “practice variation” in that sector. It exists everywhere (from the article) but even the private sector doesn’t deal with it and also seems content to blindly pay the bills. So where is healthcare better served by private industry? “No wonder costs are out of control.”

  13. Well John, we see those dragged kicking and screaming into personal responsibility ever day in the court system, if you want one example of a system of “draggers”. Single moms suing for child support is all about imposing personal responsibility on the other half of a decision. The state of healthcare and health in this country IS a result of misdirected (to put it politely without a rant) government policy. I don’t eat junk food, I watch my weight, I drink very little, I exercise, but a whole bunch of other people, many of which don’t have health insurance or much income to pay for medical care have no connection to the consequences from their actions on the rest of society. But they sure show up at the ER real quick when they need it. “Hi, I’m here for my free-can’t-pay medical care cause I didn’t have to exercise any “personal responsibility”. Keep waiting for pigs to fly if you think that sector of society will discover personal responsibility, in the meantime keep your checkbook handy.

  14. “People don’t just FIND personal responsibility, they are shown it with legislation and dragged into it kicking and screaming.”
    “Personal responsibility is about taking action, not just saying it and walking away while you count your money earned from the lack of personal responsibility and misdirected government policy.”
    Well then, is personal responsibility involuntary (dragged into it kicking and screaming)? Or is it voluntary (taking action, not just saying it)?
    If personal responsibility is involuntary, who appoints the draggers and may a kicker & screamer appeal? Anyway who decides if legislated public policy is misdirected?
    If personal responsibility is voluntary, how is one to go about dragging another into it kicking and screaming?

  15. Posted by: Eric Novack | Aug 25, 2006 6:39:19 AM
    “Of the $2 trillion spent on healthcare, less than 25% goes to physician salaries…”
    Everytime this argumant is discussed we see only this % is earned by insurance, X% by docs, X% by drug companies, X% by equipment manufacturers, ands so on. If all the little parts are looked at then this must be the best, most cost effecient, most affordable system in the world that will never implode; well somethings not smelling right.
    “Decreasing costs by arbitrarily reducing physician reimbursement is the equivalent of printing more money and thinking it will stimulate the economy. It will have the opposite effect.”
    Tax cuts and borrowing while fighting a war, that seems to work?? Taking money from the docs and putting it into the hands of consumers who will spend it in the rest of the economy , seems like a plan to me.
    “PS- this would not mean a great government plan, just a little personal responsibility.”
    Eric, while you and all the other conservatives are waiting for that pie-in-the-sky self inspired “personal responsibility” the system is crumbling and we’re all paying for it. Why don’t you just say, “We all just need to pray more.” People don’t just FIND personal responsibility, they are shown it with legislation and dragged into it kicking and screaming. So here’s suggestions I think I have made before, tax junk food at the point of retail where people make buying decisions and put that money into the health delivery system, don’t subsidize crap food like high frutose corn syrup, subsidize organic, subsidize fresh fruits and vegetables, and so on. Ban soft drinks from schools, help the poor afford good food instead of filling food. Ban selling junk food to children where future habits are learned. Personal responsibility is about taking action, not just saying it and walking away while you count your money earned from the lack of personal responsibility and misdirected government policy.

  16. The whole article is here.
    I have met Colleen Becker and if that’s what she says its good enough for me. I wonder whether she can break this down by financial class. Hmmmmm.
    I have seen one patient there whose weight was estimated to be 900 lbs. They bolted two beds together for him, and moved him on the freight elevator. He didn’t live long. On the “personal responsibility” front though, the guy was mentally ill (clearly) and had been probably all of his life. His sister was his enabler/caregiver. She was on the same road he was on. Sometimes I think the very obese suffer some kind of subclinical depression. Cause? Effect? I have no idea on earth how “the system” might deal with something like this.
    t
    PS: I don’t know how widespread it is, but the senior center where my mother in law passes a few days a month pushes very hard on having a current Dx & Rx list. All the first responders in the county know to look for a particular form on the referigerator door in the homes of the elderly. She also keeps one in her purse and we have one.

  17. Tom- from CNN.com on March 31, 2006—-
    ST. LOUIS, Missouri (AP) — Going to the hospital is rarely fun. If you weigh over 300 pounds like Beth Henk, it can be embarrassing.
    “I’ve flipped an exam table — I sat on the end of it and it just flipped up,” said Henk, whose weight peaked at 745. When her son was born three years ago, “I had to sit in the hospital bed the whole time — the hospital’s rocker wouldn’t fit my butt.”
    Today Henk helps Barnes-Jewish Hospital in St. Louis find better ways to deal with the growing number of very obese patients, an issue for many U.S. hospitals. Barnes-Jewish is replacing beds and wheelchairs with bigger models, widening doorways, buying larger CT scan machines, even replacing slippers and gowns.
    Last year, patient care director Colleen Becker decided to check the numbers. She looked at a daily hospital census — about one-third of the 900 patients weighed 350 pounds or more….
    T- let me know if you want the whole article… I can’t seem to get the whole article from the web anymore (just saved the ap story to my computer).

  18. John Fembup says:
    > PROVIDED further that I am guaranteed the same
    > politicians will never again legislate anyone
    > else’s income, specifically mine
    Remember, I am not saying I think anything along these lines being pursued on the policy level is particularly good or that I’m in favor of any of it. I’m trying to describe what I think I am seeing actually happening. That said:
    If you have a license from the “politicians” to work in a particular occupation, you will be regulated. The value you derive from that license is entirely at the pleasure of the politicians. You can always work in an unregulated or less regulated or differently regulated occupation if you don’t like the terms on offer.
    As for the foreign docs: they’ll be just as happy with a 95th percentile US income versus what they could make at home. There will be no better deal for them. People make their choices based on what is actually achievable.
    Dr. Novack writes:
    > Decreasing costs by arbitrarily reducing
    > physician reimbursement
    It might be arbitrary and probably has been in the past, but it needn’t be. The policymakers could try to determine the supply curve for physician labor, and move reimbursements towards that. I am fully sympathetic with Friedrich Hayek when he says the mere idea this is possible is a Fatal Conceit but I recognize that the market for medical goods now lacks and may never have the structural form necessary to enable an approximately ideal competitive market.
    t
    PS: I am trying to verify the “1/3 over 300#” factoid.

  19. Unlike some of the commenters here, I agree with Matt that reforming the structure (not just the level) of physician pay is critical to reducing practice variation, cutting billions in unnecessary costs from the nation’s health care budget, and dramatically improving patient outcomes. Kaiser and Mayo are great – though not perfect – models.
    Let’s stipulate that we want all providers to move towards a physician salary model, and that a good plan will overcome special-interest opposition. Absurd, I know, but we can’t get at the substantive issues without putting the political ones aside for a moment.
    How do we incentivize such a transformation from our current decentralized “free agent” system to a hierarchical “employer/employee” one? One would think that Medicare and Medicaid, encompassing as they do two-thirds of the nation’s payor costs, would have the market clout to transform the economy and culture of health care delivery, even without a universal healthcare system. Personally, however, I don’t know what levers we would use. Thoughts?

  20. John Fitz:
    The idea you describe is intriguing – it offers the possibility of reforming health care and ending unemployment at one fell stroke.

  21. I read something in the comments here a few months back about someone proposing a plan that would reduce the cost of a government-supplied health insurance plan according to the level of personal responsibility Novak refers to. Sort of like the good driver discount you get for your car insurance. X amount less per month if you’re a non-smoker. X amount less per month if you’re a diabetic and have a HGB A1C of <7. X amount less per month if you had a preventive medicine visit this year. So forth and so on. Makes perfect sense (cents)!

  22. Of the $2 trillion spent on healthcare, less than 25% goes to physician salaries…
    Decreasing costs by arbitrarily reducing physician reimbursement is the equivalent of printing more money and thinking it will stimulate the economy. It will have the opposite effect.
    Reduce utilization— the only way to really reduce costs — that must have a component of patient involvement. And when on an average day, nearly one-third of the inpatients at a major hospital (Barnes Jewish in St. Louis) are well over 300 lbs and they expect the medical profession to fix alll the problems they have, this will not happen.
    PS- this would not mean a great government plan, just a little personal responsibility.
    PPS- you can reference any of my posts about simply making a list of medications you take and why and carrying around with you — and the lack of a consistent drumbeat for this on either side of the political spectrum as evidence that the country is not ready for a real conversation about improving the nation’s health and healthcare system.

  23. Tom
    “If we (i.e. the single payer) cut radiology fees in half . . . .”
    Remember I’m a benefits manager not a policy analyst, but it seems to me that the strategy for any U.S. single-payer system must include cutting overall provider incomes if present “cost” is to be reduced or its growth moderated. This action would result in reduced individual physician incomes, or reduced numbers of physicians, or both. Certainly the impact must be assessed in advance. But I think the fundamental question is by what means could those incomes be reduced in the first place? Is it even practical?
    Since we (individuals, i.e., the real “we”) are reluctant to confront our own physicians about their charges and we don’t even like for our insurance company to do so, we seem to be praying for relief from some deus ex machina er deus ex government that will somehow someway improve the quality of health care, streamline its delivery, broaden its access, and at the same time significantly reduce our overall cost in part by forcing physician and other providers to accept lesser incomes.
    So, then. If a wide consensus of policy wonks can demonstrate that this is possible, and if our politicians will in fact set partisanship aside, and if they will stand the heat that will arise if it is seriously proposed to reduce physicians incomes – including their own physicians’ incomes – then I’m OK with that (PROVIDED further that I am guaranteed the same politicians will never again legislate anyone else’s income, specifically mine). Based on politicians’ behavior on this issue over the past 40 years – during which time health care costs have continuously been deemed in “crisis” – I think the odds of all that happening are low.
    So I think it more likely that any single-payer system in the U.S. would instead manage by rationing and withholding care – i.e., “we” will simply pay in more and different ways than we do now. Do I think administrative savings could emerge? Yes. Do I think administrative savings would significantly reduce my cost? No. Oh, yeah – I think there would be more political patronage jobs to the end of time.
    Meanwhile, a great many physicians and other clinicians from around the world choose to practice in the U.S. One big reason – not the only reason, but an important reason – is the income they can earn here vs. elsewhere. I think reducing that earning power will reduce the supply of foreign physicians. If fewer FMG’s are willing to practice in the U.S. how could the difference be made up? By patients on queue? By training more physicians in the U.S? By bidding up physician income so as to induce the necessary supply? I’m back to what I said earlier, that none of the present alternatives is appealing to me.

  24. I think Matt’s piece on practice variation makes this quote by Rose Ann DeMoro, CA Nurses Assoc. head very appropriate;
    “The fact is, there’s no health care system in this country, there’s only a health care industry that profits off of human suffering.”

  25. Well, we could look at this from the other side too, John. High-talent, self-motivated people will command above average incomes pretty much no matter what, eh? What the government I think is trying to figure out is what the “real” supply curve for physician labor is, and how much of current physician income is economic rent derived from a license to practice. This will be tricky.
    The question therefore is “If we (i.e. the single payer) cut radiology fees in half, will there continue to be enough talented radiologists to serve the public?” This would take their incomes from about the 99.8th percentile all the way down to about the 99.5th percentile. (98% of Americans make less than $150K) So, if a guy had the talent and inclination to do radiology, what would be his next best opportunity under this scenario? Would there be a better deal out there for him? We don’t really know.
    > how to explain why about 70% of U.S. physicians are
    > specialists vs. 30% in general practice?
    Better hours, better income because the reimbursements skew towards procedures, procedures are sexier than counseling, rampant credentialism, and so on…
    t

  26. Hi Tom,
    “If the only reason he’s a radiologist is because he can make $600K and now he chooses to be (what instead?) because radiologists receive only $300K now, maybe this isn’t all bad.”
    Maybe – that could well be true. I did not mean to suggest high income is the only reason high-talent individuals choose medicine, but I do think it is a very important reason – and I assume you would agree.
    If this were not true, then how to explain why about 70% of U.S. physicians are specialists vs. 30% in general practice? Or the number of FMG’s practicing in the U.S.? Or the growing concerns voiced by third-world countries that more of “their own” physicians (and other clinicians) regardless where trained, are choosing to practice in the U.S. rather than at home?
    BTW, Murray is one of my faves too.

  27. > or civil servitude, in which the physician’s pecuniary
    > interest may be so circumscribed as to reduce the
    > attractiveness of the profession to the most talented
    > individuals.
    John, I personally don’t think this is much of a danger, and point to the UK and Europe generally. I have not heard that there is a dearth of talent among doctors there. Even here, look at the docs in the big academic centers — they don’t earn nearly what docs in private practice earn, but they’re very smart and work very hard anyway. Even if what I think is going on at CMS really is what’s going on, physician incomes will remain high.
    It may be true that some people who become physicians today could be dissuaded in a world where physician income is generally less than it is today. This says to me that that guy’s vocation is not medicine. If the only reason he’s a radiologist is because he can make $600K and now he chooses to be (what instead?) because radiologists receive only $300K now, maybe this isn’t all bad. One of my favorite social/public policy authors doesn’t think it is.
    To Matthew: Dr. Novack is exactly right especially in #2 & #5, and in #2 even if you meant to exclude individual practitioners, and you meant only hospitals or health systems.
    To Dr. Novack: Matthew’s magic system of capitation does not operate at the level of individual practitioner, but rather at the level of an HMO-ish entity that could be expected to have reserves or re-insurance to deal with the eventuality you describe. Every insurer faces this very same problem every single year, and somehow they manage to pay claims pretty reliably.
    t

  28. As a taxpayer, I find it pretty discouraging that these wide variations in practice patterns are allowed to persist without much more effort to not only disseminate the information but to challenge the doctors, hospitals, imaging centers, etc. that are responsible for the overtreating. Instead, it seems that both Medicare and Medicaid are perfectly content to blindly and mechanically pay these bills and then brag about their low administrative costs as a percentage of outlays. We’re not even talking fraud here which is a significant but separate issue. It looks like government entitlement programs like Medicare and Medicaid are just checkwriting machines with precious little oversight. No wonder costs are out of control.

  29. John–I agree
    Eric–Glad that you’re reading carefully. I agree with comments 1 & 3.
    As for 2. Well you’ve heard of regression to the mean…the outliers are enough to move the mean. (as well as everything else is going on. It’s kind of like backdating stock options in Silicon Valley–everyone is doing it and Wilson Sosini say it’s OK). Meanwhile on the consulting side we’re all very proud of Deloitte’s work at UC Davis!
    #4–You’re right in that PCP based cap is a non-starter. Global cap is the only thing that can work and that also requires control over all aspects of services (a la KP) and population based planning (and reserves, etc, etc)
    #5– You are joking, right. Who was in charge of the House and Senate when AHCPR was butchered? I quote from the Health Affairs piece in 2003.
    “The North American Spine Society (NASS) created an ad hoc committee, which attacked the literature review and the subsequent AHCPR practice guideline on acute care of low-back pain. In a letter published in 1994 in the journal Spine, the committee not only criticized the methods used in the literature review and expressed concern that the conclusions might be used by payers or regulators to limit the number and types of spinal fusion procedures, but it also charged that AHCPR had wasted taxpayer dollars on the study.31 An entity known as the Center for Patient Advocacy was formed by Neil Kahanovitz, a back surgeon from Arlington, Virginia, to lobby on the issue. It organized a letter-writing campaign to gain congressional support for its attack on AHCPR. Kahanovitz used personal contacts to gain the support of Representatives Bonilla, who had a staffer who was Kahanovitz’s patient; Johnson; Gerald Solomon (R-NY); and Joe Barton (R-TX). Solomon, Bonilla, and Johnson led the effort in the House to end the agency’s funding, energetically promulgating the NASS/Kahanovitz argument that it was supporting unsound research and wasting the taxpayers’ money.”
    Didn’t notice them being Democrats, but then again I’m just a partisan hack, so that’s OK
    #6 — you are dead right. I know only 3 things about Mayo. They pay salaries, they have conversative utilization numbers, and good outcomes at low costs. If you ahve more juice about nefarious goins on there I am all ears!
    #7 — Hmm…I’ve run several pieces critical of Kaiser over the transplant thing including a link to a highly critical piece in the very same Spot-on column. yes I like the model, but I am fair and balanced. But then again Eric, your reading of my stuff is a little like the right wingers view of the New York Times

  30. Matthew, your explanation of practice variations is well done. At the close you remark
    “To get American medicine from here to Mayo is a very long road. But it’s one that the more far sighted politicians are going to have to start looking at”
    Well I wonder what is the politicians’ definition of far-sighted? After the next election?
    Anyway, your advice reminded me of George Bernard Shaw’s from almost 100 years ago (1911 to be precise). In the preface to “The Doctor’s Dilemma” Shaw states
    “That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair of political humanity.”
    And among his conclusions 90 or so pages later, Shaw advises health policymakers to
    “Make up your mind how many doctors the community needs to keep it well. Do not register more or less than this number; and let registration constitute the doctor a civil servant with a dignified living wage paid out of public funds.”
    But – what most discourages me is that I don’t believe any of the choices before us is all that appealing: fee-for-service, in which the physician has a pecuniary interest in overtreating; capitation, in which the physician has a pecuniary interest in undertreating, or civil servitude, in which the physician’s pecuniary interest may be so circumscribed as to reduce the attractiveness of the profession to the most talented individuals.
    As to practice variation, I think Wennberg’s recommendations made sense and still make sense – share credible comparative utilization information with physicians, and share it with the public too.

  31. Matthew:
    I encourage everyone to listen to my show with Dr. Wennberg from my website (under old shows).
    1. I believe that the Dartmouth data is the equivalent of a medical Able Danger program. What to do with the data is uncertain– but it needs to be amplified and disseminated.
    2. You defeat your whole argument about fraud by saying bluntly, “everyone is doing it”. That is not true and is an insult to the vast majority of us in the medical profession. Overcharging, underperforming consultants do not account for all consultants.
    3. You get it right when you speak of healthcare as being ‘all about federal funding’. I.e. the current system is very far from being a ‘free market’ healthcare system. This is a fact that so many critics of healthcare do not understand.
    4. Your magic system of capitation cannot work in today’s environment. What if the money runs out in November? Doctors cannot control the costs of the services they order in an environment where they are forbidden by law (Stark) from ownership in many aspects of healthcare delivery. Patients still can sue– the doctor would have no protection if care was not provided if there was no money.
    5. Your paragraph potshot against republicans also exposes a certain lack of seriousness of your arguments — you and I know full well that the problems of healthcare-through-lobbying is bipartisan and the product of 40 years of unsustainable policies.
    6. Ahh, the Mayo Clinic examples… do me a favor and do some real investigative research into the inner workings of the Mayo before you tout them as the future. I suspect that after you get finished finding out (a) the political seniority of the Mayo board (b) ties with different industries (c) average physician salaries vs. rest of the country — given costs of living in MN vs NY, for example (d) balance billing, etc., you will have to write a Spot On or two distancing yourself from that statement. They provide wonderful care and do great research, to be sure.
    7. To bring up the fraud in Redding, CA and more recently in OH and to gloss over the massive scandal at Kaiser by saying that ‘several’ patients were affected implies a remarkable bias bordering upon blindness. If this has been done by an organization you percieved to be ‘republican’ or conservative, it would have gotten daily play at THCB.
    I guess this critique suggests I care enough to read your submission in full.

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