POLICY: Free Market Healthcare – Fact or Fiction?By Eric Novack

THCB thanks guest poster Dr. Eric Novack for a great series of posts this week on the big issues facing the health care system.  Together with Mike Millenson and Maggie Mahar, Eric did a fantastic job of filling in for Matthew.  If you’d like to hear more from Eric, go have a listen to the Eric Novack show, which airs every weekend on KKNT 960 AM in Phoenix. Stay tuned for more from Eric in the weeks to come …

This week, in Matthew’s absence, we have debunked the low overhead of Medicare and engaged in an ongoing discussion about whether a society based upon freedoms ought to be able to compel its citizens to participate in government programs.  I am somewhat surprised to find few people have been tackling the ‘opt-out’ provision of my previous post.  My sense is that it is tough to argue on paper (electronic, of course) that the government can force everyone to join in, with no option of getting out.  Interestingly, this is at the heart of so many discussions about public education, where a growing segment of the population is demanding more choices, not fewer, for their children.

An issue we have tackled before, but is worth doing again, given the repeated references in the comments sections, relates to another of the great myths of American health care:  our ‘free market’ system. 

Fact: $2 trillion in total health care spending in 2006 Fact: direct government payments for Medicare and Medicaid in 2006 accounted for about $700 billion in 2006  Fact:  government spending on VA health care in 2006 exceeded $31 billion Fact: Department of Defense spending on healthcare in 2005 was $37 billion, though the number now is about 8% of the total defense budget for 2007 Fact:  The value of the ‘tax exclusion’ for employer sponsored benefits was nearly $190 billion in 2004 Fact: private insurers peg their reimbursement—no matter how much they would claim to the contrary—to the medicare fee schedule

And we have a ‘free-market’ healthcare system?  Like the editorial I posted previously says, “the least we can ask for is an honest comparison” of the different options for reform.

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  1. KOMBUCHA (kind stocks) is SOLD. Kombuha is the healthy beverage which has been popular with New York. My Kombucha seems that is good to the CONSTIPATION. As for my Kombucha because it is difficut to drink vey, when Kombucha is drunk, directly please drink cola or juice. Drinking Kombucha, it seems that you can defecate after the 4-5 time.

  2. Physician Compensation appears to be a point of concern and greatly misunderstood – and apparently, in the prior post, intentionally maligned.
    Physicians can be grouped as either public or private. Physicians can be further grouped as employees or owners of a private business. Finally, physicians can be grouped as Primary Care or Specialists.
    Public physicians are employed by the federal or state government and is either a state or federal employee. Physicians working for the Army, at a state financed medical school, under contract to an underserved area, or on staff with a regulatory agency would be in this category.
    Private physicians work for a hospital, for an insurance company, for a large medical group, own their own small business, or work on a contract in support of some governmental agencies – to name just a few of the many situations you will find physicians utilizing their talents.
    Corporate physicians know next to nothing about medical economics and physicians who own a small medical practice, like ALMOST any other small business, knowing medical economics is a matter of life and death. The difference being, any other small business can set their prices for sale of their products and services. The physician is DICATATED their price by the government and health insurance industry.
    Larger corporate entities, like major hospital systems can negotiate better compensation for their services. The small one, two, three physician – even ten physician family practitioner medical practice cannot.
    The only choice is to run faster on the ‘gerbil wheel’ or not accept federal, state, or health insurance ‘reimbursements’.
    The pay disparity between Specialists and Primary Care physicians is significant and historical. As a previous writer indicated, it is rooted with the organization structure and the political power of the specialty groups within the American Medical Association (AMA) – and perpetuated by the government.
    The difference in compensation is so significant that Primary Care residency’s are going unfilled, more physicians are leaving medicine, and internists are choosing to be ‘subspecialists’. Get paid more for less work.
    The devil’s part of the bargain, is that most healthcare is provided by Primary Care physicians, so the health insurance industry and the government has every incentive to keep Primary Care compensation down, so they can reap the largest cost savings.
    One solution no one has mentioned is throwing away the CPT compensation model and going to a straight time and materials billing mechanism – like accountants and lawyers, forcing physicians to compete for client’s loyalties on a quality and cost baisis. The excellent physicians with a large following, who obtain better outcomes would be better compensated.
    Instead, the physican codes a particular service with a CPT code, which is paid a specific amount, and forwards a claim to either the goverment (Medicare/Medicaid), to a health insurance company, or an individual. Usually, the entire process is hidden from the consumer. Even the Explanation of Benefit (EOB) the consumer receives has been sanitized so person A can’t compare with Person B from the same company.
    Office visits are defined as type 1 through type 5, where 1 is typically a nurse visit, the average being 3, and 5 is dealing w/ multiple chronic diseases, and therefore compensated higher. Hospital visits are defined as admissions, discharges, continuing Level 1-3, or consult. It’s much the same with nursing home visits.
    Specialists are fiancially rewarded for performing proceedures & diagnostics, Primary Care physicians for their cognitive diagnosis and coordination of care with specialists to make sure their client’s needs are met.
    Unfortunately, the last part – coordination of care in not compensated at all – consults, review of referrals, review of lab results, consulting with their patients on life decisions and changes, prescription refills, numerous forms that need physician signature and much more. It is this vital function that is NOT sufficiently compensated in the 99211, 99212, 99213, 99214, and 99215 office visit CPT codes – where 90% of a medical practice’s overhead lies.
    With reimbursement cuts looming for 2008 and beyond. You had better think about what Mom and Dad are going to do when physicians will be forced to opt out of participation.
    What is fair compensation? It had better be more than my wife, a solo family physican is making – about $4-6 net per visit – or $16 to $28/hr. She makes her “big bucks” working 80 to 100 hours a week. She closes her practice for a day periodically to conduct seminars training other physicians. She makes more money OUT OF THE CLINIC.
    See an upcoming article for more on medical economics and our NON MARKET for health insurance, health products, and health services.

  3. Addendum:
    How many motorized wheelchairs are in France and their percentage of use.
    Regarding physician compensation:
    *** How many HOURS per week do their physicians work & how many WEEKS per year do their physicians work versus their American counterparts???
    More importantly, separate your physician statics. Don’t group surgeons with primary care physicians.
    Primary care physicians & specialty care hours, expenses, compensation, and net revenue are significantly different.
    Failure to account for these differences is statistical fraud.

  4. Vive La France!
    What is missing from any discussion ANYWHERE on this site, is a separation of the cost and availability of health insurance, the utilization of health care services, the personal health habits of American citizens, personaland cultural behaviors, and the actual cost of providing health care services.
    What seems to prevail is a number of Chicken Littles screaming “The High Cost of Health Care”, figuring if they scream it loud enough and often enough there will be a groundswell of support for what they want – Universal Health Care – regardless of the facts.
    France to the rescue! A thoughtful response by Barry Carol:
    “In reading through Peter’s second link, I was struck by the considerably higher utilization in France as measured by physician office visits per capita (1999) – 6.0 in France vs 2.8 in the U.S., hospital days per capita (1999) – 2.4 in France vs 0.9 in the U.S., short stay hospital admission rate per 1,000 of population – 170.1 in France (2000) vs 118.0 in the U.S. (1998) and per capita spending on drugs (despite much lower drug prices in France) – $484 in France vs $478 in the U.S. (1999 data on a purchasing power parity (PPP) basis.”
    Let’s compare apples to apples folks.
    We are a junk food addicted and exercise adverse nation, which has obvious implications for our national healthcare utilization and expenses. How many Wendy’s, McDonalds, Kentucky Fried Chicken’s, Big Gulps, Biggie Sized Fries, sugar coated frosty flakes do you see in France?
    How many gang fights, drive by shootings, and murders are there in France and what are their corresponding ER and trauma centers?
    What are their smoking and alcoholism rates and their impact on healthcare expenses?
    Would France send a medevac helicopter to assist mountain climbers who fail to heed weather conditions?
    How comparable and prevalent are their drug addict statistics, their utilization of health care, and number of crack babies in France?
    Seeing how densely populated and geographically small France is relative to the United States, it’s mass transit is more available and financially viable. Compare their automobile vehicle accident numbers, ratios, and their implication on emergency care, surgeries, post operative care, and rehabilitation – AND its availability… then compare costs.
    Last time I visited France, the elderly were mostly cared for in the homes of their families. Our families seem to be playing “Who’s my Daddy?” and dumping Ma and Pa in nursing homes.
    How about the Schiavo case in Florida? Not to that extreme, but these scenarios are everyday occurances in our American hospitals. How about our friends in France?
    Let’s not forget our “Win the Lottery” legal system which has a significant impact on the medical decision making process. Not so, in France.
    Ommission of these factors is a serious breach of statistical analysis. It’s called normalization, where to be able to make effective comparisons between two populations (US and France for example) – they must be similar (normalized to account for differences) in order to differentiate cause and effect, and determine which practices produce the best outcome, with the greatest availability, at the lowest cost.
    Like Barry Carol, I suspect that our healthcare system is far from failing, and in comparison, with all known statistical factors accounted and adjusted for, performs admirably well.

  5. The proper income for a physician should be based on his ability to cure or prevent disease. If this paradigm was practiced the cost of healthcare would go way down since there is hardly a physician around that knows much about curing or preventing.
    The systems cost is largely controlled by the pharmaceutical and medical product companies and their ever increasing political lobby and control of medical schools. When doctors learn to disassociate themselves and practice true prevention and treatment and effort is placed on education of nutrition and natural modalities to the public, not dictated by the Health Department, the Agricultural Department or the AMA, then we will see some progress.
    All the problems lie in the use of drugs, exposure to environmental toxins and erroneous beliefs in nutrition.
    To learn the options Visit my blog. http://www.HealthSalon.org

  6. it is nice to see such an intelligent discussion. can someone point me to the educational materials that have culminated in such vast knowledge which has given some of you the ability to devine the proper income for a physician? i thought the politburo was disbanded

  7. I’m with Jack about health insurance companies offering nothing of real value in return for premiums. I would like to be able to deduct my healthcare costs off my income tax. I don’t get employer subsidized (non-taxed)insurance or tax funded medicare but have no way to offset costs like other taxpayers. But I think in absence of a single pay plan then Bush’s “plan” should also allow people to deduct health costs outside of the insurance industry. That might push insurance companies to get more competitive – HA! As with Jack, I don’t take anything Bush says with any kind of seriousness and won’t bother to dig deeper into his “plan” as he doesn’t give a rats a** about ordinary citizens. The only thing that motivates him except “god” is a desire to pump up Republican campaign donations.

  8. And I’d add one more thing Jim. George W. does not do anything in the best interest of the public, but does indeed go our of his way to propose plans that benefit his contributors. And that comes from a liflong (though currently disgruntled) Republican that voted for W twice. Am I infallible? That should tell you no.

  9. If you read my editorial you’ll see why I believe insurance companies are a waste of valuable resources that would otherwise be directed to patient care. I believe in a Medicare-for-all system, as do most phycisians with the one qualifier that reimbursements be more fair. Many managed care systems are pretty good, and many are pretty bad and limit choices. But making insurance an Option? Ask the folks in MA and CA about that. And ask those employees who are essentially forced into an HSA because the employer “opted” to provide HSAs.

  10. Jack:
    Thanks for the reply>>>>”I disagree, unless you are an insurance company exec.”
    However, your reply is puzzling. I think you are overlooking something or perhaps know something about the Bush plan that I don’t.
    As I understand it States that don’t wish to participate in the Bush Health Plan could simply opt out by enacting the same exemptions as the Federal. The Bush Plan is voluntary, no mandates, and states without income taxes are opted out from the git go.
    My state has a state monopoly on workers compensation insurance. There is also an effort to put a state wide single payer issue on the ballot. I think giving the workers who earned these health benefits should have more say in how these dollars are spent. The Bush plan permits, but does not mandate this, as far as I know. Thus, state reforms could run the gamut from free market to state monopoly.
    If I am I missing something please let me know?

  11. At the start of this thread Eric noted the value of 2004 tax exlcued benefits at 180 Billion which, if so ought to be at least $200 Billion today. Eric also calls for honest comparisons. I agree and feel the Bush Health Plan provides a baseline for comparing all other health reform proposals. Whether we end up with some kind of free market would in significant part depend on how each state chooses to allocate this new 200 billion which would be taxable at the state and local levels. By the ides of April we and all states will have a basis to compare the various plans. How so? Read on from my memo to friends and last Sunday’s post on THCB.
    “I don’t think anybody has figured it out yet but I believe Bush has changed the entire debate on health carereform. Millions, if not billions of additional revenues would flow directly to the states and local governments without going thru the Congressional appropriations process. State and local governments can then design and implement their own health
    care reforms and perhaps fund other priorities as well.
    How are any of the other health care proposals going to top this? Bigger or more generous exemptions would require additional Federal revenue or taxes. By April’s
    tax filing date every taxpayer (and all state and local governments) in America will be able to know pretty well what the Bush plan would cost or generate in new revenue for them.
    Thereafter, all competing plans would have to be compared to the Bush plan – are they better ie more or less generous to the states. What do you think? Place
    a comment the The Health Care Blog. Just google THCB or Matt Holt – a great site.
    (Sunday Blog Post on THCB re Matt, observation)
    W’s HEALTH PLAN = two new Ws’ (Germs?): WINDFALL(W1) and/or WHEREWITHALL(W2)
    At least that is my conclusion re the following excerpt from THCB dated January 25, 2007 POLICY/POLITICS: Bush’s Health Plan:
    “The Bush proposal that woke me up was the creating a tax deduction for health insurance that would apply to everyone. Potentially this really matters, and inside it is the germ of the right idea. But I guarantee you that most Americans won’t have a clue where this came
    from, and why it made it into the president’s speech.”
    … … …….
    I agree with you a) that the Bush plan contains a germ of the right idea and b) that most Americans don’t have a clue as to where (the Bush plan) came from or why it was included in the state of the union address. Further, I suspect we might agree that the mere fact that President Bush proposed the plan is likely to generate most of the resistance to it. I think we might also agree that at this point most Americans don’t (at least yet) understand, care or appreciate the impact of the plan. Do these issues really matter? I don’t think they do. My experience suggests a good idea will prevail, and often will take on a life of its own, regardless of who suggested it. With the internet and blogs like THCB, ideas, good, bad or even ugly are not
    easily suppressed.
    So, does the Bush tax deduction proposal have merit?
    I think the Bush plan has a great deal of merit, more merit and the potential for implementation of sound health care policy than any proposal I’ve observed in some forty years of dealing with insurance and health care issues as an attorney in private practice and in both state and municipal government, as a health care lobbyist, and one shot as political candidate(unsuccessful). Currently, I’m a 67 year old
    seasoned citizen in a state of job lock (for the pay and benefits) and fearful of retirement. This personal stuff is not to elicit sympathy but is offered to afford some background on those experiences which
    might affect my views. Now, as to the merits, or at least my personal view based on the rather limited information currently Clearly new information, congressional modification, amendments etc. might change my views on any of these points from a plus to a minus.
    Plus Side:
    1. The plan places primary responsibility for health care spending decisions on the individual or family subject to state and local government regulation. The federal government role is more limited but
    is still significant and of course is always subject to change via Congressional action. I View this as a positive but I realize that many may might disagree.
    2. States would appear to have broad discretion on how best to deliver, regulate or provide healthcare. ERISA issues aside, insurance regulation would continue at the state level.
    For example, it seems that a federally based one size fits all single payment system would not be possible. On the other hand a state based or regional or even local based single payor systems would be possible
    if permissible under state law. Multi-state or regional plans involving more than one state appear problematic without additional Congressional action.
    Again, I would anticipate that some will consider this attribute as a negative and agree that in some instances such views might be well founded given the power and resources of the insurance industry.
    3. The Bush plan is simple and easy to compute.
    I think most would agree that this aspect should appear as a plus. We will soon find out since every taxpayer should know by April 16 or be
    able to calculate a ballpark figure of how the proposed changes will affect them.
    4. At the Federal level, the Bush plan would tax the rich – the rich being those whose healthcare expenses exceeded the proposed (generous) exemptions – $7500 for single taxpayers, $15000 for joint taxpayers.
    Everybody but the rich is likely to agree that this is a positive.
    5. At the State/Local Level the “Germs” dubbed WINDFALL(W1) and/or WHEREWITHALL(W2) kick in and taxpayers will be impacted in accordance with their state & local tax structure.
    a. The WINDFALL(W1) germ impacts those (relatively few) states with no state or local income taxes. In these states, as I understand it, the working poor will receive tax relief from payroll taxes including
    social security for health care expenses. With no state/local taxes, this new “income” spending on health care should have a positive impact. I dub the W1 germ WINDFALL because state and local economies
    would benefit from this additional spending power upon the effective date of the plan with no legislative action on their part. It appears that withholding amounts would simply be adjusted downward and fatter
    paychecks would follow. It is not clear how it would be assured that such amounts are spent on health care. I suspect signigicant penalty and interest charges would be applied.
    b. The WHEREWITHALL(W2) germ would impact the substantial majority of states, those that have state and/or local income taxes . Unlike W1 states, the W2 impacted states would need to take prompt state
    legislative action to offset the highly regressive impact of their income taxes on the new non cash but taxable income – the value of a taxpayers health care benefits or expenses. Even after adjusting the
    for the regressive effect (presumably by exemptions or credits), there should still be plenty of money left for states to design and implement more efficient health care plans to meet the needs of their citizens
    and perhaps other needs as well. Dubbing the W2 germ WEREWITHALL seems appropriate since it addresses the most serious and most frequently omitted issue in most health care proposals – how are we going to pay
    for it.
    Though the answer to who or how do we pay for it is always we all do, the Bush plan has a quite novel wrinkle. This because Congressional action taxing and exempting health care benefits or taxing the rich
    actually generates substantial increases in state and local taxes in the W2 states. The state legislatures then have to correct the regressive effects, carve out sufficient amounts for their health care reforms and stave (off or) deal with all other interests who might wish to share in any unallocated balance of the WHEREWITHALL.
    Just imagine how many blogs will be generated during this process. Is THCB ready for this?
    To sum up, my take is that both W1 and W2 are good “germs” and there appears no urgent need to find or administer a vaccine. All states and local governments and more importantly the people could benefit from this plan. The plan clearly places the ball in the states court with what appears to me to be an adequate and appropriate financing mechanism, which in itself is a remarkable feat. I believe President
    Bush has presented a serious and well thought out plan for health care reform.
    Surely the Presidents plan is worthy of further discussion and debate. I certainly hope we can agree on this last point and further that you and THCB make it possible. Imagine THCB reporting on the progress of
    the 50 little crucibles of democracy hard at work fashioning health care reforms appropriate to their citizens.
    Thanks for taking the time to read this post. I urge and will be pleased to reply to any comments or criticisms(by email Email: jnewco@earthlink.net
    Posted by: Jim Newcomer | Feb 25, 2007 7:39:57 PM

  12. Peter – For a concise discussion of savings available to finance economic growth and the calculation of the savings rate, read this.

  13. I can understand your concern about the war, Peter, and the diversion of funds that could be used for health care. But I see that as a subject for another blog. There is a lot of waste due to our corrupt political system, including the $300 billion that the government gives away to campaign contributors. That would pay for health care for the uninsured.
    I covert much of that in my book at http://www.MoneyedPoliticians.com. But again, I do not sell it to members of this blog. A certain number of copies have been set aside and are free for the asking.

  14. Jack, a big part of my post was how expensive this stupid war is and how we could be putting that money into more deserving programs if we didn’t create the war wounded in the first place. It was not an attempt to argue if we owe the vets that expense. Much of the entitlements we see now were created during/after WWII. WWII followed and cured the depression and the parents of baby boomers were mostly vets and the tax breaks they got fueled the economy and the present wealth of baby boomers. WWII vets enjoyed education, housing, pensions, healthcare etc. subsidized by the federal taxpayer and created with memories of the depression close behind. But because the government was not honest in how it chose to pay for those subsidies then we find we are in a situation of notes due and payable. Here’s a proposal – tax the wealth transfer of our parents accumulation to us and put that money toward entitlements. Maybe then the baby boomers will see the true cost of those entitlements.

  15. Barry, I guess you don’t separate safe savings and risk savings from the calculation of savings? Or the access to cash as one measure of savings? Personally the fact that our house is paid off, higher net worth, gives me no real comfort as we have to live somewhere and pay something for housing. Right now I still make mortgage payments but to myself not to the lender, but the house value fluctuates. So maybe the equal rent for housing argument is valid? Is this off topic? Give me a few links to look at on your views.

  16. I think whenever we send men or women to war, we owe them not only healthcare when they come home, but also education and financial assistance to reassimilate into society. Those who didn’t go to war must pay their fair share of the costs.

  17. Jack, how would you view the growing entitlements of war vet healthcare. I have seen figures of $250 billion to $650 billion needed for life long Iraq war/
    Afghanistan injuries and $600,000 to $5 million cost per Iraq/Afghanistan injured. I don’t think these figures include mental health costs.

  18. harrumph,I’m glad to see that you’re no fan of the AMA. I certainly agree that any healthcare reform include physician compensation issues. I think that one advantage of single pay is how it has the capacity (hopefully) to reduce physician staff overhead and thereby get that savings of insurance overhead into the hands of caregivers. I also think as a country we should reduce the educational debt load of physicians. That pressure certainly works against the need of healthcare over billing and pushes docs into higher pay specialties. Would you be in favor of a combination system of FFS and salary with pension benefits?

  19. “It was not just about anger, Peter. Blatant misrepresentation of another’s views and then calling the other person dishonest is not the best way to demonstrate a friendly, open-minded personality.”
    “you are NOT in favor of single pay are you?
    “Peter, if that is an accusation, it’s false. If that is your conclusion, you are mistaken. I have stated exactly what my attitude is. On just this string alone:”
    Apologies John, not trying to misrepresent anyone. I remember in one post you accused me of espousing taxes were the way to wealth. I would truly like to get about the business of health reform and I am willing to take my lumps in getting a system that works better. The problem seems to be that not a lot of people look at the big picture and only want others to shoulder the burden. I’m not about to support anything unless the pain is distributed fairly. I’ll essentially take the French System as long as it looks and operates like the French system in the end. Right now any system but the present one will work better.

  20. I like P4P, but it really needs a national or regional tracking database of outcomes and best practices. I like the hourly approach, but then the problem of padding hours. I guess I finally favor a salaried approach, but in any event physician salaries must be fair and adjusted to experience (or preferably to quakity). Thanks to Barry I’ve come a long way on this.

  21. Argg. Take a break for a couple of days and miss this juicy discussion…just my luck. Physician compensation happens to be a research interest of mine. Let me point out a few things.
    1. Eric is accurate on this crucial point:
    “Fact: private insurers peg their reimbursement—no matter how much they would claim to the contrary—to the medicare fee schedule”
    This shouldn’t surprise anybody. If you’re a health plan and you try to pay less than Medicare rates, what do you think docs will do? They’ll start dumping the patients enrolled in your plan and substituting towards Medicare FFS patients. Fear of this scenario (plus some basic results of game theory) keeps health plans in-line with Medicare reimbursements.
    2. Medicare’s system for figuring out how much to reimburse for each service is corrupt. For the best summary of how this unbelievably screwed-up process works, see Tom Bodenheimer’s article in last week’s Annals of Internal Medicine: The Primary Care–Specialty Income Gap: Why It Matters (Thomas Bodenheimer, MD; Robert A. Berenson, MD; and Paul Rudolf, MD, JD 20 February 2007 | Volume 146 Issue 4 | Pages 301-306). These authors are some pretty heavy hitters, and if you have journal access, you _must_ read this article. If not, a brief summary: the discrepancy between specialist and primary care pay is way, way larger than longer training and longer hours (in a few specialties…notably _not_ radiology, the very highest-paid specialty) justify. The reason for this is the political power of specialty societies, exercised through the AMA’s RVU Update Committee, has perpetuated and worsened a compensation gap between procedures and cognitive services. Bodenheimer’s article is the “shot heard around the world” for the coming payment war between the specialties.
    3. Just because Medicare hasn’t gotten it right doesn’t mean Medicare (or government rate-setting in general) _can’t_ get it right. But boy will it be tough…and given the information asymmetries in health care, it’s difficult to believe that a pure free market solution exists. Maybe the solution will be to rip payment rate-setting authority away from the AMA and create a body within CMS to figure it out, sort of parallel to how the FDA ripped medication approval authority away from the AMA decades ago. Maybe it will be to move away from FFS altogether and just pay all doctors a training-adjusted hourly wage. There are many possibilities. But regardless of the payment mechanism, we’ll know we’re close to the right rates when all specialties fill equally with U.S. medical grads. Right now <50% of primary care residencies fill with U.S. medical grads while some specialties (e.g., radiation oncology) have ~3 applicants per spot. This is the definition of a market failure, unless you're trying to expand the number of radiation oncologists (something the rad onc societies fight tooth-and-nail…guess why). As a guide, adjust payments until all specialty residencies fill to ~80 or 85% with U.S. medical grads, then top each off with foreign medical grads. Of course this assumes that we know the ideal number of docs to train in each specialty…not an easy task. But the current system already implicitly sets the total numbers to train, and it will be better to be explicit instead.
    Then there's the whole issue of how physician pay should compare to competing professions. But this is already enough material for one post.

  22. From the same interview:
    • Entitlements: The United States must rein in entitlement programs or face economic woes, he argues.
    Walker says that today the United States is “about 3 percent short of the GDP between what we are taking in and what we are spending, and it is going to get worse when the [baby] boomers start to retire – primarily because of entitlement programs.
    “You can’t solve the problem without fundamental reform of the entitlement programs. Medicare is going to require much more dramatic and fundamental reforms than Social Security because the problem is six to seven times greater than Social Security.
    “It is going to take entitlement reform; it is going to take spend constraint; and it is going to take some revenue enhancements.”

  23. This from a Newsmax interview with the Comptroller General of the United States, David M. Walker:
    • Prescription Drugs:: Walker says that the prescription drug plan is the “poster case for what is wrong with Washington.”
    He notes that when Congress first took up the matter of Medicare prescription drugs, estimates placed the cost at $300 billion.
    But he argues that both Congress and the administration simply downplayed or ignored the true costs of the program. Today, the nation will have to pay out for the program $8 trillion-plus in current dollar terms.
    Walker also detailed that when the Medicare actuary of the Center for Medicare/Medicaid Services calculated the true costs of the program, he “was told he could not tell the Congress or else he might lose his job.”
    “That not only was unethical but it was illegal, and nobody has been held accountable for it,” an angry Walker said.

    So if you think Medicare is underfunded now, just wait for the drug companies to get their share of the wealth, then send Bush a thank-you note.

  24. “John Fembup, there was no anger from this side.”
    It was not just about anger, Peter. Blatant misrepresentation of another’s views and then calling the other person dishonest is not the best way to demonstrate a friendly, open-minded personality.
    “you are NOT in favor of single pay are you?
    Peter, if that is an accusation, it’s false. If that is your conclusion, you are mistaken. I have stated exactly what my attitude is. On just this string alone:
    1. “there is at least one country which has both a public and private health insurance system, both are thriving, and the cost of health care is about 1/3 less than in the U.S. That country is France.” (2/24)
    2. The French system is arguably the world’s best – that’s why I bring it up from time to time.” (2/25)
    3. “Based on what I’ve read (elsewhere) I’d be quite happy with a health care system that functions essentially as the French system functions now. (2/25)
    4. “I said we can learn from the French.” (2/25)
    5. “I think it’s very likely the U.S. can learn from the French. Years have been wasted arguing over the inferior British and Canadian systems.” (2/25)
    6. “What might the U.S. learn from France? A fully-public insurance system is not necessary for the overall health care system to be successful.” (2/24)
    7. “What is necessary is lower-cost health care. If health care in the U.S. remains as costly as it is, then universal insurance — regardless whether Americans pay for it thru “premiums” or “taxes” — will be more expensive than today. John Edwards gets that much right.” (2/24)
    8. “ The question is can the U.S. do it? Of course that is open to question. France can point to its experience; US. can point to . . . Medicare? The comparison is not favorable to the U.S.” (2/25)
    9. “No matter what the U.S. decides to do, it must also face up to Medicare’s unfunded liability – presently more than $60 trillion.” (2/25)
    10. “I do not think it is reasonable to believe that anything so complex as a national health care system can be grafted identically from one nation to another. I think that is so self-evident no explanation is necessary.” (2/25)
    Back to you again, Peter, you say “I’ll take parts of my link that describes the French System and we can see how much the anti single pay people, group, crowd, individuals, will actually agree with . . . the “honesty” in that position can be tested by how much of the system you would accept”
    So now you consider my honesty to be mere “honesty” and that somehow you are entitled to test it using a litmus that you have assembled from articles that you have read about the French health care system???
    Peter, I’m just not interested in winning a merit badge from you. I’m going out to shovel my driveway.

  25. Peter,
    Thanks for the links. The draft law on end of life care sounds very sensible to me. I still prefer health courts (without damage caps) to either the jury system or the worker compensation model to adjudicate medical disputes.
    I thought you made some interesting comments on the tradeoff between striving to build wealth and acquire a lot of material goods and stress. Higher stress levels do impact well being and lifetime medical costs. I have often commented to friends and colleagues that a lot of people seem to have let their expectations outrun their ability to fulfill them. What was considered a solid middle class lifestyle 40-50 years ago might be viewed as lower middle class or even near poor now.
    Since finance is my field, I have to point out that the savings rate is probably the single most worthless and inaccurate statistic published by the Commerce Department. The biggest problem with it is that it does not include capital gains. It also subtracts from income a measure called imputed rent which is a calculation intended to determine how much it would cost homeowners to rent their home to themselves. The total for the country is about $1 trillion (out of a $13 trillion GDP) which the Commerce Department counts as an expense. If you took the savings rate data literally, you would have to conclude that, somehow, Bill Gates became the richest person in the world without ever having saved a dime!

  26. For Barry,
    French Malpractice link:
    End-of-Life link:
    I couldn’t find out if this actually became law. Maybe someone else can.
    Barry, I’m no expert (not even close) to how global budgeting would work. My understanding with Ontario Canada is individual hospitals get their own budgets but the province is split up into regions. My CEO friend is responsible for a regional hospital with outlaying clinics. She is working under contract with the hospital board so I would think if she did not allocate properly that would also determine if she had her contract renewed. I do know there have been cases of overspending in hospitals and there were serious consequences. I’ll assume that the province has extensive oversight with power to step in if necessary. I’ll try to look into it closer.
    As far as lay back Canadians not as interested in money as Americans – well I’m one of them I guess. I look at how much detrimental stress I’d have to take on to achieve higher earnings. All reports I have seen say Americans are a stressed out lot. Living in the Toronto area really does require a large achievment committment just to stay ahead of rising costs. People outside Toronto seem, from memory, to be more lay back but I’m guessing it’s the same for rural America. More lay back may mean reduced stress and less medical requirements from high stress – good in the end I guess. But mental health here is a large problem. Americans seem to be chasing an unattainable carrot by running on a treadmill where growth for growth’s sake is everything. I would think stress at the lower economic level is high just trying to stay from being tossed into the street. As Americans save less than anyone else on the planet ( I think last year it even went into negative territory) I think stress is going to go up for healthcare and pension shortfalls. Ah, the good life.

  27. John Fembup, there was no anger from this side. I’m only trying to get to the core of what you and other anti-single pay (you are NOT in favor of single pay are you?) people would accept if we did go with the French System. The further we stray from a system we seem to support the further it looks like that system – hence it becomes just the present system with a different name.
    So I’ll take parts of my link that describes the French System and we can see how much the anti single pay people, group, crowd, individuals, will actually agree with. You did say that “essentially” you would accept the French System. But the “honesty” in that position can be tested by how much of the system you would accept and what the end French/U.S. system would look like. By the way I doubt Eric would accept any of the following.
    Sorry for the length of this post. Please tell me what below you would accept?
    “French NHI coverage increases as individual costs rise, there are no deductibles, and pharmaceutical benefits are extensive.”
    “French NHI covers services ranging from hospital care, outpatient services, prescription drugs (including homeopathic products), thermal cures in spas, nursing home care, cash benefits, and to a lesser extent, dental and vision care.”
    “In France, the commitment to universal coverage is accepted by the principal political parties and justified on grounds of solidarity—the notion that there should be mutual aid and cooperation between the sick and the well, the active and the inactive, and that health insurance should be financed on the basis of ability to pay, not actuarial risk.”
    “The organization of health care in France is typically presented as being rooted in principles of liberalism and pluralism.”
    These are hardly characteristics of Americans.
    “Physician associations accept the monopsony power of the NHI system in return for the state’s sanctioning of their monopoly power.”
    “The number of nonphysician personnel per bed is higher in public hospitals than in private hospitals; in the aggregate, it is 67% lower than in US hospitals.”
    Read “nonphysician personnel” as administrative costs. What say you to that Eric?
    “In 2000, roughly half of French NHI expenditures were financed by employer payroll taxes (51.1%) and “general social contribution” (34.6%) levied by the French treasury on all earnings, including investment income. Remaining sources of financing for the CNAMTS and its affiliated health insurance funds included payroll taxes on employees [3.4%], special taxes on automobiles, tobacco and alcohol [3.3%], a specific tax on the pharmaceutical industry [0.8%], and subsidies from the state [4.9%].) The general social contribution, a supplementary income tax (5.5% of wages and all other earnings) raised specifically for NHI, was introduced in 1991 to make health care financing more progressive and to increase NHI revenues by enlarging the tax base. As a share of total personal health care expenditures, French NHI funds finance 75.5%, supplementary private insurance covers 12.4% (7.5% for the nonprofit sector mutuelles and 4.9% for commercial insurers), and out-of-pocket expenditures represent 11.1%.”
    “Physicians in private practice (and in proprietary hospitals) are paid directly by patients on the basis of a national fee schedule. As for prescription drugs, unit prices allowable for reimbursement under NHI are set by a commission that includes representatives from the Ministries of Health, Finance, and Industry For example, although coinsurance and direct paymentis symbolically an important part of French NHI, patients are exempted from both when (1) expenditures exceed approximately $100(U.S.), (2) hospital stays exceed 30 days, (3) patients suffer from serious, debilitating, or chronic illness, or (4) patient income is below a minimum ceiling, thereby qualifying them for free supplementary coverage. Charges for services provided by health professionals—whether in office-based practice, in outpatient services of public hospitals, or in private hospitals—are negotiated every year within the framework of national agreements concluded among representatives of the health professions, the 3 main health insurance funds, and the French state. Once negotiated, fees must be respected by all physicians except those who have either chosen or earned the right to engage in extra billing, typically specialists located in major cities.”
    “Third, although, compared with the United States, France appears to have controlled its health care expenditures, within Europe, France is still among the higher spenders. This has led the Ministry of Finance to circumscribe health spending since the early 1970s. Much like the prospective payment system for Medicare in the United States, France has imposed strong price control policies on the entire health sector. Greater cost containment has been achieved through such controls in France than in the United States.”
    “The allowable fee for an office visit to a GP, for example, is only 20 €,(about $26)and one half of all French physicians are GPs. Physician specialists also receive low fees (23 €)($30), except for cardiologists (46 €)($60), psychiatrists (36 €)($47), and those who do not accept assignment. The $55000 average net annual income of French physicians— salaried hospital-based doctors as well as GPs and specialists in private practice—is barely one third that of their US counterparts”
    “In addition to price controls, capital controls on the health system are stringent. They include limits on the number of medical students admitted to the second year of medical
    school, controls on hospital beds and medical technologies, imposition (since 1984) of global budgets on hospital operating expenditures, and the more recent Juppé plan that imposed annual expenditure targets for all NHI expenditures.”

  28. Actually, I’ve heard complaints that FPs have to know more about more deseases and specialists have to know more about one disease, thus there is little reason for the wide variation in salaries. Perhaps the physicians on the thread could comment.

  29. jd,
    Believe it or not, I really didn’t know exactly what the average physician compensation is in the U.S. today. If I had to estimate, I would have been close on the generalist but too high for specialists.
    If physician education were paid for by taxpayers, that would certainly remove a significant burden for new doctors. However, in the case of specialists, we would still have the issue of the opportunity cost of the extra years of training required to get credentialed. There are very lucrative alternatives available to the bright, competitive people who enter this field.
    In Europe and Canada (and probably Japan), there are other cultural issues that I am not that knowledgeable about. In Canada, for example, I am told by one of my colleagues who is married to a French Canadian from Montreal, that many Canadians are more laid back and just not as interested in making a lot of money or accumulating material wealth as many Americans are. I also don’t know what the typical compensation for lawyers, MBA types, etc. is in these other countries. Furthermore, if the state is going to guarantee that it will cover education costs through college for all children and provide robust retirement benefits, there is not as much need or reason to accumulate wealth to cover these obligations. This means that a lower after tax income is required to support a given lifestyle for Europeans than for Americans who have to factor these costs into their long term planning.
    The bottom line is that we need to pay doctors enough to attract competent people into the profession and make sure they continue to practice once they start. That will likely require higher compensation (probably by a considerable amount in the case of specialists) than is typical in other countries. I do not want doctors to be low paid (compared to what they could make in other fields) glorified social workers.
    I am actually optimistic over the longer term about the potential of ever more powerful and cheaper information technology to identify doctors who drive excessive utilization of healthcare services without superior outcomes to show for it. This is what tracking services by both providing and referring doctor is about. Price and quality transparency tools also have lots of potential to help the most cost-effective providers increase their market share while the less cost effective lose share or go out of business. This is what Michael Porter and Elisabeth Teisberg wrote about in their recent book Redefining Healthcare.
    Medicare can squeeze reimbursement rates all it wants, but it cannot control utilization or at least hasn’t been able to so far. Insurers can’t control utilization. Hospitals can’t control the utilization that doctors order and drive. Drug companies feel that they need to use every means at their disposal to get doctors to prescribe their drugs instead of a competitor’s.
    I think the next “New Thing” will turn out to be the power of information to bring some rationality and efficiency to healthcare resource allocation. Even if consumers continue to be insulated from most healthcare costs, identifying high utilizers and ultimately threatening them with removal from the approved provider list if they can’t improve their practice pattern within a reasonable timeframe is our best bet for reining in the growth of healthcare costs. Of course, a more sensible approach to end of life care and replacing the malpractice jury based system with health courts would also be helpful.

  30. Barry,
    I’m surprised that you came up with the figures of $150,000 for GPs and $300,000-$400,000 for specialists as the minimum average salaries needed given the training demanded. These are, of course, the average physician incomes in the U.S.
    Other nations, though they pay their physicians considerably less, with minor exceptions do not have physician shortages. So I’m really not sure what justifies your numbers.
    As I recall reading on this blog some months ago, many nations (including Britain) actually pay their general practitioners close to as much as we do. It’s the specialists where we really go off the rails.
    Pulling my own numbers out of the air, I’d say $150,000 for generalists and $200,000 for specialists (on average) would be appropriate and would not create any physician shortage so long as we reformed the medical education system to reduce the amount of debt physicians start their careers with. If we eliminated that debt, the average pay could be even lower and we wouldn’t see shortages, except perhaps during a transition as certain personalities left the profession and others entered.

  31. Jack,
    I only read through Peter’s second link. All the points you listed appear accurate from my recollection of the article. I fully expect that in any shift to taxpayer funding of the U.S. system (my preference is vouchers coupled with the ability to buy additional non-covered benefits in the supplemental market), we will continue to spend a considerably higher percentage of our GDP on healthcare than any other country.
    With respect to the French system, in addition to my prior comments about their considerably higher utilization in certain categories (physician visits, hospital admissions, drug consumption), concerns and questions are:
    1. We will not be able to save much money by paying doctors less except to the extent that we can find ways to safely reduce utilization. If we can do that, market forces will result in adjustments such as causing some doctors to accelerate their retirement, others opting to go into research, management, try to get a job on Wall Street (as a healthcare analyst), etc. Medical school admissions may also be impacted. One area where savings might indeed be possible is radiology through at least the potential of outsourcing the radiologist’s function.
    2. Perhaps Peter can help me here, but I do not have a good idea of how global budgeting works in practice with respect to hospitals. Does each hospital get a budget or is there a combined budget for a number of hospitals in a region? Are there other sources of revenue available to them? What happens when their budget runs out before the end of the year? How much to they usually have in reserve funds to handle this contingency?
    3. I would also like to know more about how France (and other countries) deal with malpractice. Are there jury trials or health courts? What is the burden of proof? What if the accepted standard of care was provided and it is just a case of a bad outcome? How much defensive medicine is there compared to here? How much are malpractice premiums as a percentage of practice revenue for both primary care doctors and high risk specialists like OB/GYN’s and neurosurgeons?
    4. How do they deal with end of life care? Is it up to each family? Are there living wills? Is there a default protocol other than “do everything?”

  32. >>> “a national health care system can[not] be grafted identically from one nation to another.”
    It would be interesting to know what form of campaign financing they have, public or special interest?
    If the latter, we’ll obviously not get there from here.

  33. Wow, Peter, one of us is having a bad day.
    “Now your answer is NO.”
    Peter you know perfectly well that I said just the reverse – yet you completely misrepresent what I said.
    “as now you would NOT accept the French system even though you say it “is arguably the world’s best”
    I did not say that, nor did I come close to implying it. Again you completely misrepresent what I said.
    And there’s more.
    “So what parts of the French System would you “essentially” cherry pick?”
    Hmmmm. You can be selective, but I must be cherry-picking. That’s your method?
    I gave an honest and straightorward answer to your question: “I’d be quite happy with a health care system that functions essentially as the French system functions now.” I said we can learn from the French. Of course I do not think it is reasonable to believe that anything so complex as a national health care system can be grafted identically from one nation to another. I think that is so self-evident no explanation is necessary. If on the other hand you think it IS reasonable, then I think you would be the one who owes the explanation.
    And there’s still more:
    “this is the dishonesty of the anti single pay crowd.”
    So in your mind, I belong to a “crowd” that is characterized by “dishonesty”? Whoa, pal, calm down. Anyone who has not lost their temper would not call my comments “dishonest”.
    Misrepresentation of others’ points of view weakens your case and diminishes you. It also defeats the purpose of weblogs such as this one.
    Take a deep breath, get a good night’s sleep. You’ll feel better tomorrow.

  34. Barry, I’m am anxious to see your analysis of the French system. I got mostly through it, got lost in a couple of places, but it appears to me to be:
    * Medicare-for-all-PLUS (covers more procedures than does Medicare)
    * Universal coverage without a single payer system
    * Their National Health Plan covers most costs, but co-pays are covered by private supplemental coverages
    * Provides 100% coverage of population
    * No opt-out, but you can buy a heavier-than-normal supplementary plan
    * Funded partly by employers and partly by taxes
    * Extra coverages are offset by substantially lower physician salaries (US are 5.9 * average workers versus 1.9 in France)
    * Patients pay physicians directly then recover costs from the health fund
    * Heavily controlled by government
    * National fee schedule for reimbursements
    * Both public and private hospitals, the latter with negotiated per-dien basis
    * Hospitals provide all drugs for inpatients
    * Escalating coverage as patients become sicker
    * Co-payments, but they disappear after 30 days in hospital
    * 2/3 of population is “fairly satisfied” with system
    * Some geographic areas not as well covered as others
    * Lower level of micromanagement of doctors
    * Strong price controls and capital controls
    * Occasional physician strikes

  35. “Peter, that is not the question”
    That was my question. Now your answer is NO.
    “Based on what I’ve read (elsewhere) I’d be quite happy with a health care system that functions essentially as the French system functions now.”
    “Essentially”? I guess your answer to my question is still NO, as now you would NOT accept the French system even though you say it “is arguably the world’s best”
    So what parts of the French System would you “essentially” cherry pick? Now we’re back to the beginning. You asked if I would accept the French system, I said yes, I thought we had a deal, then you wanted conditions on accepting it. See this is the dishonesty of the anti single pay crowd. They say they are for reform but they don’t want to share any pain or loss in their present positions. They want that burden on someone else.

  36. Thanks for the excellent recap Barry. I agree that physicians should be in the $200-$500K range, though I think they are at great risk of losing a lot of ground as we move either toward HSAs (where patient volumes will significantl decrease) or managed care (where CEOs will make sure physician salaries decrease). I like your five-step program, plus my recommendations above, but the real question is, how do we get there with all of the cash that is flowing to block reforms?

  37. Thanks to Peter and Jack for the links to the information about the French healthcare system and to John for highlighting it as a possible source of lessons to improve our system.
    In reading through Peter’s second link, I was struck by the considerably higher utilization in France as measured by physician office visits per capita (1999) – 6.0 in France vs 2.8 in the U.S., hospital days per capita (1999) – 2.4 in France vs 0.9 in the U.S., short stay hospital admission rate per 1,000 of population – 170.1 in France (2000) vs 118.0 in the U.S. (1998) and per capita spending on drugs (despite much lower drug prices in France) – $484 in France vs $478 in the U.S. (1999 data on a purchasing power parity (PPP) basis.
    On the issue of doctor compensation, I think it is important to note that, in the U.S., bright people will evaluate the alternatives open to them in choosing a career. Many doctors may also have considered law school (3 year program) or business school (2 year program for an MBA). If we want to attract highly capable people into the medical profession, they are not going to be willing to work for a pittance, nor should they.
    I think it is instructive to look at what pharmacists earn. Pharmacists are still in somewhat tight supply, and their compensation is set by market forces, led by the major drug chains – Walgreens, CVS, Rite Aid, as well as the supermarket chains, PBM’s, and others that employ pharmacists. It requires two years of school post college (used to be one year until relatively recently). Starting pay averages about $40 per hour ($80K for a 2,000 hour year) plus full medical benefits and a generous 401-K retirement plan. The total package is easily worth $100K per year (including benefits not mentioned). Since even McKinsey agrees that there are no excess profits to speak of in the retail pharmacy sector anywhere in the world, this is a good benchmark to use. Factoring in the additional training required to become a primary care physician, coupled with the demands and responsibility that go with the job (not to mention the hours), I think a minimum reasonable compensation would be in the $150K range. For specialists, including surgeons, who require extensive additional training, there might be more room for debate, but I think $300 – $400K would be within the zone of reasonableness for an area of the country with average living costs. For high cost locales like NYC, higher compensation would be appropriate. The good news is that doctors’ compensation only accounts for about 10% of healthcare costs, so there is probably not a lot of money to be saved even if we could somehow drive pay down to the French levels.
    Given the attractive alternatives available to those who aspire to become doctors in our society, we should expect to continue to compensate them very well. My fear is that if we ever got full taxpayer financing of healthcare without malpractice reform and a serious effort to deal with end of life care, we will see utilization increase to closer to the French level, we will have the additional cost of paying for healthcare for the currently uninsured, and total spending on healthcare will sail past 20% of GDP.
    I say yet again that our focus needs to be on finding ways to safely reduce UTILIZATION of healthcare services. This means (1) curbing futile care at the end of life, (2) mitigating fraud and inappropriate care, (3) reforming the malpractice system to reduce defensive medicine (over the longer term), (4) implementing electronic records to cut duplicate testing and adverse drug interactions, especially in hospitals, and (5) creating robust price and quality transparency tools to help doctors and patients make more cost-effective medical decisions and to steer more services to the most cost-effective providers.

  38. For the free-marketers out there, this is a must-read:
    Report: Hospitals too concerned about increasing revenue
    Profit rather than need is driving some medical construction, taking money out of hospital and patient pockets without improving overall health.
    Too many decisions to build medical facilities are based on what brings in the most money for hospitals and doctors rather than what’s best for patients, the Minnesota Department of Health concluded in a report released Thursday.
    The result often is a financial strain on traditional hospitals when physician groups take over profitable specialized services and move them off campus.
    The report also notes that blanket policies that restrict construction, such as a hospital moratorium, affect communities such as Maple Grove where the need is substantial because of suburban growth.

    “Problems arise, however, when technology is overused, underused, or misused in ways that increase health care costs without providing benefits that exceed the costs.”
    Health Commissioner Dianne Mandernach recommended setting up an independent commission to develop policy goals for the Minnesota health care system, including a way to prevent duplication of services and a system that pays for outcomes instead of volume.
    The report said:
    • Competition does not necessarily lead to lower prices.
    • Areas with more health care resources do not necessarily have better outcomes.
    • Payments from government and private insurance plans do not necessarily reflect the cost of providing services.
    • For some types of health care services, such as organ transplants, a small number of “centers of excellence” may be preferable to a larger number of competing facilities.

    Imaging issues also are on the radar of health insurers. In recent months, in an attempt to control and reduce imaging expenses, Medica and HealthPartners have started requiring doctors to get third-party approval before prescribing procedures such as MRIs or CT scans.

  39. I mentioned in another thread that to Eric’s nine points toward reform, I’d add 11 more as follows, which does include cleaning up Medicare:
    10: Reinstate the certificate of need
    11: Extend CON to physician offices and clinics
    12: Reinstate the Stark laws that prevented self referrals (hosptials employing physicians, physicians having ownership in hospitals to which they refer patients, and physicians referring patients to labs in which they have a financial interest).
    13: States or the feds must pass “any willing provider” laws
    14: Physicians and nurses in the top 10% of their class should receive a 100% rebate on their tuition (perhaps graduating down to 50% rebate at the C level).
    15: Eliminate hospital and pharmaceutical advertising
    16: Prohibit “deals” between physicians and drug/device manufacturers
    17: Establish a national patient database with transparency of hospital and physician best practices info
    18: Require drugs to be clearly labeled as remakes (when they are) and require that they be tested against the original rather than a placebo)
    19: Prohibit private patents on drugs that are (even partially) funded by the NIH
    20: Establish a national health care commission similar to the Federal Election Commission where all members serve staggered 14 year terms. This commission would consisted of doctors and economists and have oversight responsibility.
    Eric has not yet responded to these, and may not agree.
    Beyond that I’m beginning to think the only way we are going to have a single-payer system is to have it operated by Halliburton. While we’d eliminate the extra costs for underwriting, marketing and broker commissions, the CEOs and profits would be preserved so they could share with the politicians.
    We have an amazing system, don’t we.

  40. “Sure John, I’ll take the French System over the Amercian, question is will you and Eric take it?”
    Peter, that is not the question
    Based on what I’ve read (elsewhere) I’d be quite happy with a health care system that functions essentially as the French system functions now. The French system is arguably the world’s best – that’s why I bring it up from time to time. I’ve stated many times my support for a system that works better than the one we have, and costs less. Well, who wouldn’t? I think it’s very likely the U.S. can learn from the French. Years have been wasted on arguing over the inferior British and Canadian systems.
    The question is can the U.S. do it? Of course that is open to question. France can point to its experience; US. can point to . . . Medicare? The comparison is not favorable to the U.S.
    One more thing on Medicare. No matter what the U.S. decides to do, it must also face up to Medicare’s unfunded liability – presently more than $60 trillion. Amortizing that unfunded liability over the next 50 years would cost a minimum of 1.2 trillion a year – about half of the entire U.S. budget for the current fiscal year. Know anyone who is prepared for a 50% tax increase solely to finance our inefficient, bureaucratic, crumbling Medicare? One way or another our children are on the hook for this liability unless legislators find the courage (commence holding breath now) to make very significant changes to Medicare – for example slash Medicare benefits, or even terminate it, and replace it with a system that is designed to work – such as a U.S. version of the French program.
    The discussion of universal health care always seems to omit the need to clean up after Medicare. That’s far from a trivial problem

  41. I have your answer Peter. No! At least the doctors would not like France’s salaries.
    See this from http://ezraklein.typepad.com/blog/2006/04/on_doctors_sala.html
    “Physicians’ incomes are much higher in the United States than they are in other OECD countries. In 1996, the most recent year for which data are available for multiple countries, the average U.S. physician income was $199,000. The comparable OECD median physician income was $70,324. The ratio of the average income of U.S. physicians to average employee compensation for the United States as a whole was about 5.5. Germany’s was the next highest, at only 3.4; Canada, 3.2; Australia, 2.2; Switzerland, 2.1; France, 1.9; Sweden, 1.5; and the United Kingdom, 1.4.”

  42. By John Fembup,
    “Peter, yet another “fact” you left out of your comment – there is at least one country which has both a public and private health insurance system, both are thriving, and the cost of health care is about 1/3 less than in the U.S. That country is France.”
    Everyone read this.
    Sure John, I’ll take the French System over the Amercian, question is will you and Eric take it?

  43. “Health care consumption usually increases with wealth. And, it’s been said, increased life expectancy at (virtually) any price is the ultimate luxury item.”
    Especially when someone else is paying (or at least when it seems that way). Why not try to consume as much of the good as possible? Rule everyting out when you have vague symptoms, try all the treatments for your cancer no matter what the cost/benefit ratio, take all the possible meds for all the possible diagnoses now available…. basically, if the medical benefits to any test/med/procedure outweigh the risks, rational individuals will ask for it. Cost won’t be a part of the equation.
    If people with “skin in the game” actually knew the strength (or lack thereof) of the studies used to justify many of our current treatment practices, they would be shocked. (and I’m not even talking here about the problems with pharma setting up the study designs in the first place) “You want me to pay THAT for such a small projected benefit? You must be kidding.” Now if someone else is paying…
    Say what you want about consumer driven care as a movement, at least it’s hitting this point head on. Maybe it won’t succeed, maybe there are too many unintended consequences, but at least it’s not dancing around the issue and pretending we can control health care costs without someone thinking about costs and limiting care at the margins.

  44. >>> “This week, in Matthew’s absence, we have debunked the low overhead of Medicare…”
    Eric, you’re spining again! That’s your opinion of course, but I think you came nowhere close to acheiving that.
    >>> “…. our founding fathers established a framework of rights based upon the ability to be left alone– not participating in a government run healthcare system would seem to fit (for both patients and providers)”
    Yeah, and I agree with Peter. I want to be left alone when it comes to paying taxes and paying for roads that go to places I don’t drive, and, and…. well, you get what I mean.
    When it comes to protecting citizens from those who are taking advantage of them, should the government play any role? Or should everything be free-market, buyer beware, etc?

  45. “Could it be that we just “like” (i.e. prefer) more healthcare than other countries?”
    Chris I think the answer is yes, so this insight explains some of the cost in our system vs other countries.
    Health care consumption usually increases with wealth. And, it’s been said, increased life expectancy at (virtually) any price is the ultimate luxury item.

  46. Could it be that we just “like” (i.e. prefer) more healthcare than other countries?

  47. jd- over time, the introduction of free market reforms will change the trajectory of health spending– but no change will suddenly bring per capita spending down to levels seen in other oecd countries.
    But, as you know, discussions based on misperceptions and distortions make real debate nearly impossible.
    PS- I did leave out FEHBP spending (my error)– which was about $20 billion in 2001, which means it was about $30 billion last year.
    Peter– what limits would you place on government’s ability to control your behavior? Do you have a problem with NYC tracking people’s blood sugar? (http://www.npr.org/templates/story/story.php?storyId=5151660)
    Remember, as Leonard Peikoff so eloquently stated (http://www.afcm.org/hcinar.html), our founding fathers established a framework of rights based upon the ability to be left alone– not participating in a government run healthcare system would seem to fit (for both patients and providers)

  48. “Eric, one more “Fact” you left out of your list;
    Countries with universal single pay governemnt run healthcare do it for about half of what we do.”
    Peter, yet another “fact” you left out of your comment – there is at least one country which has both a public and private health insurance system, both are thriving, and the cost of health care is about 1/3 less than in the U.S. That country is France.
    What might the U.S. learn from France? A fully-public insurance system is not necessary for the overall health care system to be successful.
    What is necessary is lower-cost health care. If health care in the U.S. remains as costly as it is, then universal insurance — regardless whether Americans pay for it thru “premiums” or “taxes” — will be more expensive than today. John Edwards gets that much right.
    Unless, that is, one views a universal insurance system as a mechanism to reduce costs by withholding care. One again must consider John Edwards and others who have become rich litigating malpractice claims.
    I wonder which will be easier to accomplish in the U.S? Reducing the cost of health care? Or changing the public expectation that one’s health care provider must invariably deliver a perfect outcome – and if the outcome is not perfect, the treatment was flawed, there was an avoidable injury, and the patient must be compensated?

  49. Eric, one more “Fact” you left out of your list;
    Countries with universal single pay governemnt run healthcare do it for about half of what we do.

  50. Eric, what say you to the ultimate Opt-out for individual freedom and free thought and action – give every tax payer the right to opt-out of taxation. Not to opt-out of paying taxes, although you might want to argue that, but to opt-out of contributing to policy and programs we disagree with. Now there’s a cleansing proposition. At tax time we could assign the percentage of our individual taxes we wanted to distribute to separate government programs, from 0% to 100% as to where our money would be spent. We would be able to opt-out of taxes for the military, political ear marks and pork, tax give-aways to petroleum companies and other wealthy corporations. We could even opt-out of pay raises for politicians. We then would also be able to divert out taxes to other programs we felt more inclined to support. Let freedom ring!

  51. Economists generally believe that market forces do operate in the healthcare industry, but this industry has characteristics that create inefficiencies:
    -Physicians and other healthcare providers are hired to provide expertise and help make decisions on behalf of the patient. Patients cannot readily assess the accuracy of this medical advice and the quality of the healthcare services.
    -“Medical science” is not sufficiently developed to specify clearly the impacts of specific healthcare inputs on patient outcomes. Third-party payers cannot readily discern whether healthcare providers are billing for appropriate levels of care.
    -Healthcare market participants wield market power. For example, large purchasers such as Medicare and Medicaid exert significant influence on this market. In addition, physicians, hospitals and insure may hold monopoly power in some markets.
    These market failures are not unique to healthcare; each type of market failure occurs in a broad array of industries. Diverse strategies have been deployed to address these problems throughout the economy. These strategies fall into two categories: government can address market failure problems by detailing specific regulations, or government can design policies to structure incentives to induce providers, patients and interest to produce efficient outcomes. Many policies combine the two strategies.
    While we dub these extra administrative expenses as a result as a fragmented public-private market it’s important to realize all the inefficiencies in the health-care industry as a result of the complete nature of the system. The point you bring up jd is that on a global level and in the source your provided points out that other nations do much more with less dollars using a public health system. Is the split between public/private worth all the extra health care dollars required in admin expenses? I would say, “yes”, because nations where there is a 100% insurance rate and public access to health care there isn’t the same fostering towards innovative ideas. Why would we want to change something when we are getting it for free? While 1/3 of Americans believe that the current health care system should be totally rebuild Canada’s numbers were 7% lower at 23%. In a system with universal coverage and in a country where the average $ spent per capita is half of that of America, still a near a quarter of the population would like to see a total revamp of the health care system. I would say “neh” to a nation wide movement and give more time to allow states to experiment. Lets see changes in insurance regulation, TQM, and improved IS for healthcare.
    Indeed, health care in its current state could not be called a free-market system and in pursuit of one is a shot at increasing efficiency and long-term problems (passing costs to our kids) SS, required insurance plans (young subsidizing old).

  52. This talk of whether our system is a “free market” or not misses the point when it comes to the economics of healthcare reform.
    One of the most remarkable facts about our health care spending is that our government (Medicare, Medicaid, VA, FEHBP, etc.) spends as much per capita and as a share of GDP as other nations do in total. And yet, of course, our public system insures less than half the population. Granted, it does insure the most expensive age demographic by far (65+), but that is small consolation.
    A similar story goes for the combination of private insurance and out of pocket expenses: together these expenditures are close to the average total expenditures for our peer nations, both per capita and as percentage of GDP. And yet only a little more than half are covered by private group insurance, 9% have individual insurance, and 16% are uninsured.
    Some older national comparisons can be found here, though I have seen more recent data and nothing much has changed. Recent statistics on where Americans get their insurance can be found here.
    What this tells us is that we stand out from the rest of the world not because private insurers are making a killing, or because public systems are less efficient, or because only an unfettered free market will make our bang for the buck finally match that of other nations. None of that can possibly be true given the international data. Rather, we spend more because our market structure for both public and private payers does not contain adequate mechanisms to control medical costs, and to a much lesser extent because our fragmented public-private system inflates administrative costs.
    Does anyone on this blog disagree? Pursuit of a “free market” is of interest for moral/ideological reasons, not because it is needed to get more value for the money we spend. Eric, if that’s consistent with your intent, then well and good. If not, please explain.