POLICY/PHYSICIANS: In which I criticize Uwe Reinhardt, really!

Uwe Reinhardt has written to the NY Times about What Doctors Make, and Why. It’s great that they print his letter–they should be featuring a whole lot more of his stuff in comparison to their penchant for printing out of touch loonies who don’t we think we spend enough on health care. But, here’s the fact that may take some of you a moment to digest–I  don’t actually think Uwe’s entirely correct here. Here’s what he says:

In “Sending Back the Doctor’s Bill” (Week in Review, July 29), you compare the incomes of American physicians with those earned by doctors in other countries and suggest that American doctors seem overpaid. A more relevant benchmark, however, would seem to be the earnings of the American talent pool from which American doctors must be recruited.Any college graduate bright enough to get into medical school surely would be able to get a high-paying job on Wall Street. The obverse is not necessarily true. Against that benchmark, every American doctor can be said to be sorely underpaid.Besides, cutting doctors’ take-home pay would not really solve the American cost crisis. The total amount Americans pay their physicians collectively represents only about 20 percent of total national health spending. Of this total, close to half is absorbed by the physicians’ practice expenses, including malpractice premiums, but excluding the amortization of college and medical-school debt.This makes the physicians’ collective take-home pay only about 10 percent of total national health spending. If we somehow managed to cut that take-home pay by, say, 20 percent, we would reduce total national health spending by only 2 percent, in return for a wholly demoralized medical profession to which we so often look to save our lives. It strikes me as a poor strategy.Physicians are the central decision makers in health care. A superior strategy might be to pay them very well for helping us reduce unwarranted health spending elsewhere.

Uwe’s right in saying that doctors pay per se isn’t a big enough share of medical spending (around 10%) that a cut in it would make much difference to overall health care costs. And he’s also right that we should change their incentives so that–at the least–they don’t make more by running up health care costs elsewhere in the system. And I’m including in that fixing malpractice, college debt and the other issues that make physicians feel under so much stress to increase their incomes.

And of course he’s right in saying that we need to gain some support
(or at least avoid outright opposition) of physicians if we’re to
reform health care.

But there are two points in which Uwe is only partially right, which means he’s partially wrong. (Yes, I did write that!)

First, other countries have their equivalent of Wall Street, and
plenty of their best and brightest become doctors (and make a decent
living all the same, as Michael Moore found out).

In fact in the US there are over 700,000 doctors. A decent chunk of
them do work on Wall Street or for drug companies or consulting
companies, presumably in part because the money is better. But it’s
just not feasible that all doctors could become Wall Street superstars.
According to this report
there are some 850,000 people working in the securities industry as a
whole, which I assume includes lowly clerks at regional Merill Lynch
offices as well as the hedge fund guys making billions. It’s not very
likely that more than a few tens of thousands of them are the well paid
Wall Street types that Uwe thinks doctors would otherwise become. In
fact despite the huge earnings of those at the top….

The average securities salary is now 5.1 times the average salary paid
in other industries, up from 2.5 times in 1990 and 4.3 times in 2003,
according to a recent report released by the New York state

five times other industry’s wages is not a millions miles away from the
average physician’s earnings compared to the average workers.

I admit that’s a crude analysis, but suggesting that most physicians
could trade in the stethoscope for a multi-million dollar Goldman Sachs
paycheck is stretching it. So I’m not sure that’s the right comparison
to make. After all perhaps their alternative is to become lowly-paid
professors of economics?

Secondly, and more importantly, Uwe of course knows but doesn’t
mention the most important part of physician demographics in the US. We
have a huge over-preponderance of specialists who both earn way more
than primary care physicians, and use considerably more resources. Of
course, this has been demonstrated at nauseam by two (of the very
limited number of) health economists who could be mentioned in the same
breath as Uwe–Victor Fuchs and Jack Wennberg.

Both have shown that the more specialists in an area the higher the intensity and cost per capita of the care that’s delivered there. Wennberg’s disciples have gone on to show that not only does this lead to more care, it leads to worse care.

What’s the rational answer?  Do what most other countries do and
restrict the amount of specialty positions available. Instead insist
that most physicians focus on primary care which is both cheaper to the
system and more cost-effective. Of course, doing that would be better
for the system overall, but it would be worse for individual
physicians–or at least for their incomes. It would though of course be
better for the taxpayer, who is funding the vast majority of that
specialty training. (You thought we had a free market? Don’t make me laugh!)

So paying physicians to spend less money elsewhere in the system is
a good start, but for real success in cost containment and improving
the value gained from health care spending, we need to fundamentally
change the supply structure of the physician workforce.

And whatever Uwe says, for many physicians–and of course the
medical and business infrastructure of hospitals, AMCs, and suppliers
that surround them–that is liable to be a painful process.

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