Giving Doctors A Taste Of Their Own Pills

by Medindia Content Team on Jul 30 2007 2:35 PM

Liberals say the U.S healthcare system can be mended. They suggest that slashing prescription drug prices as well as insurance company profits , will definitely leave over plenty of money to cover the uninsured.

Meanwhile, conservatives prefer to argue that the solution lies in forcing people to pay more of their own medical costs.

Many health care economists say both sides are wrong. These economists (some of whom are also doctors) say the partisan fight over insurers and drug makers is a distraction from a bigger problem: the relatively high salaries paid to American doctors, and even more importantly, the way they are compensated.

“I always find it ironic that when I go to doctor groups and such, they always talk about the cost of prescription drugs,” says Dana Goldman, director of health economics at the RAND Corporation, a nonprofit research institute in Santa Monica, Calif.

Prescription drugs cost, on average, 30 percent to 50 percent more in the United States than in Europe. But the difference in doctors’ salaries is far larger, explains Dr. Goldman.

Doctors in the United States earn two to three times as much as they do in other industrialized countries. Surveys by medical-practice management groups show that American doctors make an average of $200,000 to $300,000 a year. Primary care doctors and pediatricians make less, between $125,000 and $200,000, but in specialties like radiology, physicians can take home $400,000 or more.

By contrast, European doctors made $60,000 to $120,000 in 2002, according to a survey sponsored by the British government in 2004. Given the years of training that doctors require and the stress and importance of their jobs, few would disagree that they should be well paid. In addition, with a year of medical school now about $30,000, many doctors leave school deeply in debt. And many doctors would argue that cutting salaries would only persuade talented, college graduates to pursue better-paying professions.

Still, it remains a fact that the lower salaries are a significant part of the reason that European countries spend less on health care than the United States does — a fact liberals avoid mentioning when they preach the advantages of a European-style single-payer system.

Americans generally do not seem to mind the fact that doctors are well paid. In public opinion surveys, doctors usually rank as the most trusted professionals. Congress has repeatedly blocked Medicare’s efforts to reduce the amount it pays for each procedure doctors perform, even though overall Medicare payments to doctors are soaring and the cuts are legally required to keep the program’s budget balanced.

According to Dr. Peter B. Bach, a pulmonary physician at Memorial Sloan-Kettering Cancer Center and a former senior adviser to Medicare and Medicaid, the way that doctors are paid may be an even more significant factor driving up costs and may lead to unnecessary care.

One more point is that in the United States, nearly all doctors are paid piecemeal, for each test or procedure they perform, rather than a flat salary. As a result, physicians have financial incentives to perform procedures that further drive up overall health care spending. Doctors are paid little for routine examinations and very little for “cognitive services,” such as researching different treatment options or offering advice to help patients get better without treatment.

“I don’t have a view on whether doctors take home too much money or not enough money,” Dr. Bach says. “The problem is the way they earn their money. They have to do stuff. They have to do procedures.”

Primary care doctors and pediatricians, who rarely perform complex procedures, make less than specialists. They are attracting a declining percentage of medical students, and some states are facing a shortage of primary care doctors.

Doctors are also paid whether the procedures they perform go well or badly, Dr. Bach says and whether they are crucial to a patient’s health or not.

“Almost all expenditures pass through the pen of a doctor,” he explains. So a doctor may decide to perform a test that costs a total of $4,000 in order to make $800 for himself — when a cheaper test might work equally well. “This is a highly inefficient way to pay doctors,” Dr. Bach opines.

Yet, according to Dr. Alan Garber, a practicing internist and the director of the Center for Health Policy at Stanford University, the United States should move toward paying doctors fixed salaries, plus bonuses based on the health of the patients they care for.

Even in the existing system, some health insurers, notably Kaiser Permanente, already have large networks of salaried doctors. But it would require doctors to give up some of their autonomy and move into larger group practices or work directly for insurers, a step they have been reluctant to take. About 40 percent of doctors are in single or two-physician practices, Dr. Garber says.

Nor is the American Medical Association, which represents doctors, eager for wholesale changes in the system, opines Dr. Edward L. Langston, chairman of the A.M.A. board.

Insurance company profits and the rising cost of preventable diseases like diabetes are big culprits in soaring health care spending, Dr. Langston says.

Still, Dr. Goldman of RAND says that doctors are misleading themselves if they think the current system serves patients’ needs.

For example, if a diabetic patient visits a doctor, he said, “the doctor is paid to check his feet, they’re paid to check his eyes; they’re not paid to make sure he goes out and exercises and really, that may be the most important thing.”

“The whole health-care system is set up to pay for services that are rendered,” he avers, “when the patient, and society, is interested in health.”