Doctor's pay is not the driving factor behind increasing medical bills... administrative expenses at providers in insurance, opaque and arcane cost structures negotiated as deals between providers and insurance companies, and record profits at both insurance companies and providers point to a system that's cannibalizing itself. This will do nothing to costs even if implemented universally as it does nothing to address the actual causes of rising medical expenses.
As I understand it, salaries are only one of the many ways that doctors make money. Many "providers" are doctor-owned. Perhaps a more general statement would be that decreasing the cost of medical care will unavoidably decrease the income and/or wealth of doctors.
I don't see a problem with this, so long as doctors can earn a decent living. An idea I've thought about is that medical school is free, but doctors primarily earn their income by working for the government, for a salary. It might attract different people, who stand to benefit from that bargain.
What I've noticed about the debate is that everybody who is getting rich, is pointing the finger of blame at everybody else. Chances are, they're all gouging us.
> I don't see a problem with this, so long as doctors can earn a decent living.
There's an enormous opportunity to disrupt doctors. Doctors, particularly in the US, are grossly overpaid for the value they deliver. As I said below, there's an extra $100-$250 billion a year that gets sucked up by doctors. Frankly, the vast majority of what doctors end up doing -- collecting information, analyzing it, prescribing a course, repeat -- does not warrant the salaries doctors commandeer.
The industrialization of healthcare can't be done inside the existing system and the government certainly won't help which is what makes things tricky. But it's why you see Amazon, JP Morgan, Google and Uber starting their own healthcare companies and pushing into this industry more and more. [1] There's a great deal of money to be saved here while potentially improving outcomes. The current system, where a single doctor works obscene hours while spending 15 minutes with each patient, is just dumb.
This is just a secondary effect. The primary issue is the principal agent problem. There's effectively no limit to what doctors can charge because demand isn't limited by price. So they charge a lot.
> As I understand it, salaries are only one of the many ways that doctors make money. Many "providers" are doctor-owned.
No, nowadays, private practices are a dying breed. Most physicians are, in fact, salaried. And that salary isn't actually all earnings, because a large chunk of their business and professional expenses (insurance, continuing education, various licenses, etc.) all have to be paid out-of-pocket. These expenses are not generally tax-deductible, because of the AMT thresholds, so doctors' actual disposable income is dramatically less than you would think just by looking at the raw salary number. It's very different from other fields (like software engineering) in this regard.
But the earnings aren't all salaries either. As I understand it, doctors earn salaries from employers, but as I understand it, they are also leading investors in provider systems and in the malpractice insurance system.
They're not getting poor. The only thing I'm suggesting is that reducing the cost of care will make them poorer, but that could be offset by attracting people to be doctors who don't come from the most affluent backgrounds.
> but as I understand it, they are also leading investors in provider systems and in the malpractice insurance system.
You're completely wrong. There's actually the Stark law (https://en.wikipedia.org/wiki/Stark_Law) set up to prevent doctors from owning industry-related materia or self-referring to any entity with financial relationship. Not only that, but out of my network (100+ other physicians) very few are the 'leading investors' in provider systems, and zero have any skin in the malpractice insurance system. The MBAs run the numbers game, the MDs just work long hours.
When did that law go into effect? The provider network that my employer's insurance plan used for a while advertised on a billboard that it was "doctor owned." What I don't know is how the specific financial or legal relationship worked.
> But the earnings aren't all salaries either. As I understand it, doctors earn salaries from employers, but as I understand it, they are also leading investors in provider systems and in the malpractice insurance system.
Your understanding is very, very gravely mistaken. Most doctors do not have any of the kids of investment stakes you describe.
There's no single bogeyman behind rising medical costs but it's ridiculous to say that provider compensation has nothing to do with it. The single biggest driver, IMHO, is fee for service and medical supplies, but every aspect of the medical industry plays some role.
I'm convinced that it's the cost structure, implemented by many-to-many negotiation between providers and insurers, that drives the uniquely high cost of the US health care system. (Unique as in twice as much per capita as the rest of the industrialized world.) Japan's system is structurally very similar to ours - employer-provided private insurance - with one key difference. In Japan, pricing for all medical goods/services are set by a government agency, with an eye to keeping the industry functional/profitable while keeping costs under control. There are no "networks". Everyone knows what it's going to cost, everywhere.
> I'm convinced that it's the cost structure, implemented by many-to-many negotiation between providers and insurers, that drives the uniquely high cost of the US health care system. (Unique as in twice as much per capita as the rest of the industrialized world.) Japan's system is structurally very similar to ours - employer-provided private insurance - with one key difference. In Japan, pricing for all medical goods/services are set by a government agency, with an eye to keeping the industry functional/profitable while keeping costs under control. There are no "networks". Everyone knows what it's going to cost, everywhere.
In the US, Medicare pays for 40% of the market, and they set prices unilaterally. In addition to providers are legally required to charge private insurers more, Medicare has no mandate to keep the industry profitable, and in fact their reimbursement rates are about 7% lower than COGS. In other words, providers are (in the aggregate) losing money on Medicare patients on a per-patient basis, even before they account for overhead (building maintenance, staff wages, etc.).
Medicare knows this and admits as much - not just in their annual reports, but because they actually have a number of different stipend programs that provide extra money to providers who see a lot of Medicare patients, because otherwise they would literally go bankrupt and close their practices (ie, if they don't see enough privately-insured patients to be able to make up the gap, they will go out of business).
Medicare is, actually, the biggest beneficiary of price opacity in the American healthcare system today, but that opacity is not going anywhere.
So is Medicare paying more than similar systems in other countries, or less, or about the same? And if Medicare is paying more than, say, Japan, but it's still not enough to cover the costs in America, what is going on structurally with the other 60% of the medical system? Because there's something structurally broken here. It's not mere profiteering - it's more like a feedback loop. For-profit medicine works effectively and affordably in at least one other country with a cost of living otherwise on par with ours.
> So is Medicare paying more than similar systems in other countries, or less, or about the same?
You can't compare the raw dollar values because the economies aren't the same - $5 in New York doesn't mean the same as $5 in Tulsa, OK or $5 in London. That's why things like PPP comparisons exist (except you can't use a PPP comparison in a specific vertical like this to answer your question, because that is the very question you're asking in the first place; it'd be a tautology).
But there is an easy answer to the question, because Medicare is paying less than what would be necessary to sustain a medical practice, if you assumed that all doctors, nurses, secretaries, and janitors worked for free, and if you assumed that building and office space were free and required zero maintenance. We know that because we know they reimburse less than COGS, which is why we know their rates are nowhere near sustainable by any standards, let alone compared to other countries.
> It's not mere profiteering - it's more like a feedback loop.
Yes, that's exactly what's happening. It's a positive feedback look (in the literal sense; it's not a positive outcome for us).
The positive feedback loop comes from the fact that Medicare has neither a mandate nor an incentive to reimburse rates that are remotely sustainable, so it sets rates that are arbitrarily low. Providers are forced to accept these, and then pass them on to private health insurers. Private health insurers ultimately pass these costs on to patients in the form of higher premiums, but patients have no choice in the matter, because they can't choose providers based on how much the provider will overcharge their health insurer[0]. They can't choose providers based on price at all, because there's no price transparency in the system. And there's no price transparency in the system because that opacity is essentially mandated by law[1], and it's necessary for this system in which Medicare uses private insurers to essentially pad its own budget (by reducing its costs far below what would otherwise be sustainable if they were truly the only payer in the market).
> For-profit medicine works effectively and affordably in at least one other country with a cost of living otherwise on par with ours
Which country are you referring to? Truthfully speaking, every country has a for-profit system in that their healthcare systems are still subject to a profit motive (yes, that includes government-run systems like the IHS and NHS). Most other countries with comparable development levels to the US use privately-run systems anyway, so I'm not sure I understand which one country would be relevant to single out.
[0] Which is a different question from how much they (the patient) will be charged
[1] Not directly, of course, but indirectly - that opacity is the natural outcome of this setup
For the country I'm singling out, it's Japan, because of the massive structural parity between the US and Japanese systems - both using private employer-driven insurance, private providers, and government subsidy for those who can't afford their own insurance. And both are modern first world countries with a first world standard of living and economic complexity.
Here's the thing that gets me... the US is the only first world country with either our costs (most are about half as much per capita) or our massive coverage gap (most provide universal coverage). This suggests to me that it's not so much there's a right way to do it, as there is a wrong way, because a wide variety of other approaches, from mostly-private (Japan) to mostly-socialized (Sweden) are all working just fine. It's only the US that is so broken.
