Monday, August 06, 2007

It's my fault that health care is expensive? Uncle Uwe (Reinhardt) to the rescue!

There was an editorial in last Sunday's New York Times (next to the story on discrepancies in cancer treatment I wrote about) entitled "Sending back the Doctor's bill." which argued that physician compensation was actually the culprit in US healthcare spending. That came as quite a surprise to many of the doctor's I know. Completely missed by the author is both the expense of training physicians and the "opportunity costs" invested in becoming a Doctor by highly educated people in their early twenties.

For sake of comparison I'll use myself as an example:

  • Tuition and living expenses during college ~ $150,000

  • Tuition and living expenses during medical school ~ $85,000

  • Average wage during my intern year in 1998 ~ $5.80 /hour

  • Average wage my 8th year in surgical training in 2005 ~ $9.75 /hour

  • Spending ages 22-35 in the library or hospital ~ PRICELE$$

It was not rare to have contemporaries owe more then $250,000 in loans during residency that was accumulating interest at 8%+. Despite commanding salaries that sound impressive, many physicians will not be able to retire that debt until well into their 60's.

The wonderful Surgeon's Blog by Sid Schwab touched on this the other day in a post called "Times Two." which is excellent reading. Dr. Schwab is a general surgeon nearing retirement age who writes the most engaging perspective on surgery I've yet to find on the Internet. He writes,

"Working hard for its own sake, striving for excellence without any tangible recognition will be seen in some -- but hardly most-- doctors if they go on a salary. Because, unsurprisingly (or maybe surprisingly, to pundits) that's not how it works in real life. I've been in the military, and I've worked at VA hospitals. Try getting a case on after three p.m. Try getting a lab test or Xray thenabouts. Work another patient into a crowded schedule? Stay through lunch, after hours, come in early? Sorry. That's what ERs are for. If Alex Berenson (the NYT editorialist) is ok with it, so am I. Sleep, I've discovered, can be a pleasant thing."

Back to the NYT..................Princeton University economics profess, Dr. Uwe Reinhardt, pretty much the "go to guy" for health care economic theory responded with a letter that was published today:

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.

As Dr. Reinhardt points out, the low lying fruit in cost-containment (ie. physician reimbursement) was strip mined by the HMO movement and Medicare over 15 years ago. There is wide-spread disenchantment and lack of job satisfaction among physicians that threatens to split wide open over further aggressive pay cuts. You don't have to be a Nobel prize winning economist to understand the inevitable brain drain and service problems you'd create.



Sid Schwab said...

I saw the letter, too. What's depressing -- in addition to everything else in the world -- is the misconception people seem to have about what doctors (surgeons especially) do. Hey, cut their pay, put 'em on a salary, or (as one recent commentary suggested) hire a bunch of doctor/moms who'll be glad to fill in the gaps with part-time work, flood the market --problem solved!

Snafu Suz said...

The American health crisis is many-fold (is that a word? anyway...). There is not one answer to the problem. The whole thing needs a serious overhaul. I agree that cutting doctor's salaries will hardly help and yes, it will demoralize our health professionals which is NOT a good thing. Personally I have a huge beef with insurance companies and think that would be a better place to start. Health care should not be a for-profit business. Doctors need to be paid just like everyone else, but insurance companies don't need to be running the show. Maybe we should start there? Maybe we should start with campaign reform so that our politicians are not for sale to drug and insurance companies? Maybe we should start with making higher education universal so that doctors and other professionals don't have to carry such astronomical debt? Maybe individuals shouldn't be running to their lawyers hot to sue for things that are unproven? (The silicone implant fiasco comes to mind.) As I said, this problem has many aspects and there is a lot of corruption. Doctor's salaries are not one of them. The guy who wrote that article is smoking crack.


Anonymous said...

It is no surprise that Pravda...oops! sorry, the New York Times would have such an editorial. The American public will be in for a great (unpleasant) surprise when they get their wish for "socialized medicine".