Arnold Kling  

The Government Health Care System

Some Wishful Prizes... Writers' Strike Brings Great W...

My latest essay:

Medicare is wonderful for relieving the elderly from the burden of worrying about health care expenses. By the same token, it is wonderful for relieving doctors of the burden of worrying about the elderly as customers. You get paid for understanding the billing system, not for understanding your patients.

State and local governments do their part to harm our health care system. Licensing regulations serve to entrench and protect the specialist system and fragmented health care. In other industries, business owners decide how to train their employees to do their jobs. Competition leads firms to adopt training methods that foster customer satisfaction. In health care, training methods are dictated by government licensing boards, and they foster high prices and inefficient staffing.

The essay is based on observations of my father's medical care.

Barack Obama says that his mother was more worried about her medical bills than her care. We can relieve people of the worries about paying their medical bills. But only at the cost of entrenched mediocrity in medical care.

The real health care reformers, as Grace-Marie Turner points out, are those who propose giving more power to consumers, instead of bureaucrats at insurance companies and Medicare.

Comments and Sharing

COMMENTS (16 to date)
shayne writes:

My thoughts and prayers are with you and your family, Arnold.

Dan Weber writes:

As much as it pains me to admit it, people might be happier with simpler payments and less advanced coverage.

No politicians will ever say this, but it is the end (perhaps unconscious) rationalization of many of the policies they recommend.

Brad Hutchings writes:

Thoughts and prayers, Arnold. The broken hips are a real challenge. You make a very powerful point about touch. In the traditional Dem narrative, doctors just want to provide the best care for their patients and the insurance companies get in the way. You offer a more sober assessment that needs to be worked into the opposition narrative without demonizing doctors.

RL writes:

One of the major problems I see as a physician is that third-party payments have largely divorced quality from payment. Payment is achieved through proper billing procedures, based on RBRVS, which determines the level of payment based on general parameters (difficulty of procedure, time involved, etc.) Quality is NOT a general parameter, and the system would fall apart if it tried to pay more for better quality, less for worse quality. The market, in other areas of life, handles varying quality levels without any special effort.

There ARE mechanisms to assess quality in place in hospitals, via licensing, peer review, etc., but these are highly bureaucratic and governed by physicians, who are more likely to try and quiet whistle blowers than to remove a source of livelihood from an incompetent physician, especially a friendly one that is pleasant to work with. Since what is wrong with the patient is usually discovered at some point or other, no matter how inefficient the work up, mistakes simply lead to more testing and longer work ups, all of which is paid for, and which frequently makes the patient feel he's being well looked after.

I have been practicing medicine for over 20 years, and generally test in the top quintile of my specialty. The gross errors--most of which never lead to malpractice or even peer review--I see nearly daily or striking. But when the level of quality doesn't impact on payment, while the number of patients seen per day does, it is not surprising that there is an incentive to do a rapid and marginally sufficient job, not the best job. Referring physicians to my specialty seem to routinely prefer an incorrect answer given to them rapidly than a correct result that took a little longer.

RL writes:

I recall a few years ago writing an article applying Gresham's Law to medical imaging, pointing out that the same principles leading to hoarding good money and circulating bad money led to a withdrawl of the effort to do high quality studies when everyone else did bad quality exams for the same reimbursement.

It never got published.

Applications to medical journals were rejected because the reviewers found my reasoning bizarre.

Applications to economics journals were rejected because the point was obvious and not worthy of a paper.


Niccolo Adami writes:

I come from Italy, and often times when Americans talk about the hell hole of socialized medicine, they aren't even getting to the half of it. The government system in health care is a virus, and it seems no doctors are around to take care of it.

Mike writes:

I don't know how you are able to be so productive in your professional life while serving your role as a responsible son. I too have a similar experience having to care for an 87 year old mother with Alzheimers and know how it saps one's strength.

I wish I could come up with the silver bullet that solves all our health care problems. I think part of the problem is everyone thinking such a silver bullet exists. I think the problem with fixing health care is very similar to curing cancer. The war on cancer and health care reform must be won by many small incremental victories. There is no silver bullet for either problem. We need to work more on process rather than ideological solutions and concentrate on winning the small incremental battles so some day we will wake up and realize we are winning the war. That requires establishing a system that works more on the details in a systematic way. A good idea that comes to mind is your advocacy for a Medical Guidelines Commission. Anyway, I appreciate your commitment to seeking solutions to the problem.

Mike writes:

to RL or anyone that can answer the question:

Pardon me for my ignorance but what is RBRVS? It sounds important!

Payment is achieved through proper billing procedures, based on RBRVS, which determines the level of payment based on general parameters (difficulty of procedure, time involved, etc.)
RL writes:

Resource Based Relative Value Scale, essentially a variant of Marx's Labor theory. Clearly an objective theory of value. Government paid some hotshot economist huge amounts of money to develop "objective" payments for medical services. Why wasn't he thrown out of the profession at the next Econ. Soc. meeting?

Dr. T writes:

I agree with Arnold Kling's comments about the incorrect incentives of Medicare (also true of Medicaid). I also agree with the comments of physician RL. However, as a pathologist (who sees lots of physician errors) and a medical educator, I believe that two other factors contribute to poor, non-integrated medical care: inability of medical schools to weed-out medical students who do not have what it takes to be good, hands-on physicians and the inability of state medical societies to ensure that only good physicians retain their licenses.

The market does not get rid of bad doctors, the state medical societies get rid of only a tiny fraction of bad doctors, and the medical schools and residency training programs let bad medical students and residents become practicing physicians. I've been a physician for 25 years, and I believe the proportion of bad physicians has increased steadily. Only part of the blame goes to Medicare.

Mike writes:


Thanks for the quick feedback. I looked it up on wikipedia which looks like it has a good background explanation although

Resource Based Relative Value Scale, essentially a variant of Marx's Labor theory of value
I'm not so sure I'll find anything on the link to the labor theory of value. Its been a few years since I've seen anybody reference that (humm).

RL writes:

I believe I said it was reminiscent of Marx's Labor theory [I said it was a "variant"], and specifically I think I said it was an "objective" theory of value. I'm not an economist, but I'm pretty sure this is an accurate characterization. Happy to hear from anyone who disagrees.

RL writes:

I'd be interested to know if Dr. T sees a filtering problem involved in the steady decline in quality of physicians over the last 25 years. When he and I went to medical school, some people wanted to work very hard and make large sums of money. To achieve that, they were willing to study enormously hard. (Granted, the reason there was lots of money to be had was in part government involvement.) Now, as medicine has become enormously more bureaucratic, the type of people that applied 20 years ago choose to go into other things. Instead, people who want an easy 40 hour a week job, where a patient's problems stop at 5 PM, where they can make a very comfortable income--not what they used to make, but still quite comfortable--with far less work than before, are attracted to medicine. My personal preference is not to be taken care of by a person more adept at moving through a bureaucratic maze than diagnosing a medical condition. But that's what we have now. Dr. T...?

Mike writes:


Well, I read the wiki write-up on RBRVS and your follow-up comments. I gather you are backing away from your hasty comments about its methodological origins.

I empathize with your frustrations. I have had other conversations with physicians and their feelings about the interface with the bureaucracy are similar to yours. Health economics is no specialty of mine but I have had a fair amount of comparable experience in other areas of economics and I must honestly say that it looks like RBRVS is likely done properly.

I think your problem with the system goes beyond what they are trying to achieve in their methodology. I'm sure your problem is Medicare's dictating how you get compensated. I have no beef with that but just be clear what is the source of your complaint.

The solution to health care in America is a problem we all need to face up to and we should try to be constructive. This is going to be a Marathon not a sprint!

RL writes:


1. I have not "backed away" from anything. I kindly tried to clarify my remarks for you.

2. I assume you are aware of the marginal revolution of the late 19th century and the introduction of the concept of subjective value, replacing the earlier views that value was objectively determined by various criteria, including Marx's labor theory.

3. RBRVS is an effort to determine the "value", and therefore the appropriate payment, of a medical service or procedure by determining "objective" inputs: the time it takes, the degree of difficulty, etc. So a procedure that takes a lot of time and is very difficult, but which the patient does not want or need is nonetheless "valuable" and highly compensated by the system. I am not clear if you are an economist, Mike. I have spoken with several economists who specialize in medical economics and none of them thought my analogy between Marx's labor theory and RBRVS was incorrect.

4. I am not particularly frustrated by Medicare payments. My particular work pays me a fixed rate on a per case basis. Instead, contrary to your assumption, my entire opposition to RBRVS is methodological. I think it was a system with no theoretical justification designed solely for the purpose of lowering government payments and making them predictable. Of course, since doctors can game a system as well as anyone, it has not had that result.

fundamentalist writes:

Can you really blame doctors for wanting to be in the highest paying specialties, considering the cost of med school? Nothing will change in the med profession until we break the AMA's monopoly on the supply of medical services and let the market decide what are good medical schools and training methods. Though not a doctor, I can see no reason for requiring a bachelor's degree before entering med school. People should be able to get a BS degree in medicine and practice immediately after a short internship. And should medical school really cost so much? The AMA requires a lot of things of med schools that make no sense but drive up the prices. If med school cost less, maybe more doctors would enter primary and elderly care.

As for diagnosing illnesses, computer programs have existed for decades that do a far better job of diagnosing illnesses than can doctors. The quality and cost of care could be reduced a great deal if doctors would rely more on technology.

Comments for this entry have been closed
Return to top