Arnold Kling  

Health Reform's Savings Myth

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Economics and Modernity... Speaking of Health Care Reform...

That is the title of an op-ed piece by Maya MacGuineas that is on the Washington Post web site. I didn't see it in print, because I am still not used to the way they have mixed up the Sunday paper.

Anyway, what I was looking for on the web was a link to this article, which says that modern doctors are too beholden to insurance companies, rather than to patients. Nowhere does the the author mention that in 1960 fifty percent of personal health care expenditures were paid for by patients themselves, whereas now it is only ten percent. Instead, he writes as if modern doctors are greedier than they used to be.


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COMMENTS (6 to date)
Fazal Majid writes:

It's an open secret the AMA uses its licensing powers to restrict supply and keep physician income high. There can be no solution without taking on this core entrenched interest, whether through immigration or by ramping up military medical schools.

Doctors may well be greedier than in previous times, see this New Yorker article on the subject:
http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande

Dr. T writes:

I love it. Doctors are 'beholden' to insurance companies.

Doctors, if they want to get paid, must kowtow to Medicare, Medicaid, Workers' Compensation, and dozens of private and union-owned health insurance companies. Each of these payors has separate rules, regulations, and requirements. Eligibility, coverage, copays, and deductibles must be checked for each patient at least annually. Precertification (check with them before you dare to treat) is required for some conditions and/or treatments, but that varies by payor. Some precertifications require second opinions, and those requirements vary by payor. Payors deny claims at high rates, even when everything was done by the book. Some payors use claim denials as a way of saving money (the doctor doesn't resubmit) or of delaying payments. Because of the above issues, billing and claims services cost doctors around 7% of gross receipts.

In areas where there is one dominant insurer (such as New York state with Blue Cross/Blue Shield), the dominant insurer has tremendous clout and can negotiate greatly reduced fees. When physicians organized to fight back, they lost anti-trust lawsuits. (A near-monopoly health insurance company doesn't violate anti-trust laws, but a physician bargaining group does.)

Given this state of affairs, it is hard to imagine doctors being beholden to insurers.

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To Fazal Majid:

You don't have a clue what you are talking about. The AMA has absolutely no licensing powers. None. Licensing is performed within each state by politically-determined medical licensing boards (that are not AMA-affiliated). The AMA also has no control over medical schools, their certification, their class size, etc.

The AMA is a professional society that the vast majority of physicians do not belong to. It is an advocacy group for physicians, and it has a political action committee. It has influence but not much power.

The real scandal in medical licensing isn't that too many are granted, it's that too few are taken away from incompetent doctors.

The main reason physician incomes are high is that it takes many years of hard work (and often more than $100,000 in student loans) to become a doctor. Few young adults want to go through that ordeal, so there are many areas with too few physicians. This also explains why many physicians work over 60 hours per week.

I will concede that many physicians are greedy--now moreso than in the past. But, I've noticed that about many other professionals, too.

El Presidente writes:

Arnold,

Nowhere does the the author mention that in 1960 fifty percent of personal health care expenditures were paid for by patients themselves, whereas now it is only ten percent.

So, when people pay health insurance premiums, they're not paying for health care? Interesting. What are they paying for?

SWH writes:

El P-

I think you know better than your comment re self-pay health care in 1960 implies.

Fifty percent of expentidures were directly paid.... out of pocket at the time of service. The import is that patients had an opportunity to experience the incremental cost of the particular health care he/she obtained.... and then self-ration. That doesnt happen now - but should. Without a significant incremental cost to the patient, the patient has no reason to not seek all the services available, whether they need it or not. Another kicker is: the higher their fixed health care premiums are, the more this is true.

Mark writes:

On a related topic, last week there was a study put out by Families USA asserting a "hidden health tax" of $1,000 per person that, I thought, contained a huge fallacy. The study asserts that health care providers pass 100% of their losses on uninsured patients through to their insured patients by charging more to insured patients than they otherwise would. I thought that was absurd. If you agree it's absured then their whole study is wrong, because everything else in it is just arithmetic based off of that postulate. I also would point out that,if it were true, then the theory of achieving cost containment by having insurers bargain hard with providers is impossible and wrong.

El Presidente writes:

SWH,

The import is that patients had an opportunity to experience the incremental cost of the particular health care he/she obtained.... and then self-ration. That doesnt happen now - but should.

Are you saying that we receive more health care than we pay for in the aggregate, or are you saying that some people pay more and other people use more so that the costs and benefits do not correspond and are not easily attributable as they would be in fee-for-service arrangement?

If a person would benefit greatly from treatment and does not seek it because of the cost, is that a success?

Without a significant incremental cost to the patient, the patient has no reason to not seek all the services available, whether they need it or not.

There ARE significant incremental costs; namely copays, lost time and wages for seeking care, physical discomfort, and the threat of having any negative results or previously undiagnosed medical conditions influence future premiums should there be a lapse in coverage. One negative diagnosis could mean higher premiums for the rest of one's life or the inability to receive treatment if, by changing providers, it becomes a "preexisting condition". And I don't know of anyone who would get back-to-back colonoscopies just for the hell of it. Do you? While out-of-pocket payment might increase self-rationing, its absence doesn't eliminate self-rationing.

That wonderful diversion aside, my question remains: to the extent we are paying for something other than health care, what are we paying for?

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