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Are Doctors Like Halliburton?

The Times has a smart op-ed this morning by Peter Bach, a pulmonary specialist and occasional health-care bureaucrat who wants to see Medicare become a bit more competitive.

Bach's basic insight is that Medicare is like a no-bid contract for doctors. "We agree to treat Medicare patients for a set rate," explains Bach, "and Medicare agrees to take all of us on board, whether or not our services are needed in the city or town where we practice." The result is that doctors cluster in towns where they want to live, driving up costs (because they begin to try to increase volume), and leaving other regions totally underserved. But it doesn't need to be this way.

Medicare could use an approach called a reverse Dutch auction to set up competition for doctors in oversupplied regions.

Here is how it would work. Later this year, the agency would set a 2010 target number for each type of specialist in an oversupplied region. Then it would offer to sign up those doctors at a certain payment rate. The starting rate would be, say, $30 per doctor work unit. (Work units are a measurement that Medicare uses to set its rates; each procedure is assigned a specific number of work units.) This is lower than the $36 per work unit that Medicare pays all doctors today. If too few specialists signed up, the rate would go up, and it would keep rising until there were enough doctors for the area.

In areas where there are too few doctors, Medicare could pay more than $36 per work unit, attracting not only specialists but also the primary-care doctors who are so needed in these places.

I don't really see a downside to this idea, save that some doctors might not like it. That might be enough to scotch it in Congress. But it might be just the sort of reform we'd see if those decisions were somewhat removed from Congress and given instead to MedPAC.

By Ezra Klein  |  June 4, 2009; 11:26 AM ET
Categories:  Health Reform  
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or to a truly private insurance company.

Posted by: fallsmeadjc | June 4, 2009 11:41 AM | Report abuse

This proposal might actually have some of the biggest problems of the NHS: bureacrats set targets for provision levels, which lead to long waiting lists.

If there were a rational, automatic basis for setting (or triggering re-setting) of the target level for provision in each specialism.

Posted by: albamus | June 4, 2009 12:30 PM | Report abuse

Wow, that's almost as good as a market. It seems crazy that we pay doctors the same amount for these procedures...

Posted by: staticvars | June 4, 2009 1:21 PM | Report abuse

It's a good idea but I think I'd hypothesize that areas oversaturated with specialists are also more likely to be dominated by Medicare HMO's; therefore making any tweaking of their payment on straight Medicare sort of a weak intervention.

Posted by: ThomasEN | June 4, 2009 1:39 PM | Report abuse

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