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It's The Doctors, Stupid

Steve Pearlstein's column today focuses on one of my favorite topics in health reform: The centrality of doctors. They, after all, are the ones making most of the decisions in the health-care system. Consumers outsource their thinking to their doctor, and always will. (The job of the doctor is literally to provide medical information to, and guide the medical decisions of, her patients.) That's why pharmaceutical companies focus their persuasion efforts on doctors and device manufacturers spend all that money sending branded pens to doctors. It's possible that you can reduce aggregate heath-care costs by making it harder for individuals to purchase health care. But the only way you can change aggregate health-care decisions is by changing the incentives of doctors.

That, however, doesn't get talked about very much, or very loudly. It's one of the dysfunctions of the health reform debate that the attention different actors get is related more to their unpopularity than to their actual impact on the system. Insurers, for instance, are likely to get a lot of new regulations, as they're very unpopular. But those regulations aren't likely to do that much to achieve the administration's primary objective of cutting costs.

Doctors, conversely, aren't going to see that many changes, because they're very popular. But reforms to, say, the way doctors are paid would actually do much to change the drivers of health-care spending. In particular, most doctors are paid on a fee-for-service model. Every time they do something to you, they get money for it. That's a subtle incentive toward expensive overtreatment. Conversely, if we paid doctors exactly the same amount overall, but made that money a yearly salary rather than a reward for volume of treatment, doctors would lose an important incentive to provide more health-care services than we actually need.

And since all health-care-related commentary must now, by law, include a reference to Atul Gawande's definitive piece on health-care spending, I'd just note that insurers barely appear in his article at all. He bases the bulk of his analysis around the incentives and decisions of doctors. And he's right to do so.

By Ezra Klein  |  June 10, 2009; 5:00 PM ET
Categories:  Health Reform  
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I think it's wise that Obama has chosen to fly out to the meeting of the AMA in Chicago tomorrow. But I disagree slightly that no attention has been paid to the way physicians are paid. There is a fair amount in the HELP bill about accountable care, provider reimbursement, medical homes, and how MedCAC can take on these issues. I absolutely expect that Medicare will take on the issue of payment once someone is named (and who is the latest front runner???) to head CMS. Obama and Orzag are committed to payment reform and they seem to understand it as well.

Posted by: LindaB1 | June 10, 2009 5:30 PM | Report abuse

Doctors are key. Interestingly, they are generally big supporters of single payer.

Posted by: scott1959 | June 10, 2009 6:20 PM | Report abuse

Another timely event apropos of your blog on doctors today is the NEJM article by Elliott Fisher, Don Berwick and Karen Davis about how doctors can help support delivery system reform.

Posted by: LindaB1 | June 10, 2009 7:16 PM | Report abuse

But, unfortunately, the change in incentives can create it's own problem; some doctors (anecdotally) seem to lose the drive to work the ridiculous hours that the last generation of doctors did.

Posted by: the_pretender | June 10, 2009 8:30 PM | Report abuse

"That's why pharmaceutical companies focus their persuasion efforts on doctors"
Except for the endless TV commercials, I'd believe you.

We need the incentive to be with the consumer to refuse excessive care. A lot of this needs to be education about the dangers of overtreatment. More care isn't always a good thing.

Posted by: staticvars | June 10, 2009 10:06 PM | Report abuse

I'm unemployed. Formerly self-employed I have no Cobra and can no longer afford health insurance. I recently went to my doctor fully expecting to pay whatever. My doctor has an interesting scam. If you have insurance its $160 per visit. If you have no insurance its $80. Double bill the system and we will go broke.

Posted by: ritaf | June 11, 2009 7:03 AM | Report abuse

ritaf...your doc does not charge double for people with insurance.

The cost shift goes the other way and has been proven to do so---the uninsured get a break (in this case $80, in some cases (hospitalizations) they never pay). These balances are what help insured rates to be so high. Providers have to charge the rates they charge to cover the costs of the uninsured.

If everyone had insurance and your doctor did not have to worry about covering the uninsured shortage with insured rates, the cost of his office visits would be $120 (as an example) across the board.

Posted by: scott1959 | June 11, 2009 9:08 AM | Report abuse

staticvars....excellent point. Consumers play a role but it will always be on the margin. Taking a generic instead of a brand, deciding to go to an urgent care center instead of the ER. Once you are in the system with a major issue incurring the big dollars, it is away we go. And that is where roughly 80% of the costs are.

As for direct-to-consumer (DTC) drug advertising, it has been a huge mistake. Or rather, it has worked perfectly from pharma's perspective: consumers demand the drug, docs are too harried to fight it, so they prescribe it. I think DTC should be revoked.

Posted by: scott1959 | June 11, 2009 9:13 AM | Report abuse

What Ezra's post is dancing around is the fact that cost control will require doctors to be paid considerably less, with the highest-paid doctors seeing the biggest cuts. It's unlikely that doctors will roll over for this without a fight.

Posted by: tomtildrum | June 11, 2009 10:21 AM | Report abuse seems logical to me that the specialists are going to be asked, in some in way, somehow, to give way for increased primary care. And that will cause a fight, no doubt.

The excessive utilization and waste that comes with it is due (in large part, but not exclusively) to the excessive use of specialists.

Posted by: scott1959 | June 11, 2009 10:59 AM | Report abuse

I'd believe your fee-for-service argument [it sure sounds logical] if it weren't for the fact that so many other countries have largely fee-for-service medicine too [and patients in other countries get more care than we do], but they manage to keep their health care spending much lower than we do.

Posted by: hipparchia | June 11, 2009 10:43 PM | Report abuse

While its true that doctors are the largest driver of healthcare costs, the article's focus would be better spent on a totally worthless aspect of the heatlhcare system that we spend billions on. Because to have healthcare you NEED doctors. You cant have healthcare without them.

Thats certainly not true of middlemen insurance companies, which do nothing but get in the way and take a good 35% of total healthcare costs for their troubles.

We get an immediate, clean, 30% reduction in healthcare costs today by eliiminating the middle man and having the govt employ doctors directly. We need doctors, we dont need insurance companies. Cut them out of the loop.

The FIRST goal of healthcare reform should be to eliminate useless middleman insurance companies. The SECOND goal of healthcare reform should be to standardize doctor reimbursement such that they are paid on flat salaries and not on a "per procedure" basis which drives up costs.

Posted by: platon201 | June 11, 2009 11:02 PM | Report abuse

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