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Why health-care reform can't control costs

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A reader asks:

I heard (somewhere on NPR I think ... maybe This American Life) an argument that in many regions the public option and generally more competition among health insurers would actually drive premiums up.

In these regions, the problem is that providers are too strong and insurers don't have the bargaining power necessary to demand lower fees. When there's lots of health insurers in the market, it's easy for hospitals and doctor groups to tell any one of them to take a hike when the insurer demands more reasonable fees. Adding another insurer to the market that also negotiates fees won't solve the problem and might even exacerbate it in some places.

I haven't heard this anywhere else. Thoughts?

This is an argument made by extremely smart people, including Princeton's Uwe Reinhardt, and it's well-described on page three of this report. The base insight is that providers -- doctors and hospitals, mainly -- have most of the leverage in the battle with insurers. If there's one hospital in town, then either your insurer cuts a deal with them, or you get another insurer. What you don't do is get another hospital.

The problem is exacerbated by the fact that the insurer doesn't really care to negotiate lower prices. They tried that in the late ’90s, and everyone hated them for it. It turns out that workers don't feel the cost of their health care because they think employers pay it, and employers don't care that much about cost increases because they take it out of wages. Neither group likes premium increases, but they don't really care. But everyone screams if you tighten networks and review care. As such, providers have pretty free rein. That's part of why we pay so much more than any other country per unit of care.

Additionally, health-care reform is going to great lengths to avoid touching providers. Hospitals and doctors are simply too powerful to seriously anger. Insurers aren't. That's why the original public option was so important. Armed with -- and adding to -- Medicare's bargaining power, it was a policy that you could justify because insurers were evil, but that was actually directed at providers. When it lost its attachment to Medicare, it still had good arguments for its existence, but its potential as a gamechanger ended.

My somewhat pessimistic view is that the politics of this aren't likely to change until workers are closer to their health-care spending. You'll get public will to rein in provider spending when the public realizes how much it's actually paying for health-care coverage. As it is, employers pay more than 70 percent of the average worker's cost, and Medicare and Medicaid are no better, so there's no support for solutions proportionate to the problem because the overwhelming majority of the country is insulated from the full pain of the problem.

I think a more competitive insurance market is part of this solution, but only insofar as working Americans can buy into it, and only insofar as they begin to share in the savings of choosing cheaper insurance. The exchanges are the beginning of this, but you need to open them to larger employers and you need to let workers make their own choices once they're available. As I keep saying, this bill is a start on cost control, but only a start.

Graph credit: International Federation of Health Plans chart pack (pdf).

By Ezra Klein  |  December 3, 2009; 5:42 PM ET
Categories:  Health Reform  
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In the April 2007 Bloggingheads, Ezra says that to bring costs down, we need to squeeze the providers. Now, we finally get an idea of what that means: cutting the pay of doctors and nurses (hospitals).

Posted by: Klug | December 3, 2009 6:30 PM | Report abuse

I lived in Dayton OH in 2004/2005 when Anthem BCBS tried to negotiate rates with Miami Valley Hospital and its siblings. MVH eventually told Anthem and its customers to take a hike. If your insurance was Anthem BCBS then you were liable for the difference between what BCBS paid and what the hospital wanted to charge. MVH was the trauma center for the region and the best rated hospital. The standoff was resolved when Anthem, under pressure from its clients, caved on reimbursement rates.

Posted by: smclennan1 | December 3, 2009 7:17 PM | Report abuse

Some components of reform, such as the new Medicare commission to set reimbursement rates, have the potential to lower Medicare's bills. Therefore, this reform is opposed by physicians' groups, hospital lobbyists and pharmaceutical and medical device manufacturers who would prefer to deal with an institution, Congress, that has never shown the will to make the necessary reimbursement cuts to save Medicare from its projected insolvency.
James Rickert, MD
President, The Society for Patient Centered Orthopedics

Posted by: jrickert1123 | December 3, 2009 7:44 PM | Report abuse

A good 50% of those costs that are in the graph Ezra cites are "overhead."

That number includes nursing salaries, utility bills, malpractice insurance, leasing space, etc.

Lets stick to what doctors actually make instead of lumping in all the overhead stuff which doctors never see a penny of. I doubt that Ezra considers nurses "providers" so why is he including their salaries in his graph of "provider" incomes?

Doctors reimbursements account for 20% of total healthcare costs. Of that 20%, half of that is used to pay for overhead stuff, and about 10% actually goes into doctor's pockets.

So even if you cut down doctor take home pay IN HALF, at most you get only a 5% savings in total healthcare costs.

Posted by: platon201 | December 3, 2009 8:01 PM | Report abuse

"I think a more competitive insurance market is part of this solution..."

But Ezra you were the one saying, correctly, that a competitive market never works for an item you want everyone to have. It didn't work for competitive fire depts in colonial days and it hasn't worked for health care in the last 50 years.

Here is yet another example (from T R Reid) on how it fails. Why don't we have as good preventative as other countries who do not have a competitive system? The reason is that a person is a customer of an insurance company for 4.8 years on average. Why should my company pay for something that will only benefit some competitor?

You can't have an efficient system like other counties as long as you insist on preserving the obscene compensation for insurance executives and the high returns for wealthy stockholders of competitive companies.

Posted by: lensch | December 3, 2009 8:03 PM | Report abuse

Ezra's graph is mislabeled. He has a title at the top that says "physician fees" and a title below it that says "routine office visit $"

This makes a hugely faulty assumption that 100% of office visit reimbursement goes to the doctors. Thats a nice theory, but it makes it quite difficult to pay nurses, utilities, malpractice, etc.

Does Ezra assume that 100% of a $50 bill for dinner at a restaurant goes directly into the owner's pocket? Because thats what he's assuming in his graph above.

Posted by: platon201 | December 3, 2009 8:06 PM | Report abuse

"A good 50% of those costs that are in the graph Ezra cites are "overhead.""

Do you have a reference for this figure?

BTW, I see 6 physicians and only one (who is located in a hospital) has a nurse in the office.

Also, my doctors tell me they spend a fortune in filling out forms for insurance companies and fighting for covergae for their patients and payment for the company.

In France (T R Reid again), each person has a smart card. The physician puts it in his reader and not only does he get the patient's medical records, but it handles all billing which usually appears in the patient's or physician's account in the same day, and, in any case, must by law be paid within two weeks.

Can you ever see our competitive companies adopting such a system?

Posted by: lensch | December 3, 2009 8:14 PM | Report abuse


I've already pointed out that this graph is based on charge data, not actual cost data. Its problematic to see you use faulty data twice, when its already been pointed out to you. The sourcing from IFHP is extremely clear that the analysis is based on charge data. IF you somehow don't know, charges are list prices, meaning BEFORE insurance companies negotiate their actual cost.

There is a lot of evidence that Medicare typically has a 15% price advantage. The data here suggests a 50% price advantage. Make your point based on correct data next time.

Posted by: wisewon | December 3, 2009 8:22 PM | Report abuse

I have worked with and interact with physicians from a variety of countries. All of them are shocked at how much physicians in the US are paid.

Posted by: msgrinnell | December 3, 2009 8:28 PM | Report abuse

PS Your post is an excellent articulation why Obama's choice should have chosen Wyden's Free Choice Act, not the public option, as the controversial element of reform for him to pursue. Their is significantly more policy support for that, whereas the public option/price fixing approach to cost control has little non-partisan expert support. Those in the policy world heavily tilt towards overutilization as the key issue.

Gruber was being nice to you when he said he "wasn't a price guy." He could have been more direct and just said that he thought you were wrong. As would most policy experts. The reality is that very few people who have studied health policy believe that prices are the key problem. Prices aren't going up 6 to 10% each year. I really wish you'd stop pushing this incorrect line of logic. There is little support that its correct.

Posted by: wisewon | December 3, 2009 8:29 PM | Report abuse

"My somewhat pessimistic view is that the politics of this aren't likely to change until workers are closer to their health-care spending."

You say this, and yet you support a reform bill that does next to nothing to remove the link between insurance and employment (the link that shields people from the spending), as well as requiring insurers to have lower cost sharing than many of the plans being sold today. In other words, the current health bill actually does the exact opposite of what you think is necessary, yet you still carry water for the Democrats bill day after day. Simply amazing.

Posted by: ab13 | December 3, 2009 8:45 PM | Report abuse

There are basically two ways to contain health care costs. The obvious one is to control prices through price controls and/or prospective payments. This is the tool and the only tool that Medicare traditional fee for service uses. All of the multiple reconciliations which have occurred over the past two decades are based on Congress legislatively created price controls (i.e., RBRVS for physicians, DRGs for hospitals) and then usually cutting their update factor or making some technical change in the calculation of the price control or the update (i.e., the continuous physician battle about fixing the SGR). However, providers are smart and when they are cut, they increase their overall payments by increasing utilization of services. The CBO adjusts for this phenomenon by applying what they call a behavioral offset to payment cuts--meaning that CBO knows that providers will recoup anywhere from 1/3 to 1/2 of any payment cut by increasing volume of services.
Traditional Medicare fee for service and a public option based on fee for services can never control utilization of services. The only model we have that sometimes can is integrated managed care based on evidence based medicine and best practices. THAT IS WHY THE MOST DAMAGING PART OF THE DEMOCRATIC HEALTH CARE PROPOSALS HAS BEEN THE DEMONIZATION OF INSURERS AND MANAGED CARE. YOU ARE THROWING OUT THE BABY WITH THE BATH WATER.

Posted by: hcohen3 | December 3, 2009 8:48 PM | Report abuse

Whoops, lest we forget that physicians in many countries with health care programs (I am quite familiar with the Swedish program which incidently allows private medical insurance), are salaried. That does make a difference when comparing charts and graphs if this fact is ignored.

Posted by: jm161 | December 3, 2009 8:49 PM | Report abuse

The claim was made that more insurance competition might make things worse, but I see absolutely no compelling (or even elementary) logic in that post to suggest that providers would somehow deem to raise costs just because now there were more insurance competition.

Even if more insurance competition didn't reduce costs, it would certainly improve the insurance products for the consumers.

Your "really smart" people didn't impress me in this case.

Posted by: Lomillialor | December 3, 2009 9:29 PM | Report abuse

Lowering med school tuition would help remove graduates' sense of entitlement to gouge, justified by their leaving school with massive educational debt.

It's the next thing we'll need to do, in any case, if we plan on having sufficient medical personnel when more of the citizenry is covered.

We don't need so many expensive specialists.

Posted by: harold3 | December 3, 2009 9:50 PM | Report abuse

This is a good argument that's been brushed by the wayside. The FTC has lots of control over who can and can't negotiate together as a group for rates against an insurer. All versions of reform (and a bit of ARRA) have an emphasis on quality; often encouraging some version of a regional quality consortia. Once that happens; per the current FTC language, those provider groups would be able to negotiate prices as a group (they'd have 'clinical integration', the somewhat nebulous term used by the FTC). However, any changes to the negotiating framework don't require an act of Congress to change; it's just a swipe of the pen per my understanding. I'd assume the FTC rules are going to be re-written once whatever gets passed gets passed.

Posted by: ThomasEN | December 3, 2009 9:52 PM | Report abuse

How about requiring that employers provide employees with the amount of their health care compensation per year. Such transparency would educate workers and perhaps begin to affect public attitudes about health care cost. The failure of the Wyden-Bennett health care proposal is tragic because it proposes to disintermediate employers in the health care payment loop and make people directly responsible for paying their own insurance costs with government subsidies.

Posted by: Puck3 | December 3, 2009 9:57 PM | Report abuse

Getting rid of fee for service would also bring it down.

Posted by: harold3 | December 3, 2009 10:00 PM | Report abuse

"Getting rid of fee for service would also bring it down."

Is there any evidence this is true?

France has fee for service and better quality and much lower cost, hence its elimination is not necessary.

The institutions in the US without ffs do not have lower costs.

Posted by: lensch | December 3, 2009 10:09 PM | Report abuse

"I have worked with and interact with physicians from a variety of countries. All of them are shocked at how much physicians in the US are paid."

Yes, and I'm shocked at how much lawyers are paid in the USA. And movie stars. And athletes. And investment bankers. And lobbyists. And TV news anchors.

And your point was ......?

Posted by: dan1138 | December 3, 2009 10:30 PM | Report abuse

At last we're getting close to a central cause of spiralling health care costs - the ludicrous monopoly profits of doctors.

The doctors restrict the number of medical schools to keep the numbers down, and consequently their stratospheric incomes high.

Remove all power of doctors to run a closed shop take the power to veto medical schools OUT OF THEIR HANDS once and for all.

It is rather ironic that many doctors have become more virulent public money parasites than the diseases they seek to treat.

Posted by: lodger2139 | December 3, 2009 11:52 PM | Report abuse

Doctors are disgusting parasites, they restrict the numbers of medical schools to keep their bloated incomes high.

They are the ultimate labor union. How many more have to die before we stop them running this closed shop?

Posted by: lodger2139 | December 4, 2009 12:11 AM | Report abuse

lodger you are a fool.

NYC and Boston have the highest number of doctors per capita in the world. Guess what, they also have the highest HEALTHCARE COSTS in the world.

Your simplistic drivel that more doctors = lower costs is a fantasy.

Posted by: platon201 | December 4, 2009 1:50 AM | Report abuse

I can attest to this from a personal experience that happened today. I went to the dermatologist today. I had a full body check. I had 2 moles on my back that I wasn't able to see well and were worth watching and the doctor said I might be better off having them removed. It was a simple decision to say sure. So my visit with complete check, 2 moles removed and 2 plantar warts removed cost $800. I am sure the insurance company (IL BCBS) will cover most of it. My out of pocket may be $100. It wasn't even a thought that with my good insurance, it is simply easier to have the moles removed. I really didn't have a thought about the cost until I saw the bill and then I thought to myself good thing I have good insurance. This mentality requires a wholesale shift in how our healthcare system works. I don't have the answer on how to make this better but I do think something has to change to limit these cost as well as making the consumer to think "it might be worthwhile to just keep a closer eye pont these moles rather than having them removed.

Posted by: timnlisa1 | December 4, 2009 1:58 AM | Report abuse

Well there is a lot of emotion here and some incorrect facts. I will dispute the statement by my friend lensch that non-ffs models don't have lower costs. Operating costs at Kaiser are 80% of the industry average. And they pay their doctors very, very well. The only difference is that there are relatively fewer superstars with million dollar incomes.

People are demanding Wyden-Bennett, but relax guys Obamacare will naturally evolve into something very similar to this model. You'll get your chance to see that this model doesn't work.

The truth is patients are in no better position than employers to negotiate prices. Patients will skimp on needed primary care because of out of pocket costs. Yet specialty care is driving 80% of medical spending, much of it rendered a non-elective basis. It forces patients to try to economize in the wrong places.

The government is the only one with the authority to impose utility-like administered payment rates on specialty providers. This is the only way we will ever control costs. Unfortunately for us we're about to learn this the hard way.

Posted by: bmull | December 4, 2009 2:18 AM | Report abuse

timnlisa1-- Bingo, we need to find a way to reduce the incentive for you to see the doctor for unnecessary care without reducing the incentive for you to to see the doctor for necessary care. Oh wait. That's actually really really hard.

What we need to do instead is reduce medical spending all around through evidence-based guidelines, cost-efficient delivery systems, and administered rates.

Posted by: bmull | December 4, 2009 2:39 AM | Report abuse

I think politicians, pundits, economists and other people who obsess about controlling health care costs, should set an example for those of us who think access to high quality health care for everyone is of highest importance, by paying most or all of their own health care insurance, choosing cheap insurance and/or paying taxes on their health care benefits.

Posted by: Aprogressiveindependent | December 4, 2009 3:36 AM | Report abuse


Thoughtful posts, but I think you're off here.

1. Medicare already has the administered rates abilities. Not sure how close you're to this stuff, but its a frank joke. At a high-level that's clear. You've got radiologists making 400K on average, because Medicare is too slow on shifting rates to account for increasing efficiencies, volume and scale. But at a microlevel-- this isn't fixing the rates of electricity at a public utility. Its extremely more complex. A multitude of fields, ones that emerge that have overlapping disciplines-- e.g. interventional radiologisits vs. vascular surgeons vs. interventional cardiologists-- government is simply not equipped to effectively taken on a challenge that's arguably more complex than anything they do now. Whether they have role in still doing this is debatable, but its extremely clear to me that as the core tenet of your cost control policy, this is a recipe for failure. Its a cat and mouse game between government and providers, and there'll never be the horsepower to keep with the constantly change complex trends in medicine. "Correct" reimbursement will always be 10-15 years behind.

2. Your approach is too binary. Yes effective cost-sharing is hard. But as a principle, lower co-pays for proven, cost effective treatments, and higher co-pays for less proven, expensive treatments can work. If you've got the EBM guidelines, they can be applied to both physician AND patient. Similarly' provider co-pays-- lower for cost-effective, high quality providers, higher for the opposite. Information provided to the public based on agreed upon quality/cost metrics. This would be an even more effective tool than P4P/direct physician compensation reform because folks will drive towards the lower cost, higher quality physicians. Insurance companies have started experimenting with this approach already in CDH plans, but no one trusts their data. Give the government the role of providing the annual official data and that can be implemented in a variety of ways by payers.

3. Compensation reform. Similar to what we did with HIPAA in the 90's, we need to sunset the ability to collect compensation as an independent, single-practice/single specialty business. THIS round of reform, if it was stronger, would not simply do bundled payment pilot projects, but would require that 30% of Medicare dollars are ONLY reimbursed to integrated systems that meet certain standards by 2015. That's tough cost control.

We could go on and on, the point is that administered prices may have a role, but its not a central one. I don't think we need them at all if we couple the above with Wyden, better transparency and a couple of other things. Market pressures could work, its just complex to understand how to structure the market appropriately to do that, and frankly folks in DC and their academic buddies don't understand how-- so thats why we've got Orszag running the show instead of someone like Dennis Cortese. The former is a joke.

Posted by: wisewon | December 4, 2009 7:22 AM | Report abuse

bmull - You may be correct about Kaiser being cheaper; I couldn't find the data. BUT is there any evidence it is due to elimination of ffs? There are many posible resons. You point out they do not hire superstars. They require arbitrartion. They have been accused of dumping the poor on other hospitals.

On a larger topic, there are many complicated postings here about how to cut costs while keeping quality, but nobody seems to look at the example of other countries which, while certainly not perfect, do a vastly better job than the US.

Why reinvent the whheel?

Posted by: lensch | December 4, 2009 8:38 AM | Report abuse

Nobody has answered my points. The greedy doctors run a closed shop where they restrict the number of medical schools to keep their disgusting incomes high.

Remove the power of doctors over the LCME (body that controls medical schools) completely.

Doctors should not be determining how many other doctors are trained. This is a disgraceful outrage which is costing every family 5,000 per year minimum. Enough is enough- stop the closed shop.

Posted by: lodger2139 | December 4, 2009 9:08 AM | Report abuse

Ezra- ab13's comment above is right. The Dem health care bill does nothing to change incentives for employees. Why support it? In fact the bill moves in the wrong direction. Shielding consumers to an even greater degree, through more mandatory benefits, less cost sharing, and higher premiums. Do you think that raising the price of health insurance (as the CBO says will happen) and then partly offsetting the price increase with subsidies helps the situation? It makes it worse.

Posted by: MBP2 | December 4, 2009 9:27 AM | Report abuse

also, i disagree slightly with the way you make your argument. Contrary to your comments, insurers care a great deal about negotiating lower prices with providers. It's no coincidence that larger insurers have thrived because they have more leverage with providers. Now, where I agree with the thrust of your argument is that employers and employees hamstring insurers by refusing to allow them to create narrow networks. The fact is: insurers can control costs to a much greater degree than they do now -- if employers and consumers will allow them to do it.

Posted by: MBP2 | December 4, 2009 9:33 AM | Report abuse

I wish Mr Klein would spend more time checking facts instead of relying on inaccurate/inflammatory statistics. As a practicing physician I can tell you that I make about $23 a visit(less than what physicians in Canada rs who make). The rest of that money goes toward overhead.Most doctors charge about 70 $ a visit ..The 141 $ visit is only for specialities where a visit is very time consuming or involves procedures. I do agree however that cost savings are definitely possible by reducing overhead.

Posted by: kalyanaramankodandapani | December 4, 2009 9:36 AM | Report abuse

As shown in the chart, charges for physician visits vary widely by location and specialty. Whatever the charges, about 25% goes to billing -- aka insurance processing. Building the complex insurance exchange with subsidies will exacerbate that so I expect we'll see a 2-3% rise in in physician charges due to just increased paperwork.

It's true that graduating doctors feel entitled to a large income because of their student loans. But what about all the other people who are defaulting on their loans in this economy? They thought they would get better salaries too. If we want doctors, why don't we subsidize their education more in the form of loan waivers for underserved populations?

The proposed legislation does include something for this but it is so circular in references to existing programs that it is impossible to tell what we'll get. I've yet to read a cogent analysis of this particular point.

For the record, I am 100% in favor of health*care* reform. I don't see anything whatsoever to support in the current legislation. Delivering a captive market to the insurance industry is not reform. Increasing the costs of self-payers to extend a known dysfunctional model is not reform. Talking about ways to decrease cost is not reform. That's why I am opposed to characterizing the currently proposed bills as anything but sham legislation.

Posted by: Athena_news | December 4, 2009 10:16 AM | Report abuse

Look at your own graphic. You go on to argue that people should be closer to their own health insurance costs. Why, then, are routing costs like checkup visits paid for by insurance? These are completely predictable costs and are not beyond the means of most people to pay. Having insurance pay for it is like having your car insurance pay for gasoline. I would rather have cheaper insurance, saved for catastrophic or unpredictable things, get a raise from the money it is saving my employer and pay for this stuff myself.

Posted by: invention13 | December 4, 2009 11:48 AM | Report abuse

lodger wrote: "Nobody has answered my points. The greedy doctors run a closed shop where they restrict the number of medical schools to keep their disgusting incomes high."

platon did respond, though not very politely. I'll try to be civil and hope you'll understand. I went back to a textbook, Introduction to Health Services, 4th edition published way back in 1993. In 1966 there were 88 Med. Schools which graduated 8,759 students. By 1981 there were 126 med schools which graduated 15,667 students. Obviously there was a huge increase in med schools and graduates in only 15 years time. What happened to health care costs in that time period?

Increasing the supply of physicians per capita by 61% between 1970 and 2006 did not constrain health care cost increases.

Okay? Do you understand why anyone who knows anything about physician supply simply shrugs off your questions as hopelessly naive?

Posted by: steveh46 | December 4, 2009 1:49 PM | Report abuse

Several providers have made the argument that they don't make $59 to $151 per visit - it goes to overhead. Wisewon, in his infinite wisdom, has also made the point about these being list prices, not negotiated rates. Fine, let's look at prices for cash paying customers (i.e. customers who do not have managed care negotiating discounts). They don't get discounts and their visits don't require the use of billing specialists. In France, you still pay 21 euros for a visit to a general practioner, whereas in Washington DC you pay about $100 to $200 per visit. Sure, the doctor only pockets what doesn't get spent on supplies and physician-administered drugs, staff salaries and malpractice insurance. But all but malpractice insurance is comparable internationally, and the math just doesn't add up on malpractice costs. What it shows is higher costs to patients.

If we think the driver of costs is physician salaries, let's just look at reported salaries. Doctors don't work any more hours in the US (in fact, the most expensive often work very few hours), but they're paid several fold more than in France, Germany, Nordic countries and Japan. I'll focus on France, as it's also one of the big health spenders in the world and I have good data on France. GPs make about 2500 euros per month after taxes in France. In the US, disposable income is generally over $12,000.

Don't believe we can compare dollars across countries? Let's look at it in purchasing power parity. Doctors still make substantially more.

Don't believe in PPP? Let's look at where doctors are in the income distribution? In the US, they're generally in the top 5%, whereas in France, for example, they're in the top 20%. My sources on the wage data come from l'INSEE's enquete emploi and BLS.

Posted by: GrandArch | December 4, 2009 2:16 PM | Report abuse

I understand why this "reform" won't work. what i don't understand is why we massive subsidies are a good idea to fix this. won't the subsidies themselves just continue to drive up costs (for which we the people will be on the hook)? i understand the argument for reform and i understand the argument for subsidies. what i dont get (and nobody ever talks about it) is why increased subsidies is the preferred trade off for reform. without some actual reform of the cost system we shouldnt be throwing money at something we know is broken.

[oh, and i know a doctor's office that has 3 secretaries for 5 doctors and doesn't take medicare/aid. for a non-partner in this private practice the overhead costs were indeed a very significant cost of their private practice.]

Posted by: PindarPushkin | December 4, 2009 2:27 PM | Report abuse

I'm totally confused by your tortured logic. You seem to forget at the end of your very short post that at the beginning you seemed to be agreeing that competition doesn't hold down healthcare costs. At the end, you again call for a more competitive insurance market!!

Is this a religious observance? Does one need to always present an offering to the idol of "competition". Competition hasn't really worked in other countries to hold down healthcare costs...why should it here? How frightened are you to take the logical next steps from what (at times) seem to be learning about healthcare?

I'm wondering if you are suffering from some sort of short-term memory problem...

Posted by: michaelterra | December 4, 2009 4:56 PM | Report abuse

GrandArch: When you look at "average" physician salaries to compare U.S. and European doctor incomes, you are comparing apples and oranges. The U.S has a much higher ratio of specialists to generalists (2:1) vs. Europe (1:2). If you look at PPP incomes by speciality, you get a much closer picture. France is an outlier, unless you take into account the very large tax break they get on their sécurité sociale. See:

An interesting paper from the Robert Wood Johnson Foundation on the cost of "physician interaction with health plans" (aka "physicians trying to get paid") can be found at:

Just for comparison: In 2006 the average U.S. primary care doc made $155000. A lot of money, indeed, however Bill McGuire, the CEO of United Health Care that year made $1,800,000,000 -- or roughly 12000 times what those physicians made. Ezra does not think that $1.8B is a significant figure (UHC only makes about $3B in profit), but I do.

Posted by: J_Bean | December 4, 2009 8:58 PM | Report abuse

Great post, this is my favorite bit: "My somewhat pessimistic view is that the politics of this aren't likely to change until workers are closer to their health-care spending."

It's so true it hurts. We need published prices and higher deductible / percentage co-pay systems so that we have an incentive to shop around and let the invisible hand work, instead of creating the current tragedy of the commons.

People clip coupons to save $0.50 at the grocery store or stand in the cold for hours to save $50 on a new TV, but they won't make a choice that could save them $100 on each visit to the doctor, because they pay $10 or $20 where ever they go.

Posted by: staticvars | December 7, 2009 10:33 PM | Report abuse

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