There’s a simple lesson that I learned in one of my econ courses, now more than 50 years ago. In the absence of increases in productivity wage increases require an increase in prices. I do not believe that physician Marty Makary has ever taken an economics course. In his post at RealClearHealth he calls for a reduction in excessive treatment in favor of a more “patient-centered” approach and in the interests of reducing spending:
The trend to recognize over-treatment led my Johns Hopkins colleagues and I to conduct a study of approximately 2,000 physicians nationwide asking them how often is medical care unnecessary (excluding the respondent’s own practice)? The result—doctors say that 15-30 percent of everything done in medicine is unnecessary, a finding consistent with that of a 2012 Institute of Medicine report that stated that 30 percent of health care spending ($750 billion) is spent on things that do not make us healthier.
His suggestions are benign but, unless providers can be persuaded that they should not expect their pay to rise, it won’t reduce costs. Health care is notoriously lacking in increases in productivity and Baumol’s cost disease will inevitably lead to higher costs whether treatment is necessary or not.
The more I read about health care the more I come to the conclusion that costs cannot come down without shoving reforms and savings down the throats of providers which, at least presently, is politically impossible.
I have a great deal of sympathy for the providers. They work hard at doing what they do and have worked hard and spent a lot of money to get where they are, anticipating that it would be worth the investment.
But, as I say in the body of the post, without increasing productivity either wages will remain where they are or prices will go up and that probably isn’t what they expected.
Here’s a series of interrelated points I haven’t seen adequately addressed in a coherent way:
– The US spends way more on healthcare than any other country on a gross, average but especially per capita basis.
– Providers accept a limited number of Medicare and Medicaid patients because we are told the reimbursement rates are so low that they lose money accepting those patients.
– The OECD median per capita spending on health care is close to what we spend per capita with Medicaid on a PPP basis.
So, why are providers in other countries able to earn a living with Medicaid levels of spending while ours cannot?
I don’t see how health care can be made less expensive in this country without providers giving some measure of flesh. Savings in administration are not enough.
They would be initially. Our administrative costs are about twice Canada’s.
But Canada’s costs of administration are around 15%. By the laws of compounding with increases of 6% or more per year a 15% saving wouldn’t go very far.
“The US spends way more on healthcare than any other country on a gross, average but especially per capita basis.”
Over 50? 40 pounds over weight? Never exercise? Have aches and pains? It might be a sign of YAGFO, You Are Getting Fucking Old. Ask your doctor about Magico. (Notice: Some recipients of Magico have suffered cancer, liver failure or agonizing, horrible death.)
So ask your doctor about Magico. Doing what Advil will do for 100x the cost………
You have to figure out how to cut providers pay. If eye just cut the fees per procedure, people will find ways to do more. Cutting utilization is par to what we should be doing to cut costs. Rather than cut pay, I would just hold it steady w/o a raise. People will fight much harder to avoid a loss.
Steve
That’s the source of my concern and my sense of urgency. Pay rates are rising in the health care sector relative to most other sectors. The higher the pay, the higher the cost basis we’ll need to deal with.