The Health Care Topic Not Everyone Considers: How should we pay our doctors?

One of my frequent sources for outside opinion from the left, Ron Chusid, made me think about the aspect of health care I had not considered most closely before. As something of a policy wonk with strong feelings on this particular aspect of policy, my focus on health care has been the individual's access to quality health care and the cost to that individual. I have not considered, one way or the other, just how doctors should be paid. This has changed a lot over the years.

In the past, many doctors were the 'country doctors' and 'town doctors' of storied movie and television lore. Such doctors were an early form of 'socialized medicine.' They did not punch a clock, but rather were on permanent call should someone need emergency medical assistance and either kept regular offices hours during the week, made regular rounds, or some combination of the two. In return, they were supported by the community. Some of them lived in a home built or paid for by the community, others moved from guest room to guest room, sleeping with one family and then another on a rotating schedule. All were frequently dinner guests at the homes of their patients, some ate all their meals in community homes. If the doctor was paid in hard money at all (and not all were) it was from a community fund into which all the members of the community paid. One could not get more 'socialist.'

Urban doctors (as the phenomenon of urbanization took deep hold in the US) usually worked in hospitals. Hospitals were either public institutions, supported by local tax money, or private charities supported by philanthropists or religious groups. These sources of funding were much stronger than in today's 'for profit' hospitals, and the individual charges to patients were much lower. Doctors frequently lived in the hospital, particularly younger doctors (this is the source of the term 'resident' in medical parlance), and often ate there. Doctors in private practice, usually older doctors, were paid by their patients on a per visit basis.

Health care reform and the largely mythical question of 'cost control' (mythical in the sense that the thesis 'many medical costs can be controlled at the supply end of the spectrum' is questionable at best, many things can be done to control consumer costs) frequently focuses on medical procedures (the much villified 'unnecessary procedures' and the more genuinelyrather than doctor compensation. When doctor compensation is mentioned at all, it is used as a fear tactic by conservatives claiming that the US medical system will suffer a brain drain if doctors cannot get rich. It should be noted that since younger doctors at the low end of the profession are as underpaid and overworked as established doctors at the high end of the profession are underworked and overpaid, the question of how doctor compensation affects health care costs and how health care reform might or should affect doctor compensation becomes an important consideration.

Ron quotes Ezra Klein, blogging for the American Prospect, talking about just this subject. The primary resource for Klein's article is a poll by Kaiser/NPR. Klein, citing the poll and showing a nifty graph, demonstrates that 25% of the people polled believed their doctor should receive a yearly salary while a whopping 70% believed their doctor should be paid for each visit with patients. Klein than says:

"Honestly, I'm surprised patients even have an opinion on that. And it might be a very weak opinion. But for now, the public prefers that doctors get paid for each thing they do than on a salary basis. They prefer, in other words, that doctors have an incentive to do more rather than do less."

It can be taken that way, if one wishes to read it that way. Except that, under the current system, the final word on your medical care is not your doctor. It is either the isurance provider that pays for your care or the HMO or hospital that pays your doctor. This is an important distinction. It is also important to remember that there are times when it might be in your interest for your doctor to do more rather than less. Ron notes:

"Many have experienced the horrors of the HMO era in which doctors were actually paid based upon how little care they provided. Many also see the difference between the more old fashioned model of doctors in private practice as opposed to the increasing number of doctors who are employees paid a salary. They have seen the difference between a doctor who is motivated to work long hours to care for their patients and salaried doctors who check out at 5:00."

Ron makes a very important point for basing doctors' pay on service provided to patients rather than service to the clock. I work for myself, and in 'private practice' I am paid for the work I actually do, not for my time on the clock. While one can argue that a doctor in a hospital might deserve compensation for his availability, I agree with Ron that a doctor's primary compensation should not be for punching a clock.

To repeat an example I gave in my comment on Ron's post, compare the way doctors are compensated with the way lawyers are compensated. An associate in a law firm (the rough equivalent of a resident in a hospital) is paid a salary, because they are an employee. However, their pay is greatly affected by their billable hours (more productive lawyers are paid more) and most law firms pay extra compensation for courtroom hours. Lawyers in the same position as doctors of equivalent experience are incentivized to work more rather than less. What is more, lawyers who do not meet firm standards of billables will see their pay drop and may be fired. While this exact model may not be the perfect choice for medical compensation, it outlines a stark difference between the employment models.

I should note that prescribing more drugs (something many liberals bash, as the model which incentivizes doctors for prescribing specific drugs is clearly mistaken) or ordering more procedures (which some hospitals and doctor's offices do indulge in when they know a patient has a plan that will pay for it) are not what I am talking about. These are certainly corrupt practices which liberals rightly bashed. I am talking about the time and care the doctor gives a patient. Prescription incentives and procedure incentives may be fat in need of trimming, but doctors should be incentivized to give the highest quality care to the patient rather than worship the clock.

The major problem with health care reform is the obsession with 'medical costs' as if some miraculous reorganization of the system will magically make things cheaper. If one obsesses with 'medical costs' than one rapidly becomes confronted by the fact that the newest medications and medical procedures will always cost more. The cost of innovation will always be applied to the cost of care. Liberal discussions of trimming wasteful costs and conservative paranoia of 'rationed care' are equally removed from the real problem.

The real problem is the cost of medical care to the consumer and the fact that high consumer costs reduce access and quality of care. The uninsured bum in the emergency room is not given the same quality of care as the teacher with state insurance, and the teacher is not given the same quality of care as the millionaire who can afford to pay every cost out of pocket. This is a very real 'rationing' problem that exists in our current system, and economic rationing will not be solved by bureaucratic rationing. The added 'rationing' effect of provider corruption, which is all but required in order to make a profit, only makes it all worse.

There is no easy solution to the problem of medical costs, and liberals who say the government can solve it all and conservatives who say the market can solve it all are equally wrong. The government cannot lower the costs of the best medical research. In fact, the kind of quality controls that the government needs to impose on prescription drug research and marketing and medical technological research might very well increase the costs of those processes. Lying about this or hiding from it is only counterproductive to health care reform. The market cannot improve the situation because free enterprise must make a profit to remain viable. As long as research companies, medical providers, and hospitals are driven by the need to make a profit then consumer costs will continue to rise and Americans will continue to be denied access.

The only problem that can be addressed is consumer cost, and this problem can be addressed in at least two ways. It can be addressed by spreading consumer cost as equally as possible among the largest number of consumers and subsidizing the rest (which our current system attempts to do and fails) or it can be addressed by addressing the profit motive of corporate health care. France and Germany have gone a very long way toward solving many of the problems discussed through the latter method, with some of the former. Sweden has done even better through the former method, with some of the latter.

Which brings me back to policy. First and foremost, physician pay needs to be restructured: doctors must be incentivized to serve the needs of their patients, not the needs of HMOs or hospitals. This will have a definite effect on the overall quality of care. Second, a way must be found to address consumer costs and individual access. There are plenty of possibilities, but I admit to having particular pereferences.

I admit to favoring a system in which everyone receives access to a primary care physician of their choice and that physician and the indivual patient have the responsibility for health care decisions. I do not believe bureaucrats should make such decisions whether they work for insurance companies or the government, whatever system we choose we must be certain that neither corporate nor government interests can restrict access to treatment nor countermand the most informed decision made with the advice of medical experts.

Economic access, however, is as important as bureaucratic access. As employers increasingly slash benefits in difficult economies and small business owners have never been in a position to effectively provide benefits to their employers, I believe greater government involvement in the payment process is necessary. There should be dedicated, government subsidized health care plans for small business owners and their employees, in which the costs normally borne by the employer are borne by the government. This would dramatically increase the ability of entrepreneurs to compete in the national marketplace. I've said before that the current two-payer system, in which American business subsidizes a significant portion of the nation's health care costs to save American taxpayers a buck is a far more crippling economic burden than any corporate tax. Those costs should be picked up by the government as well. Any necessary tax increases to pay for health care would be entirely compensated by people receiving health care. While these two steps, by themselves, are not the entire process of reform they are a far bigger step we have taken along the right road since Medicare.

If I sometimes appear a broken record on the topic of health care it is because this is the single most crucial area of American life in need of truly radical reform.