Do American Doctors Make Too Much Money

Tuesday, July 31, 2007
Do American Doctors Make Too Much Money?

Many approaches have been advanced to lower the American health costs. These include,

•Introducing a single payer system.

•Forcing cuts in prescription drug prices

•Eliminating insurance company profits

Now American liberals, academicians, think-tank leaders, and reformers have added a new twists: Reduce American physicians incomes by not paying so much for procedures and by placing doctors on salaries.
Here are a few critics' comments, as quoted in a July 29 Sunday NYT piece (Alex Berenson, "Sending Back the Doctor's Bill").

•Dana Goldman, director of health economics, RAND Corporation, on diabetes care, "The doctor is paid to check his feet, they're paid to check his eyes, they're not paid to make sure he goes out and exercises, and really, that may be the most important thing. The whole health system is set up to pay for services that are rendered when the patient, and society is interested in health."

•Peter Bach , M.D., pulmonary specialist at Sloan Kettering and former senior adviser to Medicare and Medicaid, "The problem is the way they are paid. They have to do stuff. They have to do procedures."

•Stephen Zuckerman, MD, health economist at the Urban Institute, "There's not a lot of utilization review or prior authorization. If you're doing the work, you can expect to get paid."

•Alan Gerber, MD, director of the Center for Health Policy at Stanford University, "The United States should move toward paying doctors fixed salaries, plus bonuses based on the health of patients they care for."

In other words, if we could only place doctors on salaries, stop giving them incentives to do procedures, encourage them to provide preventive counseling, and reward them with bonuses for good outcomes, we could "significantly" reduce health costs.

Well, maybe. So far , P4P (pay-for-performance) with small bonuses for meeting quality indicators hasn't consistently produced good outcomes or lowered costs, paying doctors bonuses in the United Kingdom for meeting quality indicators has cost more than projected and has driven the National Health Service more deeply into debt, and the American people don't seem to mind American doctors being well paid, on average $200, 000 to $300, 000 a year, with about $150,000 for primary care doctors, and as much as an average of $400,000 for some specialists. According to a 2004 survey by the British government, European doctors in 2002 averaged $60,000 to $120,000.

How do academic and think tank critics, generally far removed from the clinical frontlines, know what's a fair income for American doctors? They seldom provide details or a thoughtful analysis based on life in America. Do they factor in the cost of living and housing is much greater in the U.S, the relentless 3% annual rise in practice expenses sending, the 5-6% annual rise in college tuitions now running abut $30,000 a year, the average debt of doctors entering practice, now in the neighborhood of $150,000. Besides, American doctors' malpractice rates dwarf those of their European counterparts?

And what about the American culture? Do they know that American patients "expect" to have something concrete done and quickly when they visit a doctor, as small as writing a prescription or as big as having a CT scan or MRI for their bad back or arthritic hip or knee? Are they cognizant most of those participating the American capitalistic society, outside of major corporations, which employ only about 10% of Americans, function on a fee-for-service basis without intervening third parties..

Lastly, is the critics' assertion realistic that U.S. doctors' incomes are a "significant factor" in why American health costs surpass those of Europeans by about 50% .

Let's take some rough numbers. Health costs are now $2.2 trillion in the U.S. About $500 billion of that $2.2 trillion is represented by physician incomes. Now let's say Medicare goes ahead with its 2008 plan to cut doctors' incomes by 10%, and health plans follow in lockstep as they have done in the past.. That would cut $50 billion from the $2.2 trillion, a 2.3% reduction of the total the U.S. spends on health care, a large amount but probably not significant in reducing the health care gap in national health spending.

Medicare lowering of doctors' incomes has consequences. AMA surveys indicate as many as 30% of physicians say will no longer accept Medicare patients if the 10% cut goes through, and if Congress follows through with a 40% reduction over the next five years, the number approaches 50%, and Medicare recipients will have to scramble to find care. Projected lower incomes would likely persuade talented college graduates to enter fields other than medicine and worsen the doctor shortage, estimated to be 50,000 by 2010 and $200,000 by 2020. Why would any bright young person spend 11 to 15 years preparing for a profession in which systematic fee reductions are guaranteed ?

Richard L. Reece, MD
Medinnovationblog