The real issue here is not perks for physicians but the corrupt, inefficient, self-serving system that insurance companies and hospital bureaucrats have devised for the American public.
I agree with what you're saying, but if anyone's responsible for it, it's actually Congress, not the insurance companies and hospital bureaucrats. Private insurers and hospitals actually hate the status quo even more than you do, trust me.
I've written about this in more detail on HN previously[0][1][2], and I'm on my phone, so forgive me if I just link to those instead of typing it out again.
[0] https://news.ycombinator.com/item?id=8122377
And by Congress, it really means YOU, the (American citizen) reader, who keeps voting for the same crooks.
If I remember correctly, the book covers the question you're asking directly. I don't have the book handy otherwise I would summarize it for you.
This is a common misconception. I've posted about this many times before, but in short, it's the AAMC, not the AMA, that used to medical school spots. They are no longer the bottleneck anymore, however; the issue is that we don't have enough residency slots, and the funding for those comes through Medicare[0].
That said, this isn't really a driver of costs anyway, because providers themselves are responsible for only 10-15% of spending.
> Basically, all entrepreneurs who don’t join the union are shut off the health care industry. This is why you pay so much money in insurance & for simple doctors visits. Do you think if a fresh entrepreneur opened a hospital you would pay $8,000 per day for a room?
No, the reason that you pay so much is because of the convoluted way that Medicare reimbursements work (even if you're not on Medicare). In short, Medicare doesn't cover its own costs, so private insurers and uninsured patients are overcharged in order to cover the difference[1]
And, regardless, if physician pay went to 0, US healthcare costs would drop by only 10%.
If we consider them in isolation, shrug and say the cut won't fix the problem, we won't fix the problem.
http://image.slidesharecdn.com/pnhplongsetweisbartversion-12...
So, sure, we can cut physician salaries and nursing salaries (nursing pay collectively is about the same as physician pay). But I don't see a downside to trying to reduce the administrative burden as a means of cost reduction.
I definitely have lots of concerns about the mega institutions that are swallowing hospitals. It's hard to believe that they really do much to improve outcomes for patients (and it's pretty observable that they haven't done any good for prices).
Sorry for potentially being probably completely obtuse here due to being deep within the structure of medicine, but new supply of what?
Can you elaborate? I don't understand what dynamic is being alleged with this often-cited reference to limited residency funding. If there really are (quasi) monopoly profits to be made, why would government funding limit that? That is, if it's really lucrative to become a doctor, but you have to do a residency, but no one will pay for it, then potential doctors should be happy to eat the costs, knowing that they can lay it back from later high salaries.
Let me put the argument in another context to say why it doesn't make sense: "demand for passenger air travel is through the roof, with revenues at hundred of times the cost of a flight. But we can't increase the number of flights because the government won't purchase more airplanes to give to the airlines."
In that case, it would be a poor argument: buy the new airplanes with the passenger revenue; you don't need a government subsidy there.
Well, there aren't. There's a bottleneck in the supply, but there aren't monopoly profits to be made, because Medicare acts more like a monopsony. Medicare sets reimbursement rates unilaterally, and medical providers are forced to accept them, even though they don't (in the aggregate) even cover the direct COGS, let alone allow for the overhead of running a practice.
I'm only bringing up residency funding to explain that the AMA has nothing to do with restricting the supply of doctors, as is commonly (mistakenly) believed. But the real topic that OP brought up was the costs of care, and the supply of doctors isn't really relevant to that topic either, because providers' earnings only account for 10-15% of total costs of care.
Nor did I ever endorse the claim the doctor compensation was a significant factor, although I should have perhaps made that clearer to avoid the rabbit hole.
My comment was intended to challenge the claim that the small number of Medicare-funded residency slots could affect doctor supply, which you seemed to genuinely believe and be able to defend. (If you can't defend this claim, I would recommend not repeating it.)
It does address your point. As I stated, there aren't higher-than-typical returns, because Medicare acts like a monopsony. Monopsonies result in lower-than-typical returns.
Medicare is involved in a number of different ways, but the two main ones here are to set the number of available residency slots, and separately to control providers' revenues through a monopsony power.
Aviation is highly regulated, but neither airlines nor passengers are monopsonies, so the analogy doesn't work.
Are you saying that the financial return to becoming a doctor is lower than for other occupations? If not, then you probably misunderstood the argument. Medicare doesn't somehow lower the return to becoming a doctor.
>Aviation is highly regulated, but neither airlines nor passengers are monopsonies, so the analogy doesn't work.
The relevant buyer would be the passengers or the employers of doctors, neither of which is a monopsony, and the use of airlines was arbitrary. Again, the point is that (lack of) governmmet subsidies can't be a bottleneck when existing revenues suffice to pay for whatever expansion is necessary.
In three comments, plus two citations, you have not provided substantiation to address the point (that lucrative businesses can't be bottlenecked by subsidy caps), and at this point I don't think you understand the criticism, but prefer instead to dismiss any clarification of the relevant dynamics with "oh that's regulated".
I request that you stop propagating your argument (and dismissing critics as having a "misconception") until you understand these criticisms better.
I did my best to make it clear that these two things are intricately linked.
> If not, then you probably misunderstood the argument. Medicare doesn't somehow lower the return to becoming a doctor.
Medicare absolutely does lower the returns to becoming a doctor, just as any monopsony lowers the returns for suppliers in that market.
> The relevant buyer would be the passengers or the employers of doctors, neither of which is a monopsony
Until very recently (the last 2-5 years), the majority of doctors were self-employed, meaning that insurers were the direct purchasers of their services. And because of both its size and also various laws, Medicare has monopsony power in the insurance market. The recent employment of physicians by hospital groups doesn't really change those economic forces; it simply adds an extra layer of indirection when resolving them.
> you have not provided substantiation to address the point (that lucrative businesses can't be bottlenecked by subsidy caps), and at this point I don't think you understand the criticism, but prefer instead to dismiss any clarification of the relevant dynamics with "oh that's regulated"
I've stated pretty clearly that medical practice is not a particularly lucrative business (hence why private practices have been going bankrupt and being bought out by hospitals and insurers, and why so many hospitals have negative gross profit margins). That's not a 'dismissal' of your criticism; it's a refutation of the underlying premise.
> I request that you stop propagating your argument (and dismissing critics as having a "misconception") until you understand these criticisms better.
I could request that you stop dismissing me as 'misunderstand[ing] the argument' until you understand what I'm saying better.
Admittedly, this is a complex topic requiring both a detailed understanding of the ontology of the health insurance industry and a firm grasp of some economics concepts that are usually only covered at the graduate level. Most HN readers, understandably, have neither of these. I happen to have domain knowledge about both of these, and sometimes I share pieces of it in HN comments where relevant, and when I think it might be appreciated.
Neither one of these is particularly easy to convey in only a few hundred words, which is the amount of text I have written today on the topic. Sometimes I succeed, and sometimes I don't. Perhaps I have not succeeded in this particular instance. Perhaps I could if I spent more time, or elaborated more, I could convey these points better, and maybe then we could come to an agreement. But that's the amount of time and energy I have to spend today writing HN comments on the matter.
Where? You haven't once mentioned the return to becoming a doctor, nor compared the two, nor given a reply that suggests you recognized the distinction between the two.
>>you have not provided substantiation to address the point (that lucrative businesses can't be bottlenecked by subsidy caps), and at this point I don't think you understand the criticism, but prefer instead to dismiss any clarification of the relevant dynamics with "oh that's regulated"
>I've stated pretty clearly that medical practico is not a particularly lucrative business (hence why private practices have been going bankrupt and being bought out by hospitals and insurers, and why so many hospitals have negative gross profit margins). That's not a 'dismissal' of your criticism; it's a refutation of the underlying premise.
Then I was correct that you misunderstood the argument. The "lucrative businesses" referred to here, two which I was drawing an analogy, would be 1) the hypothetical airline business, and 2) the "business" of training to be a doctor; it was explicitly NOT referring to that of a medical practice!
Just as superprofitable airlines don't depend on government subsidies, superlucrative becoming-a-doctor shouldn't depend on government funding of residencies. See the dynamic there?
Now, after reading your last post, it sound like you're saying that Medicare has monopsony power over all doctor services and therefore is the major determinant of all doctor compensation, even those that eg work for rich people as their personal doctor.
If that's what you meant, I don't see why you couldn't have just said that the first time around, given your deep domain knowledge. Then, the appropriate reply would be "the return to becoming a doctor is no higher than other training, so it would be pointless to become a doctor if you had to also bear the cost of the residency". Note the length is less than 500 words.
But then, seen so clearly, it would depend on very questionable claims.
If that's not what you meant, then I stand by my claim that you're not responding to my point, because that's the only way that government-paid residency slot caps could hold up the correction of doctor undersupply.
The AMA only represents at BEST 15% of American physicians [1]. If you want ANYONE to blame, it's Medicare/Medicaid, Insurers, and Hospitals. CMS and Insurance regulations mean you cannot charge different prices to different people.
Eg. I can't charge a poor person less and still bill the full Medicare allowable for other patients. I either charge the low rate for all or none. Insurers have similar language in their individual contracts. They even go so far as barring us from discussing our reimbursement rates / charge list to allow patients to comparison shop.
The only real innovations in "price transparency" come when you reject Medicare patients. Surgery Center of Oklahoma [2] is a frequently cited example of a successful model of price transparency; however, they MUST explicitly opt out of Medicare billing else they are in violation of the law.
I have considered opening a Radiology practice with an imaging center that offers flat rate charges for people to price shop, but a LOT of patients who require imaging are Medicare patients and I'm pretty sure they aren't going to fork over $1-2000 for their every 3 month head-to-toe restaging scans, especially when it's a PETCT. Perhaps if I marketed to young people and focused on MSK MRI I could pull it off, but the market of people who are looking to comparison shop for imaging prices is smaller than all the people who rant about healthcare think it is.
1. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3153537/ 2. http://surgerycenterok.com
It seems to me that the "cash" rate is what the "market will bear", which makes the hospital administration complicit in defrauding taxpayers and the general insured by overcharging for procedures and consumables when an insurer is the one receiving the bill. I suspect there's more to it, though, and I've never been able to figure out what it is.
For example, if you go to your eye doctor, they can bill you for a standard visit, a refraction (getting your prescription), an eye health check, a super-duper health check because they found something and needed to look at it more, an eye health check with dilation, etc.
I have gone to eye doctors who will do everything and then ask at the end of the appointment what my insurance situation was. If I'm on insurance, bang, they charge me for all of it. If not, they just charge me for the refraction and forget about the rest.
You can't go to an insurance company and say, "I know we negotiated a rate of X for this procedure, but the patient is poor, so I'd like to charge less for it." Well, you can, but the insurance company would come back with "Sorry, that's not in our agreement. X for procedure Y." Or worse: "So, you can actually charge less for procedure Y? In that case, we'd like you to charge that lesser rate anytime you perform that procedure, regardless of the wealth of the client."
1. They incorrectly code the encounter leading to a lesser charge. This is Medicare fraud if the doctor ever get audited, but if it's a tiny practice and no one whistleblows on the Doctor, the odds of a small practice getting audited are very low.
2. They charge the cash paying patient the full amount. Then enter a period of "negotiation" and then accept the lesser payment and write off the balance as charity care. This is more legal, but leads to people coming on online forums and bitching about a $3000 bill only to reveal it got lowered to $700. The issue here is that the doctor is super busy and unless it's a micropractice where the doctor is the one billing, some biller/coder somewhere else will send you nasty grams until the doctor intervenes and tells them to write off the balance.
You have to remember, it is law in this country that you must bull accurately. Either coding too high or too low is considered equally fraudulent which Medicare will send its auditors after viciously.
The only way to go outside the system 100% legally is to completely opt out of Medicare/Medicaid. Anything less is fundamentally a gray area that relies on the practice not having someone mad and whistleblowing on them to a RAC. Whistleblowers are entitled to a portion of the fine, so the incentive is there for a disgruntled employee just to whistleblow even on the doctors who undercharge as a kindness to their patients.
When you hear doctors say the government has royally screwed up healthcare, this is fundamentally what they are talking about. I can either offer reasonable/negotiable prices on a cash basis or I can participate in the insurance game, but not both.
My biggest fear is that they eventually make participation in Medicare / Medicaid a requirement of licensure, effectively making the cash pay system illegal.
If the AMA/AAMC are to blame, then it seems likely to be implicitly: by keeping entrepreneurs out of the hospital administration game so they can't reduce inefficiency. But you don't have to be a physician to be a hospital administrator, so this doesn't make sense to me.
Reducing physician salaries to 0 only reduces healthcare costs by <10%, and entrepreneurs can become hospital administrators without becoming physicians. So, I think that the ire directed at the AMA is misplaced, but I'd be interested to hear more (and I'm an obviously interested party, though I'm not an AMA member). The regulatory bodies are most likely what you have concerns about.
The high pay in these professions is simple economics: supply is tightly constricted through the number of residencies allowed. Those in the profession have a strong interest in continuing to restrict the number of people in their field and so they have trade organizations that do this.
The line of defense they use is that consumers are too stupid to select a good healthcare provider without their intervention. I believe consumers would be very good at selecting the best provider, and would love to see all of the regulations dropped to open free competition into the marketplace.
> Ever wonder why the cost of healthcare is so ridiculously expensive in this country?
The major point that I make is that physician salary is under 10% of US healthcare expenditure, so that's not why healthcare is so ridiculously expensive here, and driving it to 0 would likely make little overall impact. You haven't made the case that a constrained supply of physicians is the reason why there is a large amount of healthcare regulation in the US. Much of that regulation is to the consternation of physicians as much as it is to those who want to innovate in healthcare.
Finally, part of the reason that 16 of the top 30 jobs are different subspecialties of physician is that those jobs have existed for quite some time and are cleanly delineated into subspecialty. If you were to break out different roles in investment banks and hedge funds similarly, you'd probably not see physicians in the top 30 list.
My argument is that the root cause of all of the regulation is not the best interest of the patients, but what is the best interest of the doctors.
Doctor backed trade organizations push for more and more obfuscation of the actual price a consumer pays in order to be able to charge more. They don't allow pricing or quality to be openly shared in the marketplace, and they don't allow new entrants to compete.
Healthcare is ripe for disruption, but entrepreneurs are prevented from doing so by archaic laws that harm patient care and increase prices. These regulations are vigorously defended by doctor backed trade organizations.. it's in their best interests to keep their cash cow.
Nurse practitioners and physician assistants are new entrants in the healthcare marketplace, and they are absolutely a "disruptive force" in the healthcare market, in the original Clayton Christensen-sense of the term. In fact, these professions were even called out as such in The Innovator's Dilemma. So your argument that new entrants to the market will somehow magically make prices lower doesn't hold much water (and for those who think that these entities should be freed from the regulations which require them to be supervised by a physician...that's like advocating for a large bridge to be designed and signed off by a civil engineer 2 years out of undergrad).
As for Certificate of Need laws, which limit the amount of hospitals and sophisticated equipment that can exist in any given area...certainly most doctors I know don't love these laws. It's the hospital associations (made up of many, many people other than doctors) which continually fight to keep them on the books.