Health Care Spending: The Basics; How Much Do We Spend on Physicians Services? Could We Spend Less?

As a nation, we are spending well over two trillion a year on health care. What exactly are we paying for? In a December 6 post, I asked how much of that $2 trillion goes to private insurers in order to cover “administration”– which includes advertising, marketing, underwriting, lobbying, multi-million dollar executive salaries, and profits for  shareholders.

As the pie chart below shows, it turns out that in 2006, after taking in premiums and  paying out reimbursements,  private insurers  kept  close to $95 billion—or about 4.5 percent of the $2.1 trillion we spent on care—to fund everything from advertising to CEO bonuses.  Meanwhile, private insurers paid roughly one-third of the nation’s health care bills.  (By contrast, the government picked up nearly half of  the $2.1 trillion tab through programs like Medicare, Medicaid, SCHIP while spending only $525 billion —or about 2.5 percent of the $2.1 trillion—on administration.)


Ninety five billion dollars represents the difference between what private insurers received in premiums and what they paid out in reimbursements, and it’s a big number. But as I commented in my December post, even if we eliminated the private insurance industry’s role in our health care system, the $95 billion saved would be wiped out by just one year of health care inflation.

Inflation: that is the elephant in the middle of the room. In 2006, total spending on health care climbed by 6.7 percent, or $132 billion, to $2.1 trillion. In 2007, economists expect an even bigger jump.The pie just keeps on growing, year after year, far faster than the average workers’ wages: up 8.6 percent in 2003, up 6.9 percent in 2004, up 6.5 percent in 2005, up 6.7 percent in 2006…And there’s no end in sight.

This is what is making healthcare unaffordable. Each year, we spend
more on every segment of medical care: hospitals, drugs, devices,
physicians’ services, nursing homes, etc. And it’s not just that
individuals cannot afford the spiraling bills—the economy cannot
support runaway health care inflation. In 1960, health care spending
equaled 5.2 percent of GDP. In 2006, it represented 16 percent of the
goods and services we produce. In seven years, economists project that
it could easily account for fully 20 percent of GDP. And at some point,
they say, we’ll have to begin choosing between healthcare and other
things our society wants to invest in: education, the environment,
national security.

In my December post, I promised that in the future, I would continue
to fill in the pie chart, spelling out where our health care dollars
are going, while looking for places where we might reduce waste and
achieve lasting savings.

Today I’d like to focus on physicians. Looking back to 1960, it
turns out that the share of the health care pie that we spend on
doctors’ fees and clinical services has grown slightly—from 19.4
percent to about 22 percent. In “The Physician’s Role in Rising Health Care Costs,”
Robert Stowe England, a fellow at Americans for Generational Equity,
points out that “a sharper image of what these changes represent”
emerges “if  you set 1960 spending levels at ‘100’ and compare
accumulating increases since then. Using this approach, spending on
physician and clinical services rose from 100 in 1960 to 7,866 in 2006,
compared to a rise from 100 to 7,219 for total national health care
expenditures. But overall, health care spending and doctors’ fees far
outpaced the overall growth of the economy —which rose from 100 to
just 2,366.

Doctors saw their incomes climb in the 1960s and 1970s as more
insurance money entered the health care system. Medicare was passed in
the mid-sixties; meanwhile, more and more employers were giving workers
health benefits that included not only hospitalization, but also
doctors’ bills.  More patients were now able to go to the doctor. In
1966, the year after Medicare passed, the average physician’s income
shot up by 11 percent.

The 1970s saw the rise of the specialist; and this is when fees
began to levitate. Medicare had followed the precedent set by Blue
Shield, agreeing to pay doctors through a “fee-for-service” schedule
while letting them set their fees based on what was “usual and
customary” in their community.  And as time went by, the definition of
“usual and customary” compensation inevitably rose, especially among
surgeons. George Lundberg, a former editor of the Journal of the
American Medical Association, watched it happen:

“While surgeons were barred by law from fixing fees, they knew what
the going rate was [in their region.] When new surgeons entered the
community, they learned what prevailing fees were for given procedures,
and then set their fees at a higher level. Adam Smith might have
predicted that a newcomer to a community would set lower fees in order
to attract patients,” Lundberg continues, “but medicine was beyond
supply-and-demand market rules. When new surgeons set higher fees, they
not only got away with it, but also drove up the prevailing fees for
all surgeons.”

By 1980, a cardiac surgeon writing in The New England Journal of
Medicine estimated that members of his specialty were making an average
of $350,000 a year on cardiac bypass operations alone. “It is
conservative to estimate that their average gross income exceeds
$500,000,” Dr. Benson Roe wrote—a handy sum in 1980. At the same time,
the surgeon’s work had become increasingly specialized. In the past, he
cared for the patient from diagnosis through post-operative care. Now
technicians and other assistants took over most of those services—and
of course, billed separately. “Under these circumstances,” Dr. Roe
noted, “one might expect the surgeon’s fee to have dropped
considerably. But it has not. “

To be fair, in the 1970s and 1980s physicians were saving more lives
than ever before. Medical science was progressing from “comfort” to
“cure.” And Americans were more than willing to pay for spectacular

In the 1980s, doctors’ incomes continued to grow, rising 30 percent
from 1984 to 1989, or about twice as fast as the average increase for
other full-time workers, according to Theodore Marmor’s The Politics of
Medicare.   But Medicare was beginning to clamp down.  And in the
1990s, with the rise of managed care, HMOs started to question nearly
every bill. For a brief period, health care spending plateaued, and
many doctors saw their incomes fall.

In 2000 the backlash against managed care forced HMOs to loosen the
purse strings. Total health care spending once again began to soar.
But doctors remain under pressure, thanks, in large part, to Medicare’s
renewed efforts to keep fees flat. Whenever possible, insurers are
following suit.

As a result, in recent years, many doctors have found that their
incomes are not rising as fast as their costs. While rents, malpractice
insurance and the cost of equipment and staff climb, Medicare has been
refusing to increase their fees.  In an effort to make up the
difference between their overhead and their fees, many physicians have
begun increasing the volume of work they do. Others are becoming more
“entrepreneurial,” investing in clinics and surgical centers.

Many have succeeded in boosting their take-home—which is why, even
if fees for many services haven’t risen, total spending on physicians’
services continues to climb: up 6.2 percent in 2000, up 8.3 percent in
2003, up 7.3 percent in 2004, up 7.4 percent in 2005, and gaining
another 5.9 percent in 2006.
Of course, not all physicians are prospering.  As I explained on this blog last week,
Medicare’s somewhat bizarre fee schedule is based not just on how much
time a  particular procedure takes but also on the mental effort and
judgment involved, the technical skill and physical effort required,
and the stress entailed.  A committee dominated by specialists updates
the fees Medicare pays physicians on a regular basis. Not surprisingly,
specialists are paid considerably more than generalists.

Indeed, Medicare’s fee schedule favors specialists who perform some
of the most aggressive procedures. Meanwhile, private insurers use this
schedule as a model.

As a result, physicians’ incomes vary widely by specialty.  To get
an idea of the range, take a look at the tables below published in 2007
by Merritt, Hawkins & Associates,  a national health care search
and consulting firm that specializes in recruiting physicians. This
compendium of “Income Offered to Top 20 Recruited Specialties” shows
“low,” “average” and “high “base salaries ( or guaranteed income)
offered to the recruits. These numbers do not include production
bonuses or benefits. Ninety-one percent of the recruits receive
malpractice insurance as well as health benefits, and 72 percent
receive a signing bonus.


Low      Average     High
Family Practice
2006/07         $120,000 $161,000 $250,000
2005/06         $115,000 $145,000 $220,000
2004/05         $125,000 $150,000 $200,000
2003/04         $120,000 $146,000 $195,000

Family Practice with Obstetrics
2006/07         $145,000 $159,000 $200,000
2005/06         $140,000 $158,000 $180,000
2004/05         N/A N/A N/A
2003/04         N/A N/A N/A

Internal Medicine
2006/07         $135,000 $174,000 $275,000
2005/06         $130,000 $162,000 $250,000
2004/05         $130,000 $161,000 $210,000
2003/04         $125,000 $152,000 $200,000

2006/07     $145,000 $180,000 $250,000
2005/06     $140,000 $175,000 $190,000
2004/05     $150,000 $171,000 $210,000
2003/04     $140,000 $162,000 $200,000

2006/07     $250,000 $380,000 $500,000
2005/06     $240,000 $351,000 $500,000
2004/05     $250,000 $355,000 $500,000
2003/04     $240,000 $336,000 $450,000

Orthopedic Surgery
2006/07     $250,000 $413,000 $650,000
2005/06     $250,000 $370,000 $515,000
2004/05     $250,000 $361,000 $650,000
2003/04     $240,000 $330,000 $500,000

2006/07     $250,000 $391,000 $500,000
2005/06     $175,000 $342,000 $500,000
2004/05     $234,000 $320,000 $525,000
2003/04     $230,000 $292,000 $500,000

2006/07     $200,000 $247,000 $345,000
2005/06     $175,000 $234,000 $450,000
2004/05     $200,000 $247,000 $320,000
2003/04     $185,000 $242,000 $325,000

General Surgery
2006/07     $225,000 $301,000 $350,000
2005/06     $150,000 $272,000 $350,000
2004/05     $220,000 $255,000 $310,000
2003/04     $210,000 $248,000 $300,000

Emergency Medicine
2006/07     $150,000 $239,000 $300,000
2005/06     $130,000 $210,000 $270,000
2004/05     $140,000 $246,000 $270,000
2003/04     $120,000 $218,000 $260,000

2006/07     $160,000 $186,000 $230,000
2005/06     $130,000 $174,000 $230,000
2004/05     $140,000 $176,000 $250,000
2003/04     $130,000 $164,000 $260,000

2006/07     $200,000 $365,000 $450,000
2005/06     $175,000 $315,000 $500,000
2004/05     $230,000 $298,000 $340,000
2003/04     $210,000 $250,000 $325,000

2006/07     $275,000 $400,000 $500,000
2005/06     $250,000 $320,000 $375,000
2004/05     $250,000 $329,000 $340,000
2003/04     $220,000 $294,000 $325,000

2006/07     $115,000 $159,000 $200,000
2005/06     $115,000 $151,000 $180,000
2004/05     $110,000 $151,000 $180,000
2003/04     $110,000 $145,000 $170,000

2006/07     $130,000 $164,000 $200,000
2005/06     $87,000 $156,000 $210,000
2004/05     $75,000 $150,000 $190,000
2003/04     $70,000 $145,000 $190,000

2006/07     $300,000 $339,000 $500,000
2005/06     N/A N/A N/A
2004/05     N/A N/A N/A
2003/04     N/A N/A N/A

2006/07     $170,000 $234,000 $275,000
2005/06     $150,000 $210,000 $250,000
2004/05     $155,000 $209,000 $230,000
2003/04     $145,000 $191,000 $220,000

2006/07     $200,000 $312,000 $400,000
2005/06     $175,000 $272,000 $350,000
2004/05     $235,000 $304,000 $350,000
2003/04     $230,000 $278,000 $350,000

2006/07     $220,000 $300,000 $425,000
2005/06     $275,000 $306,000 $375,000
2004/05     $240,000 $303,000 $340,000
2003/04     $220,000 $300,000 $325,000

2006/07     $200,000 $318,000 $400,000
2005/06     N/A N/A N/A
2004/05     N/A N/A N/A
2003/04     N/A N/A N/A

Neuro Surgery
2006/07     $350,000 $527,000 $850,000
2005/06     $300,000 $489,000 $650,000
2004/05     $350,000 $424,000 $575,000
2003/04     $350,000 $420,000 $550,000

As you can see, high-end physicians who cut you or irradiate you
(neurosurgeons, orthosurgeons, urologists radiologists, cardiologists)
can make $500,000 to $850,000 a year, while physicians responsible for
preventive and primary care (family docs, internist, pediatricians, and
psychiatrists) may earn as little as $115,000, and can expect, at the
high end, no more than $275,000.  Even ER docs—who may have your life
in their hands—make only about $150,000 at the low end of the scale.

Who is paying these doctors? In 2007, 43 percent of Merritt,
Hawkins, & Association recruits were placed in hospitals, while 35
percent found jobs in group practices.  The company reports that in the
face of an internists and generalist shortage, demand for family
doctors is growing along with their income. But as the table below
shows, in the past year, urologists saw the biggest hikes in pay. (Fear
of early stage prostate cancer keeps urologists busy—even though the
National Cancer Institute says there is no evidence that early
diagnosis and treatment alters the course of the disease.)  Finally,
Merritt, Hawkins & Associates reports that in 2006/2007,
anesthesiology was the only specialty where incomes declined.

Specialties Showing Highest Gain in Base Income Offers/2005/06 – 2006/07

Base Income 05/07            Base Income 06/07          Percent Increase
Urology                          $320,000              $400,000                               25%
Otolaryngology                $272,000             $312,000                              15%
Cardiology                       $342,000            $391,000                                14%
Emergency Medicine        $210,000            $239,000                               14%
Orthopedic Surgery         $370,000              $413,000                              12%
Family Practice                $145,000             $161,000                              11%

In my next post, I’ll look at how much specialists in the U.S. are
paid when compared to specialists in other countries, how much debt
they have to pay off, and how hard they work compared to doctors abroad.

I’ll also ask how patients are faring as doctors boost the volume of
work that they do, and how increasingly entrepreneurial physicians are
affecting both health care spending and the quality of care.

Finally, I’ll look at how we might redistribute the dollars we spend
on physicians services to cut waste while improving outcomes.

62 thoughts on “Health Care Spending: The Basics; How Much Do We Spend on Physicians Services? Could We Spend Less?

  1. Doctors fees make up only 20% of the total healthcare cost pie. So we just need to focus on cutting the percentage increases rather than cut down what they make.
    Also the term “physician fees” is a little misleading, because in fact it includes a bunch of people who are NOT physicians. People like physical therapists, nurse practitioners, physician assistants, psychologists, pharmacists, etc can bill Medicare directly even though they are not physicians.
    Of the 20% that doctors take, about half of that is overhead, meaning about 10% of total healthcare costs go into doctors pockets as income.
    Cutting down on that 10% is not going to substantially save money. Indeed you could cut doctors incomes in HALF and it would only account for a 5% decrease in healthcare costs.
    The reason its going up every year is because every year the number of people directly billing Medicare per patient is skyrocketing. Now every Medicare member has a primary MD, 3-4 specialist MDs, along with all their NPs and PAs who are ALL directly billing Medicare.
    Take a look the total number of providers billing Medicare and that will explain that vast majority of the rises in total money paid to doctors. The amount paid out PER-PROVIDER is actually flat or decreasing, but there are so many new providers out there increasing the number of billings per patient that it causes the overall cost to go way up.

  2. Great post, as usual. One point of order. You write: in the face of an internists and generalist shortage, demand for family doctors is growing along with their income.
    But remember that unless there is an outside source or revenue like a hospital subsidy or a revenue sharing among a multispecialty group, the income of a family doctor cannot exceed the revenues generated from patient fees. This is set by medicare, insurers, and the RUC. These players are not sensitive to demand, and so I would not claim any causal connection between demand and increasing income.

  3. I find the 4.5% figure hard to believe. Businesses can easily shift funds from one category to another.
    A typical example is the claim by auto, life and property insurance firms that they lose money selling insurance. What they don’t say is that they make lots of money investing the premiums and as a result the are (very) profitable overall.
    I don’t know why you keep harping on the costs of medical practitioners. You seem to have some internal measure of what a certain profession is “worth” and find physicians are overcharging. Why not go after plumbers or hedge fund managers or lawyers?
    I also don’t think your focusing on health care inflation is logical. If something becomes too expensive for people to afford they stop buying it. Everyone thinks that health care is inelastic and people will pay whatever is asked, but this isn’t true. There are signs that the increases in costs have already started to moderate.
    One shouldn’t use straight line projections from the past to make future predictions.
    The essential point is that a government administered program would be cheaper to manage that a private one. Get the profit out of the industry and we will see cost containment happen as well.

  4. Maggie,
    I think your analysis of the physician and clinical fee component of overall healthcare costs is incomplete. It would me more appropriate to look at the sum of physician and clinical fees, hospital charges, prescription drug costs, and spending for durable and non-durable medical equipment. These components combined account for closer to 70% of healthcare costs. What they all have in common is that they are driven by doctors’ decisions to admit patients to hospitals, prescribe drugs, order tests, consult with patients and perform procedures themselves (especially expensive surgical procedures).
    Some of the decisions driving all of this healthcare utilization are financially driven, especially when doctors have a financial interest in labs, imaging centers or specialty hospitals. Other decisions have to do with defensive medicine in order to protect against possible malpractice suits. Still others relate to hospitals’ expectations for doctors to drive revenue for the institution whether the doctor is a salaried employee of the hospital or an independent practitioner with admitting privileges. Sometimes their decisions (especially to prescribe drugs or order an imaging test) are in response to patient demand based on Internet reading or TV advertising.
    This is why we need robust price and quality transparency information in the hands of PCP’s and other referring doctors as well as patients. It is also why we need a good solid rating system that would evaluate both doctors and hospitals for the quality and cost-effectiveness of their practice patterns. These ratings should be used to develop differentiated co-pay tiers designed to give patients and incentive to use the most cost-effective providers or pay more of the cost out of their own pocket.
    Complementary strategies such as comparative effectiveness research will be helpful over time but perhaps not right away. Interoperable electronic medical records could reduce duplicate testing and adverse drug interactions, especially in hospitals. More widespread use of living wills and advance directives could reduce the amount of futile and often unwanted care at the end of life. Episode pricing also has the potential to reduce waste in hospitals, but it would probably need to be coupled with serious malpractice reform so doctors will feel less need to practice defensive medicine.
    I don’t have any problem with specialist salaries even at the high end of the range in the information you cited. I do think, however, that if we had decent price and quality transparency tools, electronic records, malpractice reform, more widespread use of living wills and hospital pricing based on a complete episode of care, the incentives across the system would be much more sensible and would likely drive both patient and provider behavior toward what we typically see in most of the rest of the economy.
    Finally, the notion that the system would be better off if we took the profit out of it is off base in my view. Medicare has not done a great job of cost control. Even now, it is still not allowed to take cost into account in determining what it will pay for. It took fully 41 years before it added a prescription drug benefit to its program. I suspect that there is much more fraud in the program than in the private sector because it pays providers more quickly than necessary, and fraud mitigation is not an especially high priority. It looks like CMS would rather just pump the money out and then brag about its low administrative costs!

  5. Thank you all for your comments
    The fact that you find the 4.5% figure “hard to believe” is, I’m afraid, meaningless.
    I could say that I find it hard to believe that George W. Bush is really our president. But there it is.
    A fact.
    I have feeling that you probably know a great deal more about medicine than you do about corporate finance. (I’m guessing you’re a doctor.)
    As it happens, I do know quite a bit about corporate finance because I was senior editor of Barron’s for about 12 years, and I’m pretty famliar with reading a corporation’s financials and figuring out where the money is going. Sometimes they lie, and often I was able to find the lies and expose them. (Jim Chanos, the short-seller who figured out what Enron was doing and blew the whistle on the company, is a friend.)
    But in this case, the insurance industry has no reason to lie about how much it keeps to cover advertising, marketing, underwriting exec salaries and profits for shareholders.
    An insurer’s shareholders WANT IT TO KEEP AS MUCH MONEY AS POSSIBLE. The amount that an insurer pays out in reimbursements is called its “loss ratio.” In other words, everytime an insurer pays on a claim, its shareholders consider that a loss. Think about that for a minute.
    So insurers have no reason to exaggerate how much they are paying out in reimbursements or to downplay how much they are keeping for themselves (and their shareholders.) Quite the opposite.
    Finally, these are all public numbers and the 4.5 percent figure has been published hundreds of times. Anyone who knows anything about health care economics agrees to this figure
    So, unless you have actually done the research to back up your assertions, please don’t suggest that I’m making numbers up. I work too hard doing research for this blog.
    I don’t mind answering questions, but I do mind answering totally unfounded accusations.
    Finally, I realize that you may not want to deal with the reality of hard facts, but if we eliminated insurers and let government take over the system we would save 4.5 percent of $2.1 trillion, but we’d have to spend about 2.5% of $2.1 trillion to cover the goverment’s administrative costs (if it took over the half of health care spending that govt doesn’t now cover.) Net savings — 2% of $2.1 trillion, or roughly one-third of one year’s inflation in health care spending.
    To say that inflation doesn’t matter, or that with prices going up, health care spending is moderating is simply false. Each and every year, spending on every item on the list: hospitals, doctors, drugs, devices, etc. etc. etc. goes up. Most years it goes up more than inflation in other areas, more than growth in GDP and more than workers’ earnings.
    And, as the article I cite in the most recent issue of Health Affairs (Jan/Feb 2008), points out there is every reason to think that spending will continue to rise.
    AS I will explain in my next post, doctors incomes are rising because, on average, they are seeing more patients and doing more to them.
    Yet, in areas of the country where spending on specialists is highest, outcomes are not better. OUtcomes are worse–as are patient satisfaction and doctor satisfaction. (We have about 3 decades of reserach on this–reserach that has been done by doctors.)
    Finally, I don’t think that all doctors are overpaid. I think some doctors (family docs, palliative care specialists, pediatricians, internists and some hospitalists) are generally underpaid.
    Others, who tend to do the most agressive procedures, are overpaid.
    People on the MedPac commission agree that we need to start paying internists, family docs, etc. more. They are the people who do preventive care. And we need to slice some of the fees for procedures that are overdone.
    SHADOWFAX, you are right that insofar as a family doctor’s income is simply the accumulated fees he collects from Medicare and private insurers, those fees are not going to respond to demand.
    But when this placement service finds jobs for docs, the majority of them are placed in hospitals or in a multispecialty group where they may receive a signing bonus of $10,000 to $20,000. Those bonuses reflect the fact that primary care docs are in short supply.
    Moreover, if they work for a hospital or a large group like the Cleveland Clinic, the Mayo Clinic, Kaiser, etc. they are on salary, and that salary may be higher than the accumulated fees that they bring in.
    (Meanwhile, certain specialists at these places may be earning a salary that is somewhat less than they could earn on their own by just charging fee for service–but if they were on their own, they would have to pay for their own overhead (malpractice insurance, staff, an office, etc.) And places like the Cleveland Clinic enjoy economies of scale that make overhead much less expensive.
    Joe Blow–
    Reimbursement is complicated, and the way CMS breaks out the numbers for this pie chart is even more complicated, but in general physicians’ services includes what doctors do and services that they order directly.
    It is surprising that these servcies equal only 22 percent of the pie. Though insofar as physicians have an interest in surgical centers, hospitals, nursing homes etc., some of their income is hidden in other parts of the pie.
    And insofar as some docs take consulting fees of $100,000 or more a year from drug makers and device-makers, that income shows up in those slices of the pie . . .
    But the major reason why doctors are seen as driving health care spending is not because their dollar share of the pie is so high, but because they drive spending in nearly all segments of a pie.
    If I as a doctor decide I need to increase the volume of what I do in order to make up for the fact that fees-per-service aren’t going up, I will do more tests and more procedures.
    As a result, Medicare, or the patient, or the insurer is billed not only my fee for doing the test or procedure, but what the hospital charges for having the test or procedure done in its operating room or diagnostic imaging center, as well as a part of the cost of the MRI that that hospital had to buy because doctors are ordering so many more MRIs than they did in the past; the cost of the stents that are used in the additional angioplasties that doctors are now doing; the cost of the implanted knee as docs do more knee implants.
    In all of these areas, doctors tend to determine how many procedures and tests are done. Sure, many patients request a knee implant, but studies show that if they are then given full information about hte risks and benefits–through videos of patients who have had the procedure and pamphlets describing recovering times etc.–20 percent to 40 percent of patients decide not to have the elective procedure.
    Surgeons are understandably more enthusiastic about surgery than patients are. Not just becuase this is how surgeons make their living, but because they are proud of their craft and believe they are helping people.
    On the other hand, the surgeon don’t have to suffer whatever pain is involved, lost time from work and family, uncertainty about how well the recovery will go, or the possiblity of picking up an infection in the hospital . . .
    Finally, in terms of whether individual doctors’ incomes are rising, many are. You only have to look at the information from the recruiter I quote to see that in every area except anesthesiology, guaranteed income is going up.
    Of course the group of doctors who come to them for placement are doctors who believe that they can improve their situation. No doubt their are other doctors who wouldn’t go to a head hunter becuase they don’t think they could get a raise or a better job. And very likely, in many cases their net income (after overhead) is flat to down.
    In general, docs on salary are doing better these days than docs trying to make it on their own or in small groups–overhead is just so costly.
    But there also are many solo practioners and small groups in certain specialities that are doing extremely well.
    Cosmetic dermatologists, for example, don’t have to worry about what Medicare or insurers are paying per service. Their services usually aren’t covered.So they can charge whatever they wish for botox or a facelift, and if they’re good it, there is no shortage of patients willing to pay whatever they charge.
    Orthopods and urologists also are doing very well.

  6. Barry–
    Good to hear from you.
    You were writing your comment while I was replying to the other comments. If you look at my response to Joe Blow, you’ll see that I agree with you that a) a doctor’s income may come from other parts of the pie and b)their decisions drive spending not just in terms of fees for their service, but spending for drugs, device, equipment, hopsital bills etc that follow from what they order.
    I’ll be talking about all of that in future posts as I get to other slices of the pie.
    On your second point regarding measuring quality, as I’ve explained before, there really is no way to measure the quality of any individual physician.
    Too many people are involved in any patient’s and an individual physician has no control over the quality of their care. You really should resarch. In addition, the pool of patients that an individual physician sees is too small and can too easily be skewed by a few non-compliant patients. Moreover, we don’t want physicians avoiding difficult patients–which they will do if they are judged based on how their small pool does.
    You really should reserarch all of this in Health Affairs, which I remember you said you subscribe to. Here’s a place to start:” Unhealthy Trends: The Future Of Physician Services
    Hoangmai H. Pham and Paul B. Ginsburg
    As this article points out:
    “A payer who offers bundled payments for chronic care to a lone PCP in solo practice will likely be disappointed, because that physician’s ability to influence the care delivered by other providers would be severely limited. Thus, in the long term, the ideal payment policy would foster the development of integrated care networks that allow physicians to more seamlessly coordinate care. The more concrete the professional, financial, and legal connections among physicians within these structures, the more potential they would have to align incentives and infrastructure to produce high-quality, coordinated care.

  7. Let me address an issue that threads through this discussion but is not directly addressed: I am an Internist for over 20 years, and I recently closed my Primary Care Practice as I cannot make a living at it. I made $23K in the last 11 months. And, my departure from practice is only the beginning of a Tsunami of closures of Primary Care practices due to: defections by Doctors to the likes of Kaiser (as is already happening here in Northern California); or to “Boutique” practices serving just a few wealthier patients across hi-rent areas like California, New York/East Coast, Florida etc.; and early retirements of an aging Internist work-force. For a population of >250,000, Santa Rosa, CA now has 15 practicing Internists (outside of Kaiser) of which only 3 are under 55 years old. More choose early retirement each day and will not be replaced in the current regulatory and economic climate. Medical students are not going into Primary Care specialties as they are not idiots. Given the unhappiness of current Primary care Docs, the huge debt accrued by Medical students and the paltry return on investment in Internal Medicine/Family Practice and Pediatrics, the collapse is inevitable and will be truly frightening in its scope and degree.
    ER Docs, rightfully disturbed at the overcrowding of their E.D.’s complain that if a patient calls their PMD with an urgent problem, they will tell you to “go to the ER.” Why is that? In the past, we left “holes” in the schedule to accommodate “urgent calls”, but because of declining reimbursement and ever-increasing bureaucratic demands and costs, we are already double-booked JUST TO PAY THE BILLS.
    Our medical leadership, is still not getting it. They say they want to address Primary Care’s survival; but I’ve seen no real action in all the years I’ve been practicing. They couch the crisis in Primary care with terms like “may” or “will be” as if the crisis were not already upon us and worsening by the day. They offer “pie in the sky” solutions like the “Medical home” while oblivious of the up-front costs of these programs and the EMR’s (Electronic Medical Record) that would be necessary to implement them. Just where is the hapless Primary Care doc who is struggling merely to pay the bills gonna find $100,000 to 1 million dollars to PAY FOR THIS STUFF????
    And to the policy wonks that say; “oh, universal single payor will fix everything”, let me remind you all that IT IS THE SINGLE PAYOR, government run, entitlement driven system for all Americans over the age of 65 that has put me out of the business of seeing my patients and keeping them OUT OF HOSPITALS.
    I am apparently supposed to shuffle elderly and/or complex/complicated patients in & out of my office every 10 to 15 minutes, or I cannot make a living. Alternatively, I can bring them back every WEEK to address one more of their multitude of problems…Frankly, this is NOT a solution that I, or these debilitated patients can live with.
    I had scheduled new patients in a 1 hour slot – allowing us both time to talk and get the whole history and do a detailed exam – usually for the 1st time in years (if ever); and then plot a course on their way to wellness. I did follow-ups in 1/2 hour – again to allow these patients to express what my medicines/interventions did for them, further problems/concerns, and do a good follow-up exam.
    I believe – strongly – that this time should & must be allowed for patients…yet, Medicare/MediCal and the Insurance monopoly will not pay me enough to meet expenses, much less a decent living. Frankly, if Medicare were to do an actuarial analysis of my patients and predict how often they would likely be admitted to the hospital – then look at how infrequently that actually occurred and reimburse me only ¼ of the savings, I would be a rich man and would have been able to continue to KEEP THOSE PATIENTS OUT OF THE E.D. & HOSPITAL – and save Medicare $$$$. This model would prevent “cherry picking” and encourage Primary Care docs to take care of the sickest patients AND be available in order to address problems early BEFORE they require a hospitalization.
    You cannot piecemeal fix a completely (fiscally, ethically and morally) broken system. It must end. As for me, I have been offered a position as Hospitalist that is too good to turn down. Thus another Primary Care practice closes not due to preference, but due to the economics of survival.
    Should our governments decide to remedy this situation, it would be easy enough for them to do so, but we would need visionary leadership, not reactionary puppets.
    Once again this discussion skirts the issue but doesn’t really hit the most important point. Primary care is unravelling around us. Indeed, all of the articles about the inordinate strain & crowding of Emergency Departments across the U.S., overlook the obvious – the impending failure of Primary Care is going to completely OVERWHELM Emergency Rooms. There is no way to prepare for this other than to save Primary Care…
    The whole house of cards has begun to collapse, and all the articles and discussions fail to put it in terms with sufficient emphasis. All of the “universal” systems that actually work are built on a very strong and well-funded foundations of Primary Care. Everything else in Healthcare is built upon that foundation, and THAT is precisely what is failing across the country. Why are emergency rooms overcrowded, why are the wait times increasing even for the seriously ill? BECAUSE PRIMARY CARE IS FAILING! DUH!
    Just remember, I told you so…Good luck to all of us – we’re ALL gonna need it.
    PS: Some somewhat random thoughts…
    If I told my patients that the “Medicare” rulebook had 146,000 pages in it, would they believe me?
    If I told my patients that “Medicare” uses ARMED auditors (9mm sidearms – I checked!) to audit Doctors charts for mistakes, would they believe me?

  8. Maggie:
    You’re the financial expert so you can explain these figures from UNH. They seem typical of the industry:
    Gross profit $16.7 on revenue of $71.5 (billion) – about 22% in my book. Return on equity 23%. Operating margin 10%.
    (Figures 2006 or 12 months.)
    Revenue 2005 $46, 2006 $71 (some of this may have been from mergers, I don’t know) but whatever the reason their growth rate is not too shabby.
    As I said before insurance companies segregate their income so as to make the payout part look higher than it is as a fraction of their business.
    I’ve cited the ads from Blue Cross before. When I was a kid they bragged about paying out 96% of premiums. Now they mention number around 75%. Where did the 20% go?
    I just don’t know why you are so willing to give the for-profit money juggling industry a pass. It’s not like we don’t have the examples from elsewhere in the world as a comparison.
    OK, charges for health care are higher here then elsewhere, so are charges for everything else, including CEO payouts and plumbers. You aren’t going to change this, but we can eliminate the profit, we can reduce the defensive medicine (somewhat), we can reduce the unnecessary treatment (at least at government expense) and we can reduce the incentive for drug companies to lie about their products.
    How do you propose to regulate rising costs?
    PS. I have no connection with the health industry, except for more frequent visits to doctors than I’d prefer of late.

  9. Just a couple of points to add:
    It is not a closely guarded secret that radiologists make a lot more money than internists. Does anyone believe that this is not considered when senior medical students choose a residency field? Later, when it becomes apparent that the internist can not make a decent living, she quits/becomes an employed hospitalist/opens a concierge practice or otherwise makes a market-driven decision that decreases the supply of available primary care. Medicare and the insurers will have no choice but to change policies to reverse this trend. It’s already happening. Too slowly, not enough of a reaction, but the customers will demand, and get, what they want.
    I wish that people would not look at the increases in medical spending as inflation. Inflation occurs when a candy bar that was a quarter last year is a dollar today. It’s not the same candy bar in medical care. The treatment that Jane Patient received for a particular complaint or diagnosis a decade ago is not the same as she receives today, and this is reflected in better outcomes. It is not for us to say whether the increased cost is justified by the additional years of life, or the (ideally) increased quality of life, that the admittedly large increase in spending buys.
    Related to this is the underlying premise that opens your post. I infer that you believe that the current 16% of GDP is way too much for us to spend on healthcare; the 5.2% that we spent in 1960 is more like it. Again, it’s not for us to decide. It’s ultimately a political decision to the extent that the govt. pays for our salaries and the meds we prescribe, directly or indirectly. Some people choose to forgo healthcare due to the expense. As physicians we think that’s unwise, but it’s not our choice. I believe that the solution to the current “crisis” is to create a parallel track for care where it would be acceptable to diagnose with say 90% certainty, accept that there will be a few bad outcomes but no way to file suit when that happens, document only what is medically necessary, prescribe generics only, and get paid right now. That would cut expenditures per problem probably by a third or more.

  10. a lot of patients or prospective patients fill out these surveys stating we are doing too many tests and procedures. i have yet to see one person at the time they needed the service say that they personally didn’t want the procedure in question. it is very hard to anticipate the range of emotions you go through at the time you need it. once you go through it, i think you can have a much better appreciation of it.
    no one is forcing anyone to get the procedures or tests. if the rest of society wants them available and a minority do not, they are free not to get them. if they want to opt out, let them opt out of 50% of withholdings with the understanding that they can get no advanced care when their time comes.
    i fail to see why rich countries shouldn’t spend a higher percent of their gdp on health care. what could be more important? if you want to discuss the distribution, that very seems reasonable.
    lastly, i think you misunderstand the bonus primary care docs are paid. they are not paid because they are in demand, they are paid to cover moving costs to get a person physically there. most people at comparable levels have some form of benefit which helps defray moving expenses.

  11. “By contrast, the government picked up nearly half of the $2.1 trillion tab through programs like Medicare, Medicaid, SCHIP while spending only $525 billion —or about 2.5 percent of the $2.1 trillion—on administration.”
    Is it me, or am I missing something here? I did the math: $525 billion divided by $2.1 trillion = 25%, not 2.5% as you propose. If true, this is a pretty crummy return on the taxpayer’s investment for “administrative costs.”

  12. Richard E. Sacks-Wilner–
    Thanks very much for joining the discussion.
    You write that, in he U.S. our primary care system is unraveling, and that “Should our government decide to remedy this situation, it would be easy enough for them to do so, but we would need visionary leadership, not reactionary puppets.”
    I agree completely.
    In fact, I agree with virtually everything you say in your post except when you suggest that i’m skirting this issue.
    I’m really not; I have just saved it for the second part of this post.
    At this end of this most recent post, I promised that in the next post, I would talk about “redistributing the health care dollars” that we spend on physicians.
    I think that primary care docs and other generalists who could create a “medical home” and provide preventive care need to be paid more. I also think it would be an excellent idea for the govt. to forgive the med school loans of docs who decide to become family docs, pediatricians, etc.
    Finally, I know that the govt doesn’t seem to be moving on this issue. Over the past 7 years we have had a govt that is pretty resistant to redistributing wealth downward (in this case, from tsome of the best-paid specialists to under-paid generalists)
    But MedPac, the independent commission that advises Congress on Medicare spending understands what needs to be done, and I”m pretty hopeful that the next Congress and the next administration will listen to them.
    Of course none of this has happened in time for you to keep your practice. But I wish you well in your new career as a hospitalist. And I think the whole hospitalist movement really could improve hospital care–and coordination of care.
    I really hope it works for you.

  13. Maggie,
    Thanks for the link to the Pham and Ginsburg paper in Health Affairs which I downloaded and read last night. I have a few thoughts.
    First, I think the concept of a large, multi-specialty group practice is an excellent one that should be encouraged as much as possible. My own cardiologist, who is also my PCP, is a member of such a practice. The practice has many thousands of patients. I think these groups could be rated as groups with all of the doctors in the group sharing the same rating. If there is a less effective doctor that threatens to drag the group’s rating below the top tier, the practice management could either make sure he/she gets the training needed to improve or discharge him or her. Non-compliant patients, for their part, could, after adequate warning, also be discharged from the practice and encouraged to find another doctor after a reasonable notification period like 30 or 60 days.
    The general issue of patient compliance is a legitimate one for PCP’s when treating conditions like diabetes and heart disease. I think it is much less of an issue for surgeons, cancer docs, and others who do procedures as opposed to doctors who primarily offer counseling, referrals, and prescriptions.
    If CMS really believes that it would be better if doctors moved away from solo and very small group practices and the docs themselves think rating systems are unfair because of the non-compliance issue and imperfect risk adjustment mechanisms, CMS could list them as non-rated and ineligible for first copay tier (reserved for the most cost-effective doctor groups, surgeons, hospitals, etc.). The non-rated docs could go into a second tier with a third tier reserved for the most cost-ineffective doctor groups, surgeons, hospitals, etc. Doctors who think CMS rules are burdensome and payment rates are inadequate always have the option of just refusing to take Medicare patients. The challenge, of course, is that in most markets, there probably would not be enough patients who are able and willing to pay your fees to sustain your practice.
    I’m not sure I understand why CMS, so far, has been unwilling to consider differentiated copays depending on quality and cost-effectiveness. Is it the power of industry lobbyists who don’t want it? Is it an inability to think outside the box? Lack of information and assessment tools needed to develop an acceptable rating system? On the plus side, CMS (then HHS) did develop the DRG system in the early 1980’s to address runaway hospital costs. DRG’s, while not a complete solution, were a step in the right direction. The private sector is ahead of CMS on this, but if CMS embraces it, it would be enormously helpful, in my opinion.

  14. Just a few comments on the “medical home.” Like the politicians say, there is politics, and there is policy. I am a card carrying member of the ACP, believe in the organization and just about everything they stand for, and follow their stance on issues closely. The medical home solution has been bantered about for years, and if you read about the touted benefits of such a system, it is all good, ie, lots of juice for the squeeze. However, I also must tell you, having participated on a number of committees engaged with the ongoing MH experiment, it is not the panacea that all the clean descriptive policy papers express. In fact, when I speak to some folks involved in some of the pilot programs, it seems like the wild, wild west, and operationalizing this whole scheme will take more will, more elbow grease, and more resources than the system can currently bare.
    That is not to say I am a doubter and not a doer type, I am not, but this is another example of something looking great on paper, but in reality, will wither unless all the political changes we talk about happen simultaneously with a LOT of political muscle.
    Just as an example–and this is just a fraction–scrutinize below bullet points, and realize the changes the health system needs to make are not piecemeal and require transformation at a wholesale, top down level. Bottom line, when you are referring to a “medical home,” you will be better served by substituting the words “complete systemic health care reform”:
    • Primary care physicians would partner with patients to ensure that all of their health care is effectively managed and coordinated. Doctors would work with chronic disease patients to help them manage their own conditions and prevent avoidable complications.
    • Physicians and their teams—not health plan case managers—would be in charge of coordinating chronic care.
    • Practices would use electronic health records and other information technologies to store all clinical data and test results. Physicians would also use computerized evidence-based clinical decision guidelines at the point of care, but the ACP model would not require fully implemented electronic health records.
    • Physicians would provide—and be reimbursed for—non-urgent medical advice through e-mail and telephone consultations. Physicians would also team up with consultants and other health care professionals to provide the full spectrum of patient-centered services.
    It all sounds so warm and fuzzy.
    I am writing this because when I read posts on this blog and others, all too often I get the sense that MEDICAL HOME = ANSWER TO PRIMARY CARE PROBLEM. I am in the trenches a good deal of the time, and trust me, it is years and years away, and aint the near or even moderate term fix. We should not be dissuaded, but the benefits are not even close at hand, and a lot of stars will need to line up to make this happen (See Milky Way in dictionary). A lot of docs share my opinion incidentally, keeping in mind, we really dont want this to fail. Unfortunately, it is the other issues (SGR and Mcare fix, SCHIP, etc) getting all the attention.
    BTW, Dr. Sacks-Wilner, great post.

  15. I would appreciate an economists interpetation of the second half of the Merrit Hawkins figures you did not cite. They refer to the income to hospitals generated by different specialties. I did some blunt pencil math and got a ratio of $generated for Hosp/$cost to hosp(salary) and found the primary care folks by far the highest….So why aren’t hospitals bending over backwards to promote primary care practices and not radiology suites?…And of course the hospital buys the scanner and employs the techs, so I just don’t understand why the is no “return” on primary care. I know Stark laws have made payment to primary care docs tougher…But still, primary care docs admit to hospitals, cost less for salary, why don’t hospitals promote more practices? Instead they are paying Hand Surgeons to be available for admits…
    I believe there is a return to the community in terms of health for having good primary care available to it’s citizens. I see the perverse incentives and cringe, but if this return is truly there, why can’t local hospitals that are motivated to promote health in their communities realize some success. Instead of promoting the new 64 slice scanner, why not promote the new family doc…
    I interpeted these numbers to say hospitals were investing in the wrong specialties….
    I appreciate the economic perspective. Luvi does too.

  16. Robert, jb, anonyous, Dr. Wesf, dxdx, Bradley and Barry–
    Thanks for your comments.
    First, the easiest question!
    Dr. Wes– $525 billion was a typo. It should be $52.5
    billion. Thanks for catching it. We’ll fix it when we’re back in the office Tues.
    Robert: You’re looking at the wrong numbers. “Gross profits” for example, are
    “profits before subtracting operating and administrative expenses.”
    What you want to look at is “operating margin” (after substracting those expenses.) Scroll down on the link you sent me and you’ll find that it’s running a little over 11 percent.
    And they’re not juggling numbers or “hiding” how much of the premiums they keep.
    If you’re not famliar with terms like “gross profits” it would take hours for me to explain how to read a balance sheet. And you would find it pretty boring. So I’m afraid you’ll just have to trust me on this.
    Also–Try to understand, insurers have no motive to exaggerate how much they pay out. UNH doesn’t care what you think about them. They care what their shareholders think. And, as I explained before, their shareholders (who determine the price of the price of the stock as they buy and sell) want the insurer to keep as much as possible. That will make the stock more valuable.
    As for prices in the U.S. being higher for many things, it’s still possible to put health care costs in context in each country –which I’ll be doing in my next post.
    j.b. On inflation: You are right, the care I get this year is different from the care I would have gotten 5 years ago, or 10 years ago, or 15 years ago.
    Similarly, the laptop I buy today is different from the laptop I might have bought 5 years ago or 10 years ago or the computer I would have bought 30 years ago.
    Today’s computers can do more, are more user friendly, are lighter—and are CHEAPER.
    In most markets, as technology develops, prices come down. This is true for computers, flat-screen TVs etc. In fact, when a new technology appears on the market, everyone knows that if they just wait prices will come down. And so they wait.
    The health care market is different. Each new technology is more complex (just as new computers are more complex) but the new medical technology is also almost always more expensive.
    Prices don’t come down–in part because the cancer patient can’t say “I’ll wait until prices come down.” In part, because the cancer patient won’t say–“I’ll take the cheaper version. It might not be as good–but that’s okay.”
    In addition, in recent years the newest medical technologies have not necessarily been better than the older, less expensive technologies. (In medicine, by the way, “technology” refers to drugs as well as equipmient, devices, etc.)
    The new technologies are more complex, but too often they are not more effective. Sometimes they are riskier without providing added benefit. Have you noticed how many drugs and devices have been withdrawn from the market in recent years? After two or three years of use, we figure out that that are no more effective, and are hurting people.
    Twenty or thirty years ago, we were making real advances with new medical technologies. But at this point, in many areas, we’ve hit a flat point on the curve–in other words, we’ve reached a point of diminishing returns. We’re paying 30% more, but the product is perhaps 3% more effective for 4% of all patients. Yet we use it on 90% to 100% of patients– wasting huge amounts of money–because the manufacturer advertises it as the ‘best” product for everyone.
    That’s why everyone from the Congressional Budget Office to the leading Democratic candidates are calling for unbiased “comparative effectivenss reserach” doing head to head comparisons of all drugs, devices and surgical procedures to see which are most effective for which patients.
    As to what percent of GDP we should spend on healthcare, we’re not going to roll it back to 5.6%–nor should we try. But we can’t let it expand much beyond 16%. And we really need to provide care for the many people in our society who don’t get adequate care. That means squeezing out the waste wherever we can.
    anonymous– no I don’t misunderstand what a “signing bonus” is. It’s not to cover moving expenses; it’s a sweetener used to get someone to sign up. The term is used in many businesses.
    As to whether people turn down procedures and tests. I know many people who have done just that. A doctor tells you “I think you should have a colonoscopy, a cat-scan, a PSA test,” and you say “Is that really necessary?”
    A good doctor then explains the pros and cons. (Even a simple test has risks–like false positives)
    A bad doctor says “Yes, that’s why I’m recommending it!” I’ve had doctors argue with me in cases where I knew that I or my husband didn’t need or want what they were prescribing.
    A female doctor who is a friend once told me how she and her husband (also a doctor) had to argue with the doctors and nurses caring for her during the birth of each of her 4 children. In one case, they wanted to give her a C-section which she didn’t want and didn’t think she needed.)
    Finally, yes it makes sense that “very rich countries spend a larger percent of GDP on healthcare.
    But we are the ONLY rich country spending so much. We are spending TWICE as much, per person,
    than the average rich country, and our healthcare is not twice is good. We’re just very wasteful–which can be hazardous to our health. Overtreatment can be as dangerous as undertreatment.
    Barry– Just a couple of points. A doctor can’t simply discharge a non-compliant patient. He has a professional responsibility to try to help that patient–and also to respect the patient’s wishes if the patient doesn’t want to take a particular drug, because he doesn’t like the side effects.
    For instance, some anti-depressants can affect eyesight, making it very difficult for someone (particularly an older patient) to read.
    If I were 75 or 80, I’d rather be depressed and still able to read–but that’s because reading is so important to me. Different people have different priorities.
    Moreover, very often non-compliant patients are people who are poorly educated and have a hard time remembering and following directions; people who are depressed and giving up on themselves; people who are poor and live such chaotic lives that they have a hard time keeping appointments . . .
    These are some of a doctor’s neediest patients. A good doctor isn’t going to abandon them until he has tried every way to help them (including trying to find another doctor who might be a better fit.) Only then will he discharge a patient.
    CMS hasn’t differentiated co-pays based on quality because outcomes research is an infant science.
    When private for-profit insurers talk about lower-copays if you go to a certain doctor, they are talking about steering patients to a doctor who does less and bills for less–but they have no idea whether the quality of care he is delivering is better. They just know that he is cheaper for the insurer.
    This whole notion that you can “grade” doctors (or even groups of doctors) as easily as you can rate restaurants or refrigerators is just simplistic.
    It’s something to work on,and the Dartmouth research gives us a start–but, even when you look at that reserach and see that the Mayo Clinic and its doctors appear to be twice as efficient as UCLA hospital and its doctors what do you do?
    The Dartmouth reserach show that Mayo gets better outcomes and bills Medicare about half as much as UCLA would for a very similar patient–but how can CMS fix that?
    Should CMS say that anyone who goes to UCLA must pay a much higher co-pay? Or should CMS shut down UCLA, force it into
    bankruptcy and fire its doctors?
    Should all of the patients who would have gone to UCLA be shipped to Mayo? Would Mayo have room for them?
    Improving quality and efficiency cannot be about “penalizing” inefficiency–it has to be about teaching doctors and hospitals how to improve quality. We need to teach doctors in New York and New Jersey how to practice medicine the way they do in Minnesota (and not just at Mayo. State-wide, outcomes, doctor satisfaction and patient satisfaction are better, after adjusting for race, age, overall health of the population, etc.)
    Over time, improving quality while lowering costs has to be about putting a cap on how many hospitals we build, how much we let hospitals expand, and how many specialists we produce.
    We know that in parts of the country where there are fewer hospital beds and fewer specialists, outcomes are better, but that doesn’t mean that we can just put 1/3 of the specialists in Manhattan on buses and ship them to North Dakota. We need to cap supply and redistribute resources based on real medical needs. But that will take time.
    See Brad’s post and my reply below.
    You write: “Bottom line, when you are referring to a “medical home,” you will be better served by substituting the words “complete systemic health care reform”.
    I agree completely. One problem with these plans on paper is that often they are designed by business-school types who really think that healthcare is a business just like Toyota.
    They don’t understand the fragmentation, the fact that the market doesn’t work the way it does in other areas of the economy, that the goals of healthcare are different (better health rather than growth and higher profits); that there is a great deal of uncertainty and ambiguity about what counts as a “good quality” product –which makes rewarding for quality all the more difficult) etc. etc.
    I don’t think we should be looking at other businesses for models as we try to refrom healthcare. We should be looking at healthcare systems in other countries, trying a piece of this, a piece of that.Even then, what works in Norway won’t necessarily work here.
    I think Don Berwick’s work at IHI (Institute for Healthcare Improvement) is excellent, but he understands this is going to take a lot of time, and that it is often a matter of convincing one health care worker at a time.
    Berwick also understands that pay-for-performance is not a cure-all, that it can undermine professionalism, and that a will-to-excellence is key. (I urge everyone to buy Berwick’s book “Escape Fire.”)
    I do believe this is something we could do over the next 20 or 30 years. But there is no quick fix. We need to change everything–beginning with the way we train med students.
    dxdx: Sadly, in our money-driven health care system, even not-for-profit hospitals tend to forget their “mission.” Rather than asking, “what would be best for the community” they ask themselves “what would help us attract more well-heeled (and well-insured) patients?
    This means attracting the doctors who treat those patients. As a result, hospitals engage in a “medical arms race” buying more and more sophisticated and expensive equipment that will impress doctors and patients.
    Having a solid core of primary care physicians just doesn’t boost a hospital’s reputation. Having a team of well-known cardiologists who are considered “the best” in the city does. (Even if they wind up doing too many angioplasties and by-passes)
    And then you have to buy whatever equipment these cardiologists demand–even if you’re duplicating equipment that’s available at another hospital a half
    mile away. . .
    Thanks again for all of your comments.

  17. Maggie:
    Don’t make assumptions about other people’s understanding of financial statements.
    I quoted “gross profit” exactly because it is a meaningless figure, but one that the company sees fit to publicize. The difference between this and the “real” profit is exactly the area where companies hide the bodies. The exorbitant pay of top management is one of the expenses you allude to. So is the building and maintenance of prestige offices. The list goes on.
    No one accuses the Medicare administration of squandering this sort of money. And what are the $50 billion in assets that they claim? They make nothing. All they do is shift paper around. It can’t be their offices, no matter how lavish. It’s the money that they have siphoned off from premiums and used to “invest”.
    Suppose I get $100 in premiums and pay out $100, but I drag my feet and it takes a year until I get around to doing it. In the mean time I take the $100 and invest it at 7% (a conservative figure these days). I can show 100% payout ratio and still have a nice profit.
    Anyway, this is all a side issue. The real question is what is to be done?
    Better control of costs may save 10%. Competition with government-administered plans (optional “Medicare” for all) might cause a decrease in premiums of 10%, but the big factors still remain. High tech medicine is expensive, people demand questionable services, patents and other restrictions permit monopoly pricing and the politicians are beholding to the industry they claim they want to reform.
    There is no plan under consideration that will take the profit out of health care. Perhaps, given your background, you think big business is the best way to get things done, but I spent my career working for non-profits and I’ve seen things accomplished without needing to use financial rewards to motivate people.
    Let’s say I grant all your points. What is the plan to overcome the status quo?

  18. Robert-
    “Gross profits” are not meaningless. The company reports them because it is another number that helps people value the stock.
    But, as you say, “this is all a side issue. The real question is what is to be done?”
    You assume that, because I worked for Barron’s, I think that ” big business is the best way to get things done.”
    (Just as I made assumptions about you- assuming you were a doctor who doesn’t understand balance sheets, you make assumptions about me.)
    The truth is that I think the profit motive is the biggest problem in our health care system. See my book: “Money-Driven Medicine: The Real Reason Health Care Cost So Much.”
    (You can buy it for $2 or4 $3, used, on Amazon. Given what you’ve said in this post, I think you’re like it.)
    I also understand and like non-profit institutions. I spent the first 8 years of my working life teaching English literature at a university, and now work for a progressive, non-profit think tank.
    I enjoyed working at Barron’s becuause I wasn’t preaching to the choir. I was writing stories that might make conservatives think twice about corporate fraud, whether or not markets are rational, what was going on in Washington. . .
    You write: “High tech medicine is expensive, people demand questionable services, patents and other restrictions permit monopoly pricing and the politicians are beholding to the industry they claim they want to reform.”
    That’s a very good summary of the problems.The solution?
    AS more and more middle-class Americans find themselves priced out of the health care market, they are going to be more willing to listen to the doctors and researchers who have begun to explains that “more care is not necessarily better care”; and the “newest, hi-tech procedure is often not the most effective procedure . . ”
    At the same time, as things get worse, politicians are going to find themselves caught between a rock (voters) and a hard place (lobbyists.)
    More and more voters are going to be demanding that the government negotiate much lower drug prices from drug-makers, that the govt’ put a cap on price increases throughout hte health care industry, that the govt regulate the industry (the way it regulates other industries that produce necessities– electricity, water , etc.)
    Do I think this is going to happen all at once, in 2009? No.
    But I believe it will happen. Every other developed country in the world has figured out how to provide care for all of their citizens at an average of half the cost of what we spend, per person.
    We can do it too.
    As to where we can save money, see this article that I wrote last spring:

  19. “Should CMS say that anyone who goes to UCLA must pay a much higher co-pay?”
    In a word, yes! If people had to pay higher co-pays to go to doctors and hospitals tagged as high utilizers or cost-ineffective providers, maybe you will start to get some pushback from patients that will lead to changes in practice patterns. I have zero confidence that we will ever be able to cajole or teach UCLA to practice medicine more like Mayo. It takes financial carrots and sticks to get their attention, in my opinion. I suspect that doctors and hospitals in NY and NJ also know how care is practiced elsewhere, but they have their own way and their own culture. They have a mentality developed over decades that basically says leave us alone to practice as we see fit and pay us our bills promptly. We don’t care how its done outside of our community or region. Again, financial rewards and penalties eventually get attention. Pleading and cajoling don’t.
    As for discharging non-compliant patients, I’m told that there are plenty of inconsiderate middle class patients who don’t bother to call and cancel an appointment. They just don’t show up. Or, they just don’t take their medications or don’t take them consistently, not because they lead chaotic lives but because they are undisciplined and irresponsible. I think personal responsibility should count for something. You seem to think the individual is never to blame and must be protected by a nanny-like system no matter what.
    I don’t think either one of us is necessarily right or wrong. I just think we come at these issues in fundamentally different ways philosophically.

  20. maggie-
    thanks for your interesting replies to each post.
    my experience, although admittedly anecdotal, is that at the point of advanced illness where people need to make a criticial decision, unless they are close to death and have accepted it, they will frequently ask for advanced, expensive care even after steadfastly refusing it in the past. the situations you describe certainly occur, but are not what i meant when i made my earlier statement.
    perhaps you can educate me about corporate signing bonuses? what is the advantage of offering a bonus over a higher salary? in our small corporations, we don’t really have to set a line for future hires or for other firms to work off of. you might also argue that it alows me to offer a lower salary over multiple years, but i would argue that we would divide the bonus into the years of the salary, and have the same question. i truly simply offer it because i cannot get the hire to town any other way, given their hundreds of thousands of debt they carry and them having made 40k and already maxed out credit cards for the past several years. you might argue that this reflects market issues and without it i could not sign them. i disagree with that, but of course ultimately there is no way of knowing.
    the last personal relocation we made cost us over 100k out of pocket for tail coverage (despite never having been sued) and moving expenses and renting a place as a bridge etc. we don’t have the realtor fees covered. we absorb those costs personally. my friends in the corporate world are shocked to hear that those things are not covered or at least a budget is provided for. i apologize if i am misinformed on corporate issues.

  21. Maggie:
    Perhaps we’re looking at the health industry in the US the wrong way. Let’s assume that there is some truth to the claims of, say, the drug industry that they need to charge high prices to fund R&D.
    This could be regarded as a form of foreign aid by the US. We pay the extortion levied by Pharma and the medical equipment makers and this allows other, less wealthy, countries to impose restrictions on costs. The US is, in effect, subsidizing the health care of these poorer states. In other words its a form of indirect foreign aid.
    Not only are we paying for the R&D, but we are ensuring a large enough market so that new products will have lower production costs. Perhaps there are too many MRI machines in the US, but economies of scale mean that they will also be sold elsewhere at lower prices then would exist if there hadn’t been so many sold domestically.
    Then the question gets reframed from “is the US being overcharged” to “is there a net gain in benefits worldwide when the US is overcharged”?
    I think AID’s medicines are the perfect case. The African states would never have been able to make their claims if they couldn’t have pointed to the huge profits already being made by the existing suppliers.
    Given the general dislike of foreign aid by the US public, perhaps a back door path is all that is available.
    Just a thought…

  22. Maggie;
    I have been following this discussion with interest and really don’t have much to add except a small footnote about nonprofits. As you well know, they are only “nonprofit” AFTER paying all their executives; thus having a “nonprofit” medical system will not exclude anyone holding power from overpaying themselves. This already goes on in many, many “nonprofit” hospitals and insurance companies, etc. One can’t change human nature, no matter how we put names on things.

  23. Maggie,
    I would like to offer one comment on administrative costs and one on how Wall Street views for profit, publicly traded insurers.
    First, on administrative costs, your comments imply that all administrative costs are bad and need to be minimized. I think we need to look at these costs in three buckets. The first is what I would call “core” costs. These include claims processing, which any system requires, and network access. The second bucket consists of customer driven administrative costs. These include fees for disease management, wellness programs, nurse hotlines, life coaches, etc. Customers buy these services because they think they save money in the form of lower healthcare utilization than they would experience without the programs. The final bucket consists of the widely hated medical underwriting costs and commissions for insurance brokers. Large, self-employed plans do not pay anything for underwriting or broker commissions, though they do pay consultants to help with benefit design and the like. It is the individual and small group markets where these costs loom large. Under community rating, with medical underwriting eliminated, young, healthy people would pay substantially more for health insurance than they do now. Moreover, Medicare’s comparatively low administrative costs benefit from the fact that the average Medicare beneficiary incurs about 2.5-3.0 times as much in claims as the average person under age 65. This alone means that Medicare’s administrative costs per MEMBER are spread over a much higher dollar base resulting in a low percentage. The administrative cost gap between Medicare and large self-insured plans is really quite small on a per member per month (PMPM) basis.
    As for how Wall Street views private insurers, a couple of points. First, the insurance companies haven’t used the term Medical Loss Ratio in quite some time. They call it Medical Cost Ratio (MCR) now which is actually what it is. Second, investors like to see the MCR stay as close to the normalized level that insurers price their product to as possible. If it falls too low, it is considered unsustainable and likely to be competed away in lower prices or richer benefits. If it moves too high, margins are squeezed and prices will have to rise more next year in order to restore balance. In the last couple of years, investors have been much more focused on membership growth whether it’s commercial members or Medicare and Medicaid members. Stocks often go down when membership growth numbers are disappointing. To drive membership growth, companies need to please customers by offering a decent benefits package for a fair price and provide good service. If they don’t, members leave, especially in the Medicare Advantage and Part D programs where beneficiaries can change insurers once a year if they are not satisfied with what they have. As a buy side securities analyst who either listens to the conference calls each quarter or reads the transcripts, I think I speak with some authority on this.

  24. anonymous–
    In the corporate world, I’m told “a signing bonus typically runs from 20% up to 200% of the base salary.”
    The person who receives a signing bonus will normally be asked to sign a contract agreeing to stay with the company for a certain number of years. If he leaves sooner, he will be required to pay back the signing bonus.”

  25. Correction:
    In my last comment, the reference to self-employed plans should have, of course, read: self-insured plans.

  26. barry,
    on the subject of rating doctors and saving costs through a tiered co-pay system (or something similar):
    Many (most?) patients are non compliant in some way. Most diabetics don’t do exactly what they should medically. Neither do those with heart disease, or high cholesterol, or high blood pressure. Those with tougher social/economic situations have an even harder time “following doctors orders.” That’s life.
    I think we need to be extremely careful (as Maggie notes) rating doctors on outcomes largely determined by the ability of patients to follow through on the medical plan. I at least 3 very serious problems if we go that direction.
    1. Doctors will avoid working in areas with “tough patients,” as it will likely result in lower ratings. This is a large disincentive to care for those, arguably, who need good care the most.
    2. Patients from any social/economic situation who have “tough to treat” disease, for whatever reason, will be pariahs if such ratings sytems take hold. Again, those who may need care the most will have the hardest time finding it.
    3. Doctors will be incentivized to exaggerate the medical benefit of additional treatment to those “borderline on the numbers” to get their(the doctor’s?) “numbers” right for the ratings measure. This will lead to more medical costs/intervention with minimal medical benefit at the margins. For example, the benefit of getting a controlled diabetic’s ldl from 110 to 90 is probably minimal (maybe even less than minimal given recent zetia events), but a doc who needs “good numbers” will tell them that is VERY IMPORTANT to get that LDL less than 100. Is this how we want to influence physician advice to patients?

  27. Barry,
    I think the “core” costs are easily as hated as the underwriting costs. Have you spent a day in a hospital/doctor group billing office? The chaos that is the American Health Care funding mechanism is absolutely not necessary. We spend 4 times more per capita on administrative expenses than Canada does. All that extra waste is not just underwriting and benefit design. The claims payment system is a huge part of it.
    Also, I wanted to applaud Dr. Sacks-Wilner’s post. I wish people with power were listening!

  28. I too what like to know an itemized breakdown for “OTHER.” That seems by far the largest slice of the pie. The doctors actually care for the patients so they deserve fair compensation. Without knowing what the OTHER is, I’d say that’s the likely place to find “the fat.”

  29. pcb,
    I appreciate your comments. It’s always good to get a doctor’s perspective. I’m curious, though, if you have any alternative suggestions for measuring doctor (and hospital) performance. Clearly, some doctors practice more defensive medicine than others. Some have financial interests in imaging centers, labs, ASC’s, etc. and make more referrals to those facilities than doctors who do not have such a financial interest. Medicare makes risk adjustment payments to insurers who wind up with insured populations that are riskier than the norm. We should be able to, over time, develop individual health risk scores that could predict relative utilization of healthcare services that are roughly similar to the credit scores used today in the financial world. Factors like low socioeconomic status would contribute to higher risk scores (sicker / more difficult to treat / non-compliant, etc.) that could address some of the issues that you cited.
    Without some objective evaluation procedure, how would you recommend rationally going about choosing a doctor or hospital, especially for someone who is new to a community? Are surgeons’ outcome stats relevant? How about hospital complication rates, infection rates, and adjusted mortality rates? Metrics will never be perfect, but we should be able to develop performance measures that are a heck of a lot better than nothing. Shouldn’t we?

  30. Art, pcb,Mike C Barry, Bev M.D. and Robert Thanks for the ongoing comments–
    Bev M.D. —
    I agree that many not-for-profit hospitals have forgotten their “mission” as they pusue profit margins. But to be fair, CEO salaries at not-for-profit hospitals are still, on average, much lower than CEO salaries at for-profit hospitals.
    Mike C– I completely agree about Richard E. Sacks-Wilner’s post!
    pcb & Barry– I agree with pcb– evaluating the quality of physicains’ services is very, very tricky. We definitely don’t want to encourage doctors to shun the poorest, most difficutlt patients.
    In my newest post on paying physicians I talk (at the end) about
    a) moving away from fee-for-service and b) paying some bonsues to large doctor/hospital groups for better outcomes while using fewer resources.
    But I think it is most important to begin shifting health care dollars to pay doctors more who do the things that lift the overall health of the population (preventive care, smoking ceassation clinics, etc.) rather than paying them more to do things that require more physical exertion, are more stressful, or require more years of education.
    When compensating physicians we need to encourage more med students to enter fields where they will be most useful.
    I’m convinced that people are healthier in other countries because preventive care is widely avalable–often free. So in Scandanavian countires, everyone gets a Pap Smear,
    And there’s far less emphasis on “Sputnik medicine” high-tech, aggressive medicine that can be wildy profitable but is often unproven and helps relatively few people.
    I’m not a Luddite. We’ve made tremendous progress in certain areas–for instance in treating children with cancer. But that’s where I think we should be spending our dollars–on children & on keeping adults healthy for as long as posssible.
    As you’ll see in my most recent post, I also think we should shift some of the dollars we spend reimbursing physicans to upfront payment–subsidizing their med school education.
    Art– this post on spending on doctors services is part of a series where I’m filling in the slices in the pie chart.
    “Other” refers to those future posts which will look at spending on: hospital care; nursing home care; prescription drugs; medical devices; over the counter medicines, home health services and dentistry.
    Actually the big drug companies spend relativley little on reserach. (Most break-through reserach is done either by NIH or by small drug companies. If they stike gold. then big companies buy them, or contract for their products. But big drug companies don’t take many risks.
    So by paying more for drugs, the U.S. is not subsidizing drug reserach for the rest of the world. We’re just lining the pockets of drug company exectuives and their sharehodlers.

  31. Maggie,
    I’m unclear about the two admin numbers you provided. I am aware that there are substantial admin costs that go into the “physician” and “other” parts of the pie, and some of these costs have to do with claims, eligibility, etc. (basically, the provider side of insurance administration). That much is clear, so I’ll put it aside.
    What I don’t get is what goes into the 4.5% private insurance admin number and the 2.5% public insurance admin number. Maybe Barry Carol or someone else brought this up earlier. It seems to me that this difference is misleading, because the 4.5% private admin number includes the admin costs of private plans for FEHBP and for public programs like Medicaid and Medicare.
    If so, then the 4.5%/2.5% contrast distorts things. For example, you point out that government pays for nearly half of all health care. But this includes FEHBP and TRICARE, which are both administered by private plans, as well as that portion (maybe 15%?) of government-sponsored programs that are run by private managed care. If all these things were administered by the government instead of private insurance, the 2.5% number would go up and the 4.5% would go down.
    I completely accept that private insurance admin costs are higher….but they aren’t that much higher. And I know Barry has made that point several times before.

  32. Barry,
    I’ve noticed there seems to be two camps on the doctor ratings issue:
    1. The “we need to do something, even if it doesn’t totally make sense (yet)” camp.
    2. The “we can’t do something until what we do makes sense” camp.
    Count me in the latter group, mainly for the serious unintended consequences I mentioned in my previous reply. There are limitations, and there are fatal limitations.
    Addressing other points:
    The P4P and ratings system I’m familiar with have absolutely no risk adjustment or socioeconomic adjustment. None. I cannot extrapolate, but I haven’t heard of much of that going on elsewhere either. (keep in mind my experience is with primary care ratings) That’s probably due to a couple reasons. One, it takes time and money to make it a decent adjustment, and no one wants to spend. Two, there is a lot of doubt that this sort of adjusting, even the expensive type, does what it’s suppossed to do in the first place.
    On to other things…
    Each time a patient walks into the doctor’s office, it’s a completely unique situation. Not only are the medical details unique, but also the values and preferences of the patient (not to mention economic issues.) The job of the physician is to take all the info and render a verdict as to what is in the patient’s best interest. Much like a judge renders a verdict in a legal case. The reason we have judges rather than algorithmic rules for legal judgment is the details provide important information regarding a proper outcome. I see physician decisions similarly.
    Additionally, the doctor patient relationship is often essential to proper physician judgment, and that relationship (and the decisions that flow from that relationship) is difficult to measure.
    So then how do we rate physicians? Well, how do we rate judges? I don’t know, do we have a good system for objective measurement of a good judge? Intuitively, looking for outliers on verdicts seems reasonable. But that only addresses the outliers, which by definition are few. How would we rate the rest?
    One thought: The least distorted way to rate a physician would be a case by case evaluation/audit by an independent medically trained panel, sort of like an court of appeals would assess a previous judge’s opinions in the legal world. Then the details on cases (where the devil always hides) can properly be taken into consideration. There are still issues with such a system (how much to weigh cost consideration vs. “best care available”, bedside manner, interaction with staff, etc.), but it’s better than what’s being done now.

  33. pcb,
    I wonder how you (and Maggie) view the UK’s NHS’ effort a year or so back to offer incentive bonus compensation to PCP’s based on no fewer than 147 separate metrics with points assigned to each adding up to a maximum possible score of 1,050 points. I have no idea what the metrics were or what the impact on the health of the population or the utilization of healthcare services turned out to be. I do know that the docs performed better than the NHS expected and, therefore, it had to award more bonus compensation than it budgeted for. Apparently, the program could not have been implemented without widespread use of interoperable electronic medical records to gather and analyze the data. The sheer number of metrics is mind numbing to me, but the NHS obviously thought it was worth doing.

  34. Barry,
    I do know this: the UK P4P let doctors opt out patients if they (the doctor) felt the patient “wasn’t appropriate” for the measurement. For whatever reason, as far as I know. (correct me if anyone knows better on this point).
    Bottom line, this is a HUGE concession to the concerns I have about ratings. If I can decide that a patient isn’t appropriate for the data, using my judgment, I’m more willing to accept the data as an accurate measure of quality. I’ve not heard this opting out to be a part of any P4P program this side of the pond, at least none that I’m familiar with.

  35. pcb,
    Your comment about the UK doctors being able to exclude patients from the data as inappropriate is important and something I, of course, was not aware of. Even using that methodology, I think, would be a lot better than nothing in the eyes of the non-physician public (including myself). It would also be useful, though, if each practice disclosed the total size of the patient population that its metrics are based on as well as how many additional patients were excluded for various reasons and what the most common reasons are. Might we be on the way toward some common ground here?

  36. Maggie,
    I am sorry to belabor the point on your numbers but there is a “perspective” problem that I have with them. When speaking of the overall efficiency of medicare vs private insurance, the overhead percentage should be calculated as a percentage of the total that entity paid out, not total paid out over all. Making the overhead of pvt insurance 13.6% vs medicare 5%. If we are shopping around for say, a pump that fills resevoirs, they all lose water, we dont evaluate how well a pump does by dividing it’s losses by the work of all the pumps, just the work of the pump you are evaluating.
    The bottom line, even though 95 billion would be eaten up quickly, we need to evaluate and remove all and any inefficiencies possible, and if you look at private insurance, it should be one of the first to go in it’s current form.

  37. pcb,Barry, Bev M.D. j.d., dr.matt,
    thanks for your comments.,
    Bev. M.D.–as always, thanks for the links.
    Pcb & Barry– I agree with pcb about the difficulty of evaluating physician’s performance. We’re not ready to do it well, particularly in an economy (and a health care system) where there are such disparities in the overall health of rich and poor.
    At this conference, Dr. Don Berwick, head of IHI, and one of the most respected people in American Medicine (regularly elected the most important person in American Medicine) said that he often asks his medical students what would be the most important test they could do to judge the overall health and likely life expectancy of a new patient.
    He receives answers like “check their cholesterol,” “check blood sugar,” “weigh them.”
    No, the correct answer is “look at the color of their skin.”
    I interviewed Berwick before he gave his speech (I’ll be posting about our conversation and his speech) but one thing I asked him was about the debate we’ve been having here. At this point, are we in a good position to rate the quality of care that docotrs are offering?
    He said “no, because what you’re rating is ‘the cream of crap.’ Our system is so broken,” he said, “that even top performers are trapped in a system where they cannot perform optimally.”
    The system in the U.K. on the other hand, is much better he pointed out, because there is a nearly unanimous consensus on two points: everyone has a right to health care, and it should be absolutely free at the point of delivery. That’s not the time to pay. (Instead, you pay through taxes.) But when you are sick, whether or not you get care (or go for care) should not depend on whether or not you can afford it.
    He added that, in the U.K. it would make no difference which political party is in power. This is what the vast majority of people in the U.K. believe.
    Money should have absoultely nothing to do with health care.
    dr. matt– I agree with you that $95 billion is a significant amount of money (even if a small percentage of the whole)–and more importantly, I don’t think we’re getting much value for that $95 billion. Moreover, in many cases private insuerers are obstructing the delivery of good care.
    That said, I’m trying to make the point that the private insurers are just a
    small part of the problem of wasting health care doillars. The biggest waste comes when you look at some of the other slices of the pie: drug-makers, device-makers, hospitals and doctors who try to pump up volume, selling us more care than we need in a dangerous way while too often ignoring people who most need care.
    Too many people would like to tell themselves that if we just got rid of the insurers, we could on with our current health care system and somehow magically raise quality while finding the money we need to provide care for the uninsured.
    That just isn’t true. Seeing the waste in the insurer’s slice of the pie is the easy part.
    What Don Berwick has to say–that’s the hard part.
    Have any of you read his book “Escape Fire”? I highly recommend it. Many of you would like it. It’s brilliantly written–he’s a compelling speaker and it’s a collection of his speeches.
    In particular, his speech about what happened when his wife was seriously ill and they went from one elite hospital to another seeking good care is an eye-opener.
    You can get the book on Amazon.
    j.d.– the point is that it really doesn’t matter whether private insurers’ overhead is 1 1/2% higher than govt overhead, 2% higher, or 3% higher.
    I don’t mean to be copping out of the argument, but you’re losing sight of the forest for the trees.

  38. Maggie,
    While there may well be a near unanimous consensus in the UK that healthcare should be paid for through taxes and free to the individual at the point of service. I seriously doubt that such an approach could ever survive the U.S. political process, at least in the foreseeable future. As I understand it, the UK system also vests PCP’s with a critical gatekeeper role in accessing specialists. I’m told that it is difficult, if not impossible, to see a specialist without going through a PCP first to get authorization. Didn’t we try that approach with HMO’s in the 1990’s, and didn’t it have a bad ending? Presumably, making healthcare free at the point of service also requires a robust system to control utilization. While I’m absolutely convinced that good preventive care extends lives, I’m not at all convinced that it saves money for the healthcare system. I don’t need to look any further than my own experience with heart disease for evidence. Catching it in time led to bypass surgery, a lifetime of medical therapy, and a stent six years after the bypass. If it wasn’t caught in time, perhaps I would have died of a heart attack years ago. While that obviously wouldn’t be so great for me, it would have been a lot cheaper for the healthcare system!
    The UK, as a society, also determined that it is willing to spend much less of its GDP on healthcare than other OECD countries, including those in the rest of Western Europe as well as Canada. The NHS uses QALY metrics to both ration care and decide which drugs, devices, procedures, and other services it will pay for. While I personally think that is a sound approach, it would be an extremely tough sell in the U.S.
    Finally, with respect to the large regional differences in practice patterns in the U.S., you and others have consistently said that it is, in large part, due to regional differences in the supply of specialists and hospital beds. I wonder to what extent it may also be due to differences in the malpractice litigation environment. I’ll bet that the perceived need among doctors to practice defensive medicine is a lot lower in Minneapolis and Salt Lake City than it is in New York, Los Angeles, Miami, Philadelphia, and Washington D.C.

  39. Barry–
    You constantly throw out ideas based on false assumptions –and this kind of “I’ll bet that” off-the-top-of-your head thinking can lead to the spread of misinformation.
    Over the course of nearly 3 decades of research, the doctors at Dartmouth also considered whether difference in the malpractice environment explained overtreatment. Those many years of painstaking reserach show that the answer is NO.
    Just one example: There is far more overtreatment in Southern California than in Northern California. Yet the same state law regarding malpractice applies in both halves of the state.
    And that’s just one of many examples.
    In addition, the size of malpractice awards and settlements is increasing much faster in the U.K. Canada and Australia than in the U.S., giving their doctors good reason to practice “defensive medicine” but we don’t see the problem of overtreatment in these countries.
    Conservatives have made a crusade out of exaggerating the cost of defensive medicine as part of their compaign against plaintiffs’ attorneys. They don’t like plantiffs’ attorneys because they protect all of us by bringing suits against corporations that knowingly produce dangerous products–whether those products are cars that explode into a ball of fire when back-ended, drugs that cause heart attacks and strokes, or abestos insulation.
    Corporations (and the conservatives who support them) believe they should have a right to continue to market a dangerous product–even when they know its dangerous–and settle with the relatives of the deceased as needs be. This, corporations think, is part of the cost of doing business.
    But to be sued for wrong-doing, to have to pay hundreds of millions in fines, to be publicly exposed! Thus, they would like to crush the plaintiffs’ bar. And one way to do that is to suggest that the fear of malpractice is what drives the high cost of medicine in this country.
    In fact all of the settlements and court awards combined equal less than 1/2 of one percent of the nation’s health care bill. As to how many tests and procedures doctors do because they fear a lawsuit–there is no way to measure that.
    What we do know is that whenever a doctor decices to order a test or treatment, he probbably has a number of reasons– a gut instinct that tells him he should go one step further, genuine concern about the patient who he has known for a long time, perhaps a fear that if he misses something he might be sued, probably a much greater fear that if he makes a mistake, he might seriously hurt the patient, and perhaps, somewhere in the back of his mind, the knowledge that, since his fees aren’t rising and his costs are, he needs to make up the difference on volume.
    As for the quality of healthcare in the U.K.. anecdotes really don’t tell us much. Medical research does. And that research shows that affluent Caucasions in the U.S. are only as healthy as low-income Caucasians in the U.K. (Meanwhile affluent caucasians in the U.K. are much healthier than affluent white Americans.) No one can explain why–we’re more obsese, but they smoke more. Drinking is about the same in two countries.
    The only reasonable explanation is difference in the quality of care. When preventive care is free at the point of service, people don’t postpone it.
    By the way, I recently ran into Brian Klepper at a conference where he told me about the clinics that he is involved with. There are no co-pays are deductibles–and the results have been excellent.
    Since Brian is working with employers and large corporations, this suggests that it is “politically possible” for Americans to grasp the
    importance of making sure that money is not a barrier to care.

  40. maggie,
    If the number and award size of malpractice cases is increasing in Europe, and more physicians’ reputations and confidence are affected as a consequence, it’s just a matter of time before defensive medicine starts to proliferate overseas.
    While I agree that the reasons for overtreatment are many, to minimize defensive medicine in the US healthcare system just doesn’t pass the sniff test for those of us practicing medicine on a daily basis.
    CYA medicine is widespread and pervasive, it is hammered into young physicians during their training by the majority of our mentors, among both staff and supervising residents. (It dominates decision making in the ED, ask some ED docs and the radiologists who have to read their CT/MRI scans.)
    I do not pretend to have a solution to this problem. (I think societal expectations/entitlement, poor understanding of probability theory, and a litigious culture are the main players.) But to downplay it as a significant driver of costs in our country doesn’t fly with what is actually happening in the trenches.

  41. pcb–
    I don’t mean to suggest that fear of malpractice isn’t a problem and isn’t part of the mix leading to overtreatment.
    It’s just that people tend to focus in on one problem and decide that it’s the villain. We could declare an end to malpractice suits tomorrow, and we’d still have overtreatment in this country because a) so many people make so much money on overtreatment (drug-makers, device makers, hopsitals that are operating on very thin margins and are desperate for revenues as well as some doctors) and b) because Americans have been taught to believe that “more” is always better.
    But you are right that unrealisrtic expectations, a sense of entitlement and poor understanding of probabilty theory all contribute to malpractice suits. The public needs to be educated so that people understand the uncertainty us inherent in medicine. And that a bad outcome doesn’t mean you’ve won the Lotto.
    There is a way to do this–through “shared decision-making” which I have written about on this blog and for Dartmouth Medicine Magazine:
    The state of Washington recently passed a law which says that if a doctor takes a patient through shared decision-making (there is a whole protcol and international guidelines for this) so that the patient truly understands the risks, the benefits and the odds of the procedure ahead, it will be much, much more difficult for the patient to sue the doctor after the procedure.
    This seems to me an excellent idea. And other states are likely to follow suit.
    I personally also would like to see malpractice cases decided by judges who specialize in medical cases or panels of doctors, nurses, and well-informed patient advocates.
    The cases are just too
    complicated and lay juries are just too emotional.
    Settlements have been expanding in Canada, the U.K. and Australia for a while, but overtreatment isn’t rising for a simple reason: their health care systems have global budgets and other constraints that put a lid on volume.
    For example, in Canada certain surgeons can only do so many operations a year–based on how many surgeries citizens in that province have needed in past years, adjusted for various factors, with room for some increase, but nothing like the increases in volume that you see here.
    Global budgets for regions also limit volume at hospitals.
    In this country, we need similar constraints on growth. At the conference I attended last week, I interviewed Don Berwick, head of the Insitute for Healthcare Improvement.
    Among other things, he talked about how we need to encourage hospitals Not to fill all of their beds. “We need to cut the link between profit and volume” he said, and suggested that rather than pay hospitals for quantity of patients they admit, we might pay them for not using all of those beds. (Rather like paying farmers not to plant.) In Mass. they have are talkign about paying utility companies for conservation efforts that lead their customers to use less energy. Rather than paying utilities only for the number of kilowatts sold, they are paid negowatts— whenever they sell fewer kilowatts.

  42. pcb,
    Great comments on defensive medicine.
    The prostate cancer case discussed in the link you cited clearly illustrates the need for clear liability protection codified in law for doctors who follow established evidence based standards. It would also inspire more confidence, I think, if malpractice cases were heard by special health courts presided over by knowledgeable judges with the medical panels Maggie described as opposed to by juries who cannot understand the science, the evidence and are easily swayed by sympathy for the plaintiff and the skill of lawyers.
    I think malpractice reform will have to evolve state by state. It is highly unlikely that a legislative change like this would ever see the light of day at the federal level under a Democratic president or a Democratic congress (especially in the senate). Democrats love trial lawyers and take a lot of their money. I won’t hold my breath waiting for a Democratic president to stand up to them on this issue.
    By the way, I would be interested in your comments as to what malpractice litigation reforms you would like to see and, if achieved, how long it might take before doctors practiced materially less defensive medicine as a result of the changes becoming the law of the land.

  43. OK, Maggie, if you’re going to go after my buddy Barry Carol (“you constantly throw out ideas based on false assumptions”), I’m coming off the sidelines. Be careful thinking that you possess all the facts yourself. Your information on pap smears detecting 100% of cervical cancers is just plain wrong, for instance. I’ve seen you make this assertion in several places. The pap smear has both high false negative and false positive rates and is now being supplanted by better procedures. Look up the medical references before you spread misinformation yourself.
    I agree with pcb and Barry about defensive medicine and malpractice. Anyone who practices sees it every day in every way. Your example about California is irrelevant – just because the state law is the same does NOT mean the “malpractice environment” is the same. We all know the type of people who live in southern California are totally different from those who live in northern California, duh! Likelihood to sue is the operative characteristic here, not state law.
    Barry was kind enough to ignore your slight, but I find him one of the more thoughtful commentators on this blog. I do think you should make your own interpretations more thoughtful and less media-like black and white.

  44. Bev – Thanks very much for the kind words. This topic, by its nature, can get a little heated at times. I try to never take it personally. I respect Maggie’s knowledge base, healthcare industry contacts and research skills. We are at different places on the philosophical spectrum, however. I’ve learned a lot and continue to which is why I enjoy commenting here. Moreover, in contrast to sites like Daily Kos and even Ezra Klein, where you often find liberal ideologues who don’t even know much about the subject trying to shout down opponents with foul language, the generally civil tone here is very much appreciated, at least by me.
    I want to make a comment about the research Maggie cited that suggests that defensive medicine is not an especially important factor in rising healthcare costs and invite comments. Suppose a team of researchers goes around and asks a representative group of doctors practicing both in office and hospital settings what percentage of the healthcare utilization (at cost) that they ordered or performed in, say, the last month was defensive or CYA medicine. The chances are that most docs would say little or none of it was. It was almost all necessary and in the best interest of their patients. Now suppose a doctor, at the end of the day in the doctors’ lounge, asks another doctor with whom he is friendly and may even socialize with the same question. How much of that utilization would you not have ordered if the patient were a family member and you were paying the bill out of your own pocket? The chances are that the answer would be very different and much higher. One of the key reasons why estimating the cost of defensive medicine is so difficult is that doctors are not likely to answer questions about it truthfully to anyone other than other doctors with whom they are friendly. Yet, as both Bev and pcb say, defensive medicine is embedded in the medical culture and is likely to be most intense in the highest risk surgical specialties and in the cities and states with the most litigious populations and environment.

  45. Barry, Bev M.D. and pcb–
    I’m glad you didn’t take offense. I didn’t think you would. I often spend quite a bit of time responding to your comments (doing research, sending you links) because your comments are generally very intelligent and thoughtful.
    Admittedly, I was annoyed when you suggested that the DArtmouth researchers had never considered the malpractice angle.
    Dr. Jack Wennberg, who started this research has spent more than three decades on it, working up hill the whole time. And if you think about it, over the course of that time, it’s insulting to suggest that the malpractice angle wouldn’t have occured to him and his team. If it had, they would have used it. They’re not particularly political.
    So in many ways, when I responded, I was defending the expertise of Wennberg,, and the time, commitment and absolute integrity that they have brought to their research.
    As for the role of defensive medicine in healthcare inflation, I agree that, in conversation with other doctors, many doctors would say that they are doing more tests and procedures because they are worried about lawsuits.
    What they wouldn’t say–even to most of their peers–is that they are pumping up volume in order to make up for the fact that their costs are rising while fees are not.
    I don’t even fault primary care docs for doing more tests, seeing more patients per hour in order to break even. They really are having a hard time financially.
    But I think you and I agree that the fact we pay for volume (fee-for-service) is a major problem in our system.
    Bev MD and pcb- just came home from work, must eat dinner – but I’ll catch up with you tomorrow

  46. Maggie,
    Thanks very much for your response to my last comment.
    Today, I attended a luncheon sponsored by the Manhattan Institute for Senator Tom Coburn, Republican from Oklahoma. I didn’t even know that he is a physician by training (internal medicine and pediatrics) and he has proposed a healthcare reform plan that, as you would imagine, relies on the formation of a national insurance market, high risk pools, and replaces the current tax preference for employer provided health insurance with a tax credit.
    Anyway, during his talk he cited a study, which I was not able to find, by the AMA done in the mid-1990’s that pegs the cost of defensive medicine (based on today’s healthcare prices) at about $180 billion per year or about 8% – 9% of healthcare costs. The AMA’s figure also includes the current cost of malpractice insurance. He further commented that he thought as much as half of that amount could eventually be saved through sensible malpractice reform, most notably, health courts. I suspect that these figures would have an upward bias as both the objective and the sponsor of the study would encourage doctors to provide high estimates for their defensive medicine costs. Even if we take these figures at face value, they are not going to save the system. I think health courts are worth pursuing, however, both because they would improve the way we resolve medical disputes and it would neutralize defensive medicine as an issue in the healthcare reform debate. At the very least, it is a strategy that can be pursued at the state level without federal level action.

  47. pcb–
    I’m famliar with the prostate cancer case.
    It’s in the law journals because it is such an outlier– under virtually identical circumstances plaintiffs never have won cases like these.
    But because it is so unusual, it got a lot of attention–and fueled physicians’ anxiety about lawsuits.
    There is an absolute consensus in the law journals that shared decision-making would protect a doctor in a case like this.
    For political reasons, President Bush and other conservatives have done their best to exaggerate the likelihood of a doctor being sued.
    In fact only 1 of 8 victims of avoidable medical injury sue, and only 1 of 15—about 7 percent—receive any compensation.
    Moreover, in our present system, in order to win restitution, a harmed patient must prove not just that a doctor or hospital erred, but that the error was caused by neglect or incompetence so severe it amounts to a breach of the doctor’s or hospital’s legal duty of care.
    In other countries, where there is a “no fault” system, the plaintiff only has to prove that an error was made–he does not have to claim “fault.”
    People like President Bush like to talk about a “malpractice crisis” much as they liked talking about how Iraq had “weapons of mass destuctions.”
    Their political arguments are based on fear because they have no evidence.
    Here are the facts:
    malpractice claims and awards are not rising. Total medical malpractice payouts dropped 6.9 percent from 2001 to 2002 according to a National Practitioner Data Bank (NPDB) analysis by Public Citizen.
    · Jury verdicts in medical malpractice cases are stagnant, even according to Jury Verdict Research data, which tends to over-inflate award trends.
    Verdict and Settlement Study Released: No Change in Median Medical Malpractice Jury Award
    Most malpractice is caused by a small number of doctors who are never sanctioned. Just 5 percent of doctors (1 out of 20) that are responsible for 54 percent of malpractice payouts.
    This is all on– a website devoted to making politicians and media accountable to ordinary citizens.
    But the fact that ideologues misrepresent the dangers of malpractice does not mean that the fear is not real. Moreover, way too many “nuisance cases” are brought, adn even if the plaintiff does not win, the whole process is very time-consuming and exhausting for the physician.
    For that reason, I’d like to see panels of health care professionals deciding these cases.

  48. Barry and Maggie,
    Barry: I’m not sure what the best reforms would be. If damage caps end up discouraging lawyers from seeing malpractice as a chance to win the lottery (John Edwards style) then maybe fewer cases would be filed and those that were filed would be the reasonable ones. It would take a long time to see any benefit in the actual practice of defensive medicine though. Why? Well, from a doctor’s standpoint, the trial is the fear, not so much the money. (Insurance usually covers that part.) As Maggie notes, it’s the time, shattered confidence, damage to professional pride, percieived (and often real) loss of reputation, having to answer “yes” to the “have you ever been sued” question on all the forms. That’s the real fear, and why we practice defensively. On health courts:
    Bottom line, I agree with your last paragraph. If practicing docs felt that other practicing docs were going to judge their decisions, right or wrong, they might practice less defensively and rely on “reasonable judgment” more often. Facing a John Edwards type, his smile and slick presentation, is a scary proposition.
    If the medical facts are going to be put through the spin cycle and then judged by laypersons, most of whom have limited understanding of medical science and clinical decision making, docs are going to do whatever it takes to avoid the courtroom. Since that’s the current system, those fears lead to pervasive defensive medicine.

  49. Bev M.D.
    You wrote: “We all know the type of people who live in southern California are totally different from those who live in northern California, duh.”
    I don’t even know how to respond. Let me suggest you read the reserach on
    overtreatment in California hospitals here
    You can also read about how the supply of specialists and hospital beds drives overtreatment nationwide here
    The idea that, over the course of three decades of research, it never occurred to Dr. Wennberg or his researchers to consider whether fear of malpractice might also be a factor is, if you think about it, highly improbable.
    In fact if you read their research you will find that they have considered this possibility. But as the point out, even proponents of tort reform (and caps on awards) claim that “malpractice reforms that directly reduce provider liability pressure lead to reductions of just 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications.” )This is from Kessler, Daniel and Mark McClellan. “Do Doctors Practice Defense Medicine?,” Quarterly Journal of Economics, 1996, v111(2,May), 353-390 So this doesn’t begin to explain why Medicare spends twice as much per patient (after adjusting for age, race, differences in local prices, and underlying health of the population) in some places than in others.
    In addition, whatever stereotypes you may have in mind about the “type of people” who live in “Southern California, Miami or Manhattan,” the reserach shows that overtreatment is also commonplace in towns like Lubbock, Texas and Hattiesburg, Missippi–where there are twice as many hospital beds per 1000 residents as in many other cities.
    In both towns, patients are far more likely to land in the hospital, seeing 10 or more specialists during the final six months of life.( Yet outcomes are no better. Often they are worse.)
    I suppose one could speculate that the “type of people” who live in Lubbock and Hattiesburg are more litigious than the average American and that’s why they receive more aggressive treatment.
    But I find it hard to imagine that two-fold differences in Medicare spending can be explained by regional character flaws–particularly when overtreatment pops up in places like Hattiesburg and Louisiana–cultural milieus that bear little resemblance to either Miami or Manhattan
    You suggest that I am spreading misinformatio on Pap smears.
    The truth is that while Pap smears can produce a false negative, if a woman goes for an exam each year, the disease will almost certainly be caught in time.
    How do I know this?
    This is what the doctor who was the lead researcher on Gardasil, Merck’s vaccine against cervical cancer told me when I interviewed him.
    As he explained, in Scandanavian countries where they have Organized Screening and virtually everyone gets a Pap Smear (at no cost) “they probably wouldn’t need Gardasil” (the vaccine against viruses that cause 70 percent of cervical cancers.)
    The point that I have made is not that Pap smears are perfect, but that they are so good that in the U.S. they have turned cervical cancer into what the NIH calls a “rare disease” and in Scandanavian countries where almost all women are screened they have been even more successful.
    Therefore, it’s not at all clear why we are spending a fortune on a vaccine that guards against only 70% of the viruses that cause the cancer. We might better take 1/5 of that money and use if for a campaign to make sure all women and girls get regular gynecological exams and pap smears.

  50. Barry–
    You wrote: “Anyway, during his talk [Tom Coburn] cited a study, which I was not able to find, by the AMA done in the mid-1990’s that pegs the cost of defensive medicine (based on today’s healthcare prices) at about $180 billion per year or about 8% – 9% of healthcare costs”
    It’s possible that you couldn’t find the study because it doesn’t exist. Politicians routinely cite studies that someone told them about that they have never seen–
    On the other hand, it may exist. But given the AMA’s attitude toward the plaintiff’s bar, I’d take their numbers with a grain of salt.
    In truth, only a mind-reader could know how much defensive medicine costs. You would have to go into the mind of the doctor, untangle the 3 or 4 motives driving any treatment decision, and then figure out how much weight to give to fear of malpractice.
    Even proponents of tort reform claim that malpractice reforms that directly reduce provider liability pressure lead to reductions of just 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications.” )This is from Kessler, Daniel and Mark McClellan. “Do Doctors Practice Defense Medicine?,” Quarterly Journal of Economics, 1996, v111(2,May), 353-390
    Even if you believe those numbers (and they have been disputed) this doesn’t begin to explain why Medicare spends twice as much per patient (after adjusting for age, race, differences in local prices, and underlying health of the population) in some places than in others. Supply does.
    Finally, you might want to keep in mind that Sen. Tom Coburn is something of an extremist. He has said that he believes that gynecologists who perform abortions should receive the death penalty and also objects to legal abortion in cases of rape. He has justified his position by noting that his great-grandmother was raped by a sheriff.
    I can understand people having concerns about abortion, but . . .
    Last year, Coburn threatened to block two bills honoring the 100th birthday of Rachel Carson. Coburn,calling Carson’s work “junk science”, proclaiming that Silent Spring, “was the catalyst in the deadly worldwide stigmatization against insecticides, especially DDT.”
    Finally, this may provide a clue as to why he doesn’t like malpractice suits:
    In 1990 he sterilized a 20-year-old woman without her written consent.
    Coburn explained that he performed the sterilization during an emergency surgery to treat a life-threatening ectopic pregnancy, removing her intact fallopian tube as well as the one damaged by the surgery.
    The woman sued Coburn, alleging that he did not have consent to sterilize her, while Coburn claimed he had her oral consent.
    Although the lawsuit was ultimately dismissed with no finding of liability on Coburn’s part, I find it pretty extraordinary that a doctor would sterilize a 20-year-old without getting her written permission . . .
    He also has charged that Oklahoma’s high schools are filled with lesbians . . .and he launched a protest to try to stop NBC from airing “Schindler’s List . .”
    I don’t know Barry, all in all, “wacko” is the word that comes to mind.

  51. Maggie,
    I think the figure of 5%-9% of medical costs that could be saved if we had effective malpractice reform is well worth pursuing, though it will not, by itself, come anywhere close to solving the problem of rising healthcare costs.
    I accept the build it and they will come evidence developed by Dartmouth Atlas that you have written about often. Medicare, as you say, has known for years that it spends far more per beneficiary in some regions than in others with no difference in outcomes. The issue is what can we do about it?
    I am a believer in the power of information. Even if it is not feasible to rate individual doctors, small practices or even large practices, I think there are some things we could do. For example, suppose I live in Boise, ID, and a surgeon tells me I need back surgery. If there were a user friendly website or objective infomediary that I could access and learn that surgeons in Boise are twice as likely as surgeons elsewhere to recommend back surgery, it would be helpful to know that. What if my images and chart could be e-mailed to a surgeon at Mayo or Inter-Mountain for a second opinion review paid for by CMS or my private insurer? The reviewer would be paid the same no matter what the verdict and no matter what the patient decides to do. If doctors in high utilizing regions were challenged more often, maybe practice patterns would start to change for the better sooner rather than later.
    I was seeing a specialist (not heart related) every six months for the last several years. Since every checkup was fine (following a procedure in 2004), I asked if I could safely cut back to a once a year checkup. He said that I could and I have. Maybe most people will still follow their doctor’s recommendations no matter what, but in the Internet age, patients need to learn to be more proactive, and making more information easily available to them from objective, unbiased sources could instill the confidence they need to ask questions and not just accept medical advice on blind faith.

  52. Barry;
    I apologize for becoming slightly uncivil myself on your behalf, but I think Maggie’s statement about your making false assumptions was patently untrue.
    Like I once said on Paul Levy’s blog; you should run for Congress. In addition to being thoughtful (wait, maybe that’s a disqualification!), you have thick skin! (:
    I’m not sure where to start with you, either. Let’s start on what we can agree on – the root cause(s) of excess expenditures on health care in the United States are multifactorial. You are doing a multipart post on these causes, the first of which is “physician services”, on which we are commenting here.
    Barry, pcb and I, if I may speak for them also, are putting forth the thesis that malpractice and defensive medicine comprise two of the many root causes of perceived excess expenditures for physician services. Evidence for how big a role they play is difficult to measure, but, as Barry says, even a 5-9% contribution is “worth pursuing.” Here is one reference (maybe the AMA didn’t study it, but a lot of other people are; try googling “entrez pubmed”).
    Your trying to minimize them as a factor is, ultimately, counterproductive – since there are MANY factors which will have to be pursued in order to reduce expenditures for physician services. I absolutely agree with you that fee for service payment is another root cause – but it’s not the ONLY one, so why oversimplify a complex situation?
    Second, re pap smears – even though this is off topic, I am following up because it’s really important for you to understand. A layperson reading your statement could badly misinterpret and cost herself her life as a result. You have previously stated pap smears detect 100% of cervical cancers. There is no laboratory test, I repeat, no test, which detects 100% of anything in the entire population tested. In a recent post on another blog (I forget which one), someone was angry that they were charged for a pap smear and an HPV test – you replied that the HPV test was unnecessary and she should not pay for it. Please read this link from the medical literature (not “someone told me”), which says otherwise.
    Any female reading your 100% detection statement could go out and get ONE pap smear which is read as negative and, following your advice, figure she’s home free, as you did not mention the all-important qualifier that many sequential pap smears will detect most (not all) cases of cervical cancer. Please modify your future statements to reflect the whole picture.
    Finally, as to California, i could not access the Health Affairs link. However, I did not, and do not, dispute the Dartmouth’s group’s expertise nor that they factored in malpractice environment in their studies. I merely took exception with your, once again, overly simplistic interpretation that because all of California is covered by one state law, that all doctors in California have an equal fear of lawsuits. As pcb points out, it is FEAR of lawsuits, not actual malpractice data, that drive defensive medicine – and I would fear that more from a southern California patient than a northern California one. Enough said.

  53. Bev M.D.
    I’ve never suggested that “one Pap Smear” would do the trick. I think everyone knows that we are talking about annual Pap Smears.
    But you’re right, if I said 100% I shouldn’t have. It should be “nearly all.”
    But the fact that the lead reseracher on the vaccine said that it wouldn’t be needed in these Scandanvian countries is impressive.
    Re the Health Affairs article: You can access it by going to (You might have to pay for that one article, though I don’t think so. In any case, it’s well worth it.)Or you could read the long cover story I wrote about it for the Spring 2007 issue of Dartmouth Medicine. (Google my name and title of magazine)
    No one has proven that tort reform would save 5% to 9%–this is merely the number that has been thrown out by those who want tort reform. If you look at the history of what has happened in states with reform, it’s pretty clear that caps aren’t the answer.
    Though, as I’ve said before, I think lay juries are a terrible idea.
    Finally, if you talk to people who have spent the last 25 or 30 years studying the problems with in our healthcare system–people like Dr. Don Berwick of IHI, Dr. Jack Wennberg, or Dr. Steve Schroeder, former head of the Robert Wood Johnson Foundation and now at UCSF, they will tell you that emphasizing “fear of malpractice” as one of the big problems is the oversimplification. (Also, to get a better idea of the major factors driving overtreatment, read Shannon Brownlee’s excellent book: “Overtreatment.”
    They would also tell you that some doctors like to empahsize fear of malpractice because it absolves them of all responsibilty for over-treatment. They can say:”The lawyers made me do it.”
    Doctors who are more candid admit that much of overtreatment is connected to docs jacking up volume in recent years. Young doctors working with older doctors tell me that the older doctors give them “quotas” as to how many x-rays they need to read in a given day, how many patients they need to see–and the quotas exceed what they can do safely.
    Finally,those who have studied health care spending in the U.S. and abroad in a systematic way point out that in other countries the number of suits and size of settlements is rising, but governments still manage to keep a much better lid on health care spending becuase they don’t pay fee-for-service, they have global budgets, they don’t allow med schools to graduate so many specialists, they put a limit on how many very expensive procedures a specialist can do in a given year, etc.
    These are the things we need to do to put a brake on health care inflation.
    Some doctors don’t like the idea of government putting a brake on health care inflation: one man’s overtreatment is another man’s income stream.
    So they keep try to bring the conversation back to “the lawyers made me do it.”
    And conservaives and libertarians strenuously object to government curbing overtreatment. In part, this is because they don’t like any kind of govt regulation; in part, the drug-makers, device makers and others who make huge contributions to conservative and libertarian campaigns don’t want to see government doing anything that would curb their profits–even if over-treatment is hazardous to our health.
    BTw, for-profit drugmakers etc. contribute far more to conservative Republicans than they contribute to liberal Democrats or liberal Indpendents.
    That’s why people like the Oklahoma senator who Barry heard speaking at a conservative think tank keep trying to pretend that fear of malpractice is one of the main drivers of inflation. It’s a factor, but not a main driver.
    As I’ve said before, I respect the fact that fear of malpractice is causing real anxiety for many good doctors–particularly in certain specialities. As I noted above, I don’t think lay juries should be deciding these cases, I think legislation like the law in Washington that calls for shared decision-making would go a long way toward solving the problem.
    And finally, I think that doctors themselves need to get much tougher about reporting colleagues who are, in fact, practicing sub-optimal medicine.

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  55. To Maggie on Tom Coburn and Silent Spring:
    DDT has proven to effectively drive down malaria worldwide – cheaper and with relatively low side effects compared to its overwhelming benefits. Countries that banned DDT at the behest of the EU have seen much higher rates than Kenya and others that have kept using it. About 500,000 children die needlessly each year, because of the overreaction compelled by Rachel Carson and her ilk. In the name of political correctness, that’s many millions. By itself a pretty good reason to not honor her. Coburn’s other acts may brand him negatively, but not having the courage to expose the awful effects of this woman’s pseudo science, much of which has been disproved over the years. She’s the Godmother of Al Gore, another guy who worries about hypotheticals and uses scare tactics to enrich himself, instead of helping people right now.

  56. March 7, 2010
    Hi Maggie,
    Thank you for your informative blogs/ articles on Health Care Issues and Health Care reform.
    This is my first time commenting on your web site, which I happenstanced on yesterday, while googling issues on health care.
    In this article (blog), you make a valid point that while Health Insurers have their faults (denying coverage, capping services, raising premiums, paying exorbitant top management salaries), the system is broken in other areas too, all of which add to the out of kilter inflation growth in this industry with regard to the the rest of the economy.
    Your chart shows Physicians costs at about 22% of the health care pie compared to 4.5% for Private Insurers and and 2.5% for Government programs. However, the 71% for “other” stymied me. It needs further explanation, and further breakdown into understandable bites of data. I would appreciate an elaboration to this portion of your pie chart, either on your blog, or via personal email.
    I concur with your main point in this blog that Health care costs encapsulate more than just health Insurance Costs. While we talk of the few murky physicians who work in shuttered offices to defraud Medicare and Medicaid, the fraud is systemic and there is no shame from hospitals Admininstrators to Physicians Offices to Medical Device Makers, etc.
    Hospitals who charge $147 for a single Tylenol, and pad their bills are systemically into defrauding the system. Yet many hospitals are going broke. Big Pharma who charges Americans 3-10 times what they charge citizens in other countries, stating that the exorbitant costs are simply in order to pay for R&D for their fabulous new drugs, but yet spend more on their Advertising & Promotion budgets, and have some of the highest CEO Compensation in our Capitalistic System. Big Pharma also gets a lot of tax payer funds for primary science research and the role of FDA in bringing their products to market. Along, with Physicians whose fees keep rising yearly, and Medical Devices manufacturers who charge, say, $7000 for a long steel needle, which probably took all of $10 to manufacture, appear to be making out like bandits.
    If Inflation is the real cause of our health care costs rising double and triple the CPI every year then don’t we have to go after all the culprits?
    Not that physicians don’t have a right to make a good living. However, they and CEOs and Big Pharma and Pvt. HMOs don’t have the right to make such a large income that it breaks the personal bank of individuals at home, and breaks the piggy bank of the USA economy.
    Back to the Pvt. Health Insurers, I think if we consider Health care a basic “right”, then we need to regulate them as Utilities, and pass a Bill that reverts them to their original Not-for-Profit Status.
    I am a fiscally conservative Democrat who is NOT for a Public Option. Our government is flat broke. We need to have pragmatic fixes to our system, without breaking the bank, again and again!
    A. F. Nariman
    Williamsville, NY,

  57. Take a look the total number of providers billing Medicare and that will explain that vast majority of the rises in total money paid to doctors. The amount paid out PER-PROVIDER is actually flat or decreasing, but there are so many new providers out there increasing the number of billings per patient that it causes the overall cost to go way up.