One of the drivers of growth in health care costs is rising doctor income. The New York Times has an excellent piece on this phenomenon as it pertains to specialist doctors and the procedures they do. Some specialists have seen their salaries increase by more than half after inflation since 1995. More:
“The high earning in many fields relates mostly to how well they’ve managed to monetize treatment — if you freeze off 18 lesions and bill separately for surgery for each, it can be very lucrative,” said Dr. Steven Schroeder, a professor at the University of California and the chairman of the National Commission on Physician Payment Reform, an initiative funded in part by the Robert Wood Johnson Foundation.Doctors’ charges — and the incentives they reflect — are a major factor in the nation’s $2.7 trillion medical bill. Payments to doctors in the United States, who make far more than their counterparts in other developed countries, account for 20 percent of American health care expenses, second only to hospital costs.
In the face of rising health care costs a popular approach to reform has been to shift costs around by means of subsidies and mandates. This is essentially what Obamacare is. But what stories like this show us is that subsidies isolated from reform are just serving to prop up a status quo that is deeply unsustainable. Helping people to get access to a system that is more expensive than it should be, and that is getting more expensive as time goes on, is not good policy. If we just keep raising subsidies to keep pace with increasing costs, we will eventually go broke.This is one of the reason America’s health care policy problem is much more dire than its budget deficit problem: With cheaper health care, our long term fiscal prospects look strong. Without it, all of our entitlement and budget challenges become much worse.