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ACA Agonistes
Why We Can’t Have Nice Things, Healthcare Edition
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  • WigWag

    Unless we find a way to reduce physician salaries by 30-50 percent, healthcare in the United States will remain unaffordable and no delivery system known to man will work.

    Democrats and Republicans are looking for villains in all the wrong places. It’s not the greedy trial lawyers or the greedy insurance companies or even the greedy pharmaceutical companies who are to blame. It’s the greedy doctors and their evil cartel that is literally ruining our country.

    • QET

      Physician salaries, maybe. But what about hospital charges? And talking about greedy physicians is like talking about greedy baseball players. In your litany of possible villains, physicians are the only ones who actually provide the medical services. If any component is going to be well-paid, if we want to incentivize our “best and brightest” to enter medicine, so that people with IRB are not diagnosed with colon cancer, and vice versa, and so that your kidney transplant is done correctly, we want high MD pay. The other components–lawyers, insurance companies, etc? Not so much. (PharmCos are a hybrid and so particularly difficult to deal with).

      • WigWag

        Here is the average take home pay for physicians in the United States (by specialty in 2015) The data is from Doximity:

        Allergy and Immunology $296,705; Anesthesiology $357,116; Cardiology $436,849; Colon and Rectal Surgery $343,277
        Dermatology $400,898; Emergency Medicine $320,419; Endocrinology $217,610; Family Medicine $227,541
        Gastroenterology $379,460; General Surgery $360,933; Hematology $376,660; Infectious Disease $205,570
        Internal Medicine $223,175; Medical Genetics $158,597; Pediatrics $205,610;Neonatology/Perinatology $290,853
        Nephrology $306,302; Neurology $243,105; Neurosurgery $609,639; Nuclear Medicine $290,639;
        Obstetrics & Gynecology $315,295; Occupational Medicine $229,450; Oncology $341,701; Ophthalmology $343,144
        Orthopedic Surgery $535,668; Otolaryngology (ENT) $369,790; Pathology $302,610; Pediatric Cardiology $303,917
        Pediatric Emergency Medicine $273,683; Pediatric Endocrinology $157,394; Pediatric Gastroenterology $196,708
        Pediatric Hematology & Oncology $192,855; Pediatric Infectious Disease $163,658; Pediatric Nephrology $183,730
        Pediatric Pulmonology $218,106; Pediatric Rheumatology $200,027; Physical Medicine/Rehab $278,283
        Plastic Surgery $407,709; Preventive Medicine $270,888; Psychiatry $227,478; Pulmonology $317,323
        Radiation Oncology $418,228; Radiology $404,302; Rheumatology $244,765; Thoracic Surgery $471,13
        Urology $381,029; Vascular Surgery $428,944

        With average salaries this high, no health care delivery system would work. Why do physicians earn so much money? It’s because the medical cartel aggressively limits the number of doctors by limiting medical school admissions far below what they should be and by making it extremely difficult for foreign doctors, even from developed nations with excellent medical schools, to practice in the United States.

        You’re certainly not wrong about hospital costs; they are far above where they should be. Expenditures on hospitals make up the largest segment of U.S. health care costs; physician compensation comes in at second place.

        Until the reality is confronted that physician salaries are dramatically too high, the Democrats and Republicans can fret all they want about how to fix the delivery system. None of it will matter.

        By the way, out of control health care costs is not only killing medicare, medicaid, the private insurance system and the VA, its depressing the salaries of the working and middle classes and its responsible for a significant percentage of the pension crisis in the United States.

        We all love our doctors and we want them to be as skilled, knowledgable and compassionate as possible. Most doctors work very hard and are committed to delivering high quality care. But as a group, physicians are almost singlehandedly ruining our country.

        Their cartel needs to be destroyed before it totally destroys America.

        • QET

          MLB utility infielders make more than that. Good working class Democrat-voting families happily go to Fenway Park and spend upwards of $300 for a day at the park, paying $13 for a watered-down beer and $10 for a small hot dog, yet their $25 co-pay is a political outrage because greedy doctors? You just are not convincing. And I think median numbers would be more illuminating than averages, and median numbers by geographic region. I work 3 blocks from Mass General and I guarantee that every one of those averages is pulled up significantly just by the MDs working there (and more generally in the Longwood area). I just received, in fact, a statement from a MD from a recent office visit with a small procedure involved, and the total is less–by far–than I paid for 2 Boston Bruins tickets recently. And that doesn’t even include the food, drink & parking. And the Bruins game was sold out, all 17K+ seats were filled, many with good registered Democrat (this is Boston we’re talking about) working families (this is hockey we’re talking about) who probably voted for Sanders because this country owes them dammit!! Every person in effing Cuba and England has free healthcare of the best quality, and I gotta pay a deductible because of greedy doctors/lawyers/capitalists????? In a nutshell, I have just described the actual politics of the matter, politics that are totally indifferent to policy wonkery. Just pay my d%mn medical bills or else, is the Alpha and the Omega.

          Congress should just expand Medicare to the entire country, raise some taxes on the upper middle class (because that is the most politically vulnerable class), do more creative accounting, and postpone the inevitable as long as possible but at least until I am out of office.

          Full disclosure: my father is a retired MD, so assume all the bias you want.

          • WigWag

            It’s got nothing to do with the $25 co-pay and whether that is too much or too little. It’s got everything to do with the total cost of healthcare. It strains credulity to suggest that U.S. health care costs are not out of control; they are. There is simply no way to reduce health care costs without touching one of the major factors driving those costs which happens to be physicians salaries.

            As for your request for medium salaries, I cited what I could find which was average salaries. The table that I linked to does provide average salaries by geographic areas. You can take a look.

        • Beauceron

          So doctors make far less than lawyers and investment bankers, but need more education and have more responsibility.
          At the top Manhattan law firms, starting salary for a fresh out of school first year is $180K.

          • WigWag

            It is true that at top white show firms starting salaries for lawyers approach $200,000 but those salaries are obtainable by only a very tiny percentage of law school graduates. Partners in the most well-respected law firms make more than average doctors do, but average doctors make far more than average lawyers. In fact, average lawyers salaries have been going down not up and jobs for lawyers are getting harder to find.

            Investment bankers and their ilk are at the top of the top of the salary scale in the United States; the average is much more than doctors make. But the real issue (as always) comes back to supply and demand. One of the main reasons physicians are so well compensated is that the supply of physicians is kept artificially low. American medical schools admit only a small percentage of qualified applicants and the medical profession works tirelessly to convince a credulous public that only a small percentage of the population has the requisite intelligence and skills to supply even basic medical care; it’s a lie.

            Most medical schools are massively subsidized by the federal government. If these schools were required to double the size of their classes while reducing tuition, it would make a big difference. So would admitting qualified foreign doctors.

          • Beauceron

            I suppose I just think, in the grand scheme of things, medical doctors are on a par professionally with lawyers and investment bankers and accountants, etc.
            I think, if you lower the salaries too much (as they do in Germany, for example), you’ll have less people going through medical school. Not that doctors do it for the money, or solely for the money– but earning a good living is certainly part of the draw to the profession I would think. Less medical professionals is not what we’re after.

          • f1b0nacc1

            I don’t want to put words in WigWag’s mouth, but unless I am mistaken, his suggestion is to ‘lower the salaries’ of medical professionals by increasing the supply. Hence his comment “One of the main reasons physicians are so well compensated is that the supply of physicians is kept artificially low” I myself completely endorse this view, and believe that if the monopoly power of state medical boards (as well as that of medical schools, which act hand in glove with them) was broken, we would see a dramatic drop in the average level of compensation, which would work to bring about the desired results. The key is to break the cartel that (with state intervention) is distorting the marketplace.

        • rpabate

          Where is Watson when we need him?

          • WigWag

            He called. He’s indisposed at 221b Baker Street.

  • Andrew Allison

    For the purposes of discussion:
    1. To what extent is the high price of health care due to insurance?
    2. Is it reasonable that the employers’ portion of premiums is tax free whilst that for private insurance is not?
    3. The post acknowledges that employer-provided insurance actually represents untaxed income to the employee; is it reasonable that the federal government is subsidizing employer-provided insurance.
    4. Should employer-provided health insurance premiums be taxable?

  • jeburke

    Disagree. It’s WRM who falls into a trap — that is, that US healthcare is expensive because structural problems, and that highminded reformers can find clever ways to solve those problems and reduce costs, or at least “bend the cost curve.” This trap has ensnared three generations of experts, pundits and politicians, beginning in the 1980s when “managed care” emerged as the favorite “reform.”

    While there may be some opportunities to trim costs at the margins — more scope for nurse practitioners, “urgent care” facilities to divert traffic from ERs, more generic drugs, digitized data, “comprehensive” care and oversight for the elderly with multiple ailments, etc. — healthcare is expensive because it’s expensive. That’s mostly because of the high standards we have for health care professionals and high levels of pay they get, plus the high standards we have for hospitals and other institutions, plus our expectation as consumers that we will get the best care every time, all the time.

    The problem is that a lot of people simply cannot afford any unsubsidized (by government or employers) insurance. Honest debate would focus on how to deliver those subsidies.

  • QET

    The ACA is an attempt to provide Medicare to everyone without having to show Medicare numbers in the budget. Medicare paid for miraculously (because that is precisely what it is based on–the occurrence of miracles) by reshuffling private health insurance company products and using fictional financial models. What people want, even Trump voters (and here I agree with the venerable FriendlyGoat) is for government to pay all of their medical bills. Pure and simple. You can veil this molten core of the volcano with as high a policy cone as you like (hey, people at TAI and elsewhere get paid by building cones!); the fact remains that no amount of policy sleight-of-mind can alter the reality. That reality is the same reality that makes an appearance every time some politician talks about reforming Social Security. The AARP organizes old people and places them in town halls and TV commercials to demand that their SS be reduced by not one dime, because they’re old and frail and helpless and what sort of heartless bastards would do such a thing and besides they’ve “earned” it. With ACA, you see the recent townhalls where individuals stand up, the recent Blue City Newspaper front page pieces featuring, “individual stories” of how without the ACA this person before you will die a horrible death and what sort of heartless bastard are you to even think about doing away with the ACA? To hear their well-rehearsed laments, you’d think people were dying en masse in the streets in the years prior to ACA.

    Basically, the order from the voters (Trump voters, too) is this: find a way to pay for everyone’s medical care without reallocating one dime away from anything else that government is currently paying for.

  • seattleoutcast

    Denninger, over at The Market Ticker, has stated that our health care prices could easily come down by an order of magnitude if 15 USC Chapter 1 was used against the medical industry over blatant monopolistic practices. I would like to know if he is right.

    • seattleoutcast

      Anyone? Anyone? Bueller?

    • f1b0nacc1

      I have heard that suggestion before, and I don’t have numbers one way or the other. With that said (and see the comments WigWag makes above), I suspect that there is much to this. Simply go after the medical industry (including, and perhaps especially the medical boards in each state) as monopolistic enterprises….should be fun to watch if nothing else…

      • seattleoutcast

        Thanks, good info.

  • Chris Cachor

    Here’s an idea: make healthcare expenses tax deductible (carry forward say ~10 yrs max) and every American gets full coverage through Medicare. Every citizen gets an HSA account administered by Uncle Sam (just like Obama did with MyRA retirement accounts). Insurance companies can go bye bye.

  • FriendlyGoat

    Whether you get insurance from self-purchase, employer or government, a policy which costs $100, $200, $300, $400, $500, $600, $700, $800 or $900 per person per month cannot pay claims of more than $1000, $2000, $3000, $4000, $5000, $6000, $7000, $8000 or $9000 per person per year on average. This is the silly simple statement of real economics from which we should start our thinking.

    The plan right now is to get some state to bless carriers and policies which will sell in the low end of those ranges and for those policies to be sold to you and your employer in all states. You can decide for yourself how well-insured you or your family might be against any hospital charges you have heard about lately.

    As for TAI’s “short term palliative methods to relieve distress”, I don’t know what those are.

  • seattleoutcast

    I think the title should be changed from, “Why We Can’t Have Nice Things” to, “Why Economic Rents Prevent the Average Citizen from Having Nice Things.”

  • Fat_Man

    I think that the Republicans should repeal the individual and employer mandates, the coverage mandates (maternity care for 50 year olds), the extra taxes, and the price controls. They could then announce that they have repealed Obamacare, but saved all the subsidies. They should then go onto longer term fixes, such as universal HSAs.

  • ვეფხისტყაოსანი

    Note that the vast majority of Americans — and even most pundits — cannot maintain the distinction between health insurance and health care.

    One should also keep in mind that the possibilities for health care when my father-in-law started out as a GP in the 1930s are vastly different than they are now. If our options today were the same as they were 80 years ago, doctors could still be paid, as my f-i-l was, in sides of hogs and bushels of corn.

    • FriendlyGoat

      In the 1970s, my father-in-law visited a real physician whose standard fee for an office visit was one dollar. No kidding. I think the doctor was basically retired (not subsidized) and continued to see patients in a small-town practice as his own form of public service.
      Today, we should be seeking to know the average doctor’s malpractice insurance costs per patient visit. Seriously, we’d likely all be shocked to know any doctor’s annual insurance premium divided by his annual number of patients seen.

      • WigWag

        FG, I can’t answer your question about malpractice exactly as you asked it, but here’s what I can say with certainty; dissembling Republicans constantly lie about the impact of malpractice rates.

        Malpractice awards and insurance premiums make up less than 3 percent of healthcare spending in the United States. The average doctor spends less on malpractice premiums than the average patient (or the patient’s employer) spends on healthcare premiums.

        While some specialties do pay a lot for malpractice premiums (the average ob/gyn for example) and while some states are particularly expensive (e.g. New York) most physicians pay less than $1,000 per month to buy malpractice insurance. What’s more, rates have been coming down for years, not going up. See,

        http://m.huffpost.com/us/entry/4171189

        Republican huffing and puffing about malpractice insurance is merely designed to divert the public’s attention from the real problem.

        There is no solution to our country’s healthcare quagmire if we don’t reduce costs. There is simply no way to reduce costs without driving down physician compensation.

        • FriendlyGoat

          Well, knowing the truth about that could cut both ways. If, in fact, we would not be surprised at how high the malpractice premiums are, we might be surprised the other way about how low they are—–when we have been led to believe they are high.

          As for the problem of physician compensation, it is the same problem as ball player and coach compensation, CEO compensation, attorney compensation in business law firms, and hedge fund manager compensation. The tax code was once designed as much to avoid excesses as to collect revenue—–but a bunch of liars promised us job creation if we gave away the top end of the brackets. Well, we did that as they asked and you see what we got. Now we’re about to double down and do it again bigger than ever. Ya think a tax cut is going to push physician charges down? Why would anyone think so? The Reagan tax cuts and forward were associated with physician charges going up.

        • ვეფხისტყაოსანი

          The problem is not the cost of the premiums, but the effect the constant threat of lawsuits has on the nature of medical care. If doctors did not constantly have to use every conceivable test, drug, and procedure in order to be able to defend themselves in court, our costs would be much lower. But because they do, actual, measurable malpractice costs are lower — even as the cost of health care skyrockets.

          One can only imagine the piggy squeals of lawyers if they were to be tried for legal malpractice by people — doctors, say — who know nothing about the law.

          • WigWag

            The costs associated with defensive medicine are hard to quantify. There are two things to be said; as the price of malpractice insurance has declined nationally, it stands to reason that the incentive to practice defensive medicine has also declined.

            In addition, when a physician orders an expensive test (e.g. an MRI), at least in the context of private insurance, he typically needs to get pre-clearance from the patient’s insurance company. These companies are loathe to approve payments for tests that are not actually necessary. To be fair, experienced physicians know how to present their case to get approval.

            So defensive medicine is a problem. It’s hard to quantify how big a problem it is, but the magnitude of the problem is almost certainly declining.

            Miraculously eliminating the practice of defensive medicine would make, at most, a marginal difference in total American healthcare expenditures.

            The only way to bend the cost curve downward is to attack the two major factors driving healthcare costs; hospital expenditures and physician compensation.

          • ვეფხისტყაოსანი

            There’s a third factor: the growth of the medical bureaucracy. There are a lot of people in hospitals, insurance companies, hospitals, and government pulling down six-figure salaries who have absolutely nothing (or nothing good, anyway) to do with health care.

            You may recall that our former first lady was given a $100+k sinecure at a Chicago hospital — and there is no record of her ever having done any useful work. And her case is quite typical.

  • WigWag

    Off topic, but if you’re out there Professor Mead, how about sharing your thoughts with your loyal readers about your alma mater, Yale, dropping John Calhoun’s name from its roster of colleges.

    Apparently some of the students and faculty found it intolerable to work on a campus where a supporter of slavery had his name memorialized in stone. Naturally, the Yale President capitulated.

    Of course the University itself was named after a slave trader. Should Yale change its name to the University of Eastern Connecticut or, perhaps, the College of New Haven.

    You spent a lot of time there as a student and teacher, Professor Mead.

    What do you think of all of this. I am sure many of your readers are curious.

  • Jacksonian_Libertarian

    Free markets are the only way to fix healthcare, nothing else is worthy of the lives of ourselves and loved ones.

  • Angel Martin

    Prof Meade has made the point in the past that the non-insured part of medical costs are falling – cosmetic surgery, veterinary care and the like.

    That suggests to me that insurance is a major part of the problem.

    My own view is that that the medical insurance system simply cannot handle clients with pre-existing conditions. For example. a 2 million dollar catastrophic medical claim wipes out the profit on ~10 million dollars in medical insurance premium income (assuming a 20 percent profit rate.

    At a policy rate of say, $5000 per year, that one claim wiped out the annual profit on 2000 policies.

    Real insurance simply excludes applicants who represent tail risk in terms of claim costs. ie. the “Road Warrior” cannot get collision insurance. If you mandate that the “Road Warrior” must be insured, the auto insurers are going to spend their time trying to (legally) exclude the “Road Warriors” from claim payouts.

    Thus, the mandates that stop insurance companies from excluding on pre-existing condition were a step in the wrong direction – in my view.

    I think the place to start is to pull people with pre-existing conditions out of the insurance system, and put them on Medicare or Medicaid. Charge them a percentage of income, and let the private insurance market see what it can do with the costs of insuring and treating healthy clients.

    • ScottishRed the Deplorable

      The thought I’ve had and haven’t heard addressed is: why not some sort of re-insurance program? Place a cap on the yearly or total amount the insurance company is on the hook for an individual patient. Once that amount is reached, then a “catastrophic” policy kicks in and covers the rest. This plan might be offered by the government or private insurance.
      I have no idea what the limits might be, but that could be worked out. The idea is used in all sorts of other insurance situations. Why not health insurance?

      • Angel Martin

        Yes, that could work also.

        Since the States each define a different insurance market, let one state test putting pre-existing conditions on Medicare/Medicaid, let others try variations your re-insurance proposal. If a State wants to try single payer… or whatever, – i say let them.

        Anything is better than another single, gigantic, Federal-driven, untested health insurance “reform”.

  • ljgude

    The US spent 16% of GDP on healthcare when the ACA was passed. It capped expenditure to 17.5% of GDP by 2017. Actual expenditure reached 17.1% of GDP in 2014 according to articles here on TAI. Life expectancy has actually gone down – as of 2016 we are now 53rd in he world at 79. 13 years. Australia, where I live, is 9th at 82. 31 years. Australia spends 10% of GDP on healthcare as do most OECD countries. In terms of life expectancy New Zealand, Norway, Ireland, Germany, UK come in at 25-29 respectively with a life expectancy of about 81 years. I am most certainly not arguing that the ACA has caused life expectancy to go down but rather with or without it US healthcare costs as a percentage of GDP are way too high. I think the cost increased under the ACA because whenever you disrupt a market the players with the power to do so will increase their prices. It could easily happen again as the Republicans repeal and replace the ACA. I think we are far more likely to reach 20% of GDP than we are to significantly reverse the upward trend. Google Steven Brill’s 2013 Time article ‘Bitter Pill pdf’ to get a clear understanding of exactly why US healthcare costs threaten to double what is actually necessary to achieve good health outcomes.

    • WigWag

      To put your excellent comment in context (and to provide a little new data) in 2015, the U.S. spent 17.8 percent of GDP or about $3.2 trillion on healthcare. See,

      https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountshistorical.html

      The OECD country that spent the next highest amount was France. The French spent 11.5 percent of GDP on healthcare.

      If by some miracle the United States could reduce expenditures on healthcare to what the French spend we would save close to $1.1 trillion on an annual basis.

      It’s amazing to think of what could be done with $1.1 trillion per year in terms of tax relief, shoring up entitlements and pensions, medical research, and providing raises to middle class and working class people.

      If that money was available we could have wonderful arguments about how the savings could be deployed. Instead, that money is flowing into the already overstuffed pockets of doctors and hospitals.

      It’s sad that neither Democrats, Republicans nor the Trump Administration have the cojones to confront this problem head on.

    • charlesrwilliams

      Well, you have a point but some medical costs are not by any stretch of the imagination essential health care. So one reason health care spending in the US is so high is that people are freely using their income on discretionary items. I have one relatively good eye. I freely chose to spend an extra $2000 for premium cataract surgery to get the best possible outcome. I feel safer driving now that I am 20/30 with no correction. My retina specialist asserted that I would see no benefit. A small benefit is worth a lot to me. I have no regrets. Cataract surgery was marginally necessary, medically speaking, but the premium surgery is a luxury.

      Then you have in-vitro fertilization, boob jobs, hair implants, circumcisions, etc., none of which are medically necessary.

      The point is that we should not confuse medical spending with health care costs.

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