U.S. Healthcare Costs, Health Plans, and Doctor Salaries

Posted by Anthony Lee Jul 25, 2009

This week, I am posting two blog entries, both of which are a major departure from my usual musings. Instead of disease or the inner workings of the medical profession, I would like to discuss rising healthcare costs in America.

President Barack Obama is working to provide health coverage for the uninsured, an effort I applaud given how the issue has always been all talk and no action. At the same time, I am reminded of factors that could possibly drive up healthcare costs. After all, a problem is best solved from multiple angles, including the root causes (why costs are rising) and the end consequences (the now increased costs). While generating money to fill health insurance gaps is a start, one might also want to think about the following issues:

Fee for Service

• Problem: A fee-for-service health plan reimburses the doctor for any office visits, test, and treatment, creating a financial incentive for the doctor to order unnecessary tests.
• Suggestion: Pay the doctor on a fixed salary, leaving services to be decided based on medical necessity.

Emphasis on Sick Care

• Problem: Some health plans pay little to none for preventive health and much more for services related to disease, leading many patients to wait until they get sick before requiring expensive tests and treatments.
• Suggestion: Create a level playing field by reimbursing more on prevention and less on sick care.

Abundance of Specialists

• Problem: Primary care physicians earn much less than specialists, an incentive for doctors to specialize while creating a shortage of generalists to do preventive medicine.
• Suggestion: As with health plan reimbursements, create a level playing field by boosting salaries for generalists and controlling salaries for specialists.

For more thoughts on U.S. healthcare costs, see my other blog entry.