Map of life expectancy at birth from Global Education Project.

Saturday, February 03, 2007

A hundred billion here, a hundred billion there . . .

pretty soon it adds up to real money. Of course I'm referring to The Emperor's new budget, which wants $245 billion to continue the program of world conquest while cutting $70 billion out of Medicare and Medicaid.

Obviously, if we just held on to the $245 billion all the rest of our problems would be a lot less daunting, but let's separate the questions for now. Yes, publicly financed health care is costing more and more and we're going to have to come up with some combination of more revenue and cost savings. As you know if you've been reading the best way to save money is to actually expand these programs to cover everybody, but that's dreamland for now. The Administration proposal includes raising premiums for wealthy Medicare beneficiaries, which seems to make sense; and cuts in reimbursement rates for providers, which is a more complicated story.

Continuing our discussion of why health care costs so much more in the U.S. than it does in civilized countries, one of the most important reasons is that inputs cost more: we pay more for drugs, medical devices, and physicians' salaries. We'll deal with the drugs and stuff later, but today let's talk about the docs with the horse farms. Docs in the UK make less than their U.S. counterparts, but more than docs on the continent, and the Brits tend to think it's too much, although presumably most British M.D.s don't agree. There are a couple of reasons why European physicians accept lower incomes than American bone sawyers. First, there is less economic inequality overall in Europe, so in general people don't feel they need immense incomes in order to feel appreciated. Higher education, including medical school, is heavily subsidized, so docs don't graduate with a quarter million dollars in debt. (That's the number one excuse I hear when I bring up the question of physicians' incomes with members of the profession.) That also means, of course, that Europeans don't need to make huge incomes in order to help pay for their own children's education.

Physicians have a lot of responsibility, obviously, and they work hard. They have to invest a lot in their training, and it's a very demanding road. They don't start making a substantial income until their late 20s, at best, while their business school counterparts are out there making the big bucks three or four years earlier. But the truth is the really big bucks are concentrated in certain specialties, whereas primary care physicians make the least, and are losing ground. Now that's a big problem. There is a looming shortage of primary care docs, even more so ones who specialize in geriatrics, and those are the kind we need the most, especially if we want to help control costs by better prevention.

So the issue is not to just squeeze providers, but to reconfigure reimbursement to better reward primary care physicians and the institutions where they practice; while ratcheting down the ridiculous overpayment of some specialists. That's going to be tough. Once people have something, they feel entitled, they feel as though they deserve it. But really, $300,000 a year is just too much.

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