Belmont Club

Ticket to Ride

The New York Times suggests that cash is increasingly being preferred to insurance by doctors in Manhattan. The doctors want to avoid dealing with the insurance ‘caps’ that may be charged for procedures.

Efforts by insurers to rein in health care costs by holding down physician fees — especially for primary care doctors, who play a critical role in health care though they are among the lowest paid doctors — appear to be accelerating the trend, and some patients say it’s getting harder to find an in-network physician …

a new survey of 13,575 doctors from around the country by The Physicians Foundation found that over the next one to three years, more than 50 percent plan to take steps that reduce patient access to their services, and nearly 7 percent plan to switch to cash-only or concierge practices, in which patients pay an annual fee or retainer in addition to other fees.

The cash-upfront trend raises an uncomfortable question. Can the Affordable Care Act, intended to widen access to health care, succeed by expanding insurance coverage if primary-care doctors are walking away from insurance? …

A June report by the Medicare Payment Advisory Commission, which advises Congress and focuses primarily on the government plan for seniors, suggests adults ages 50 to 64 are having more trouble getting an appointment with a new physician …

The country is already facing a shortage of physicians, according to the Association of American Medical Colleges. By 2025, the nation will have 100,000 fewer doctors than needed, according to the association. With fewer medical students choosing to go into primary care, shortages in this area are expected to become especially acute.

When economists find that capacity in a given industry is declining and that shortages are emerging they usually look at the price incentive structure to identify the problem.

Several tens of millions of people are going to be entering the market with  Affordable Care insurance policies in hand but will they find any doctors who’ll take them?  “When the Affordable Care Act’s insurance mandate takes effect in 2014, some 30 million newly covered patients—people generally treated in emergency rooms now—will be shopping for doctors. That’s a problem because the U.S. has 15,230 fewer primary-care physicians than it needs, according to the U.S. Department of Health and Human Services.”

Yet teaching hospitals aren’t rushing to fill the void. The federal government foots most of the bill for residency programs—and Congress has capped enrollment at about 85,000 students for the last 15 years

But if more patients and fewer doctors do not mean higher prices with the reimbursements capped they will mean even longer waiting lines. One acknowledged factor at work in reducing primary care physician availability is low expected earnings. “While medical schools are increasing enrollment, there are still few going into primary care because of lower pay … 97% of people in Massachusetts have health insurance. But nearly a third of them had trouble finding treatment in the last year.”

Even if residency programs are expanded, medical students themselves are choosing not to go into primary care practice.  Student debt is one reason. “School debt and income expectations are two main reasons many medical students decide to enter a high-paying specialty instead of becoming primary care doctors, according to a new long-term study … By graduation, 30 percent of the students who entered medical school with the intention of becoming a primary care doctor switched their preference to a high-paying specialty … In 2010, 86 percent of medical students graduated with some education debt, according to the Association of American Medical Colleges. The average debt was $158,000, but 30 percent of graduates were more than $200,000 in debt.”

With the cost of producing primary care doctors rising and the reward of entering the profession falling availability is declining. So what can be done to ameliorate the situation?

According to Michael Lind at Salon the answer is simple. “Experts know that the answer to health costs is regulating what doctors, hospitals and pharma companies can charge”. Medical access and procedures should not be limited. All that is required is to make people charge less for it. Here’s how Lind thinks it should work.

In all-payer regulation, every few years the government bargains with representatives of health care providers—doctors, hospitals and pharma companies—to set prices for medical goods and services. The fee schedule that results from the negotiations is binding on all providers, public or private. All-payer regulation keeps prices down, in otherwise different health care delivery systems, including the Swiss system based on individual mandates to buy (nonprofit) private insurance and Japan’s fee-for-service system.

The process appears to resemble the negotiations that politicians periodically have with teacher’s unions. Will it work? We’ll soon find out.

The great conceit of government is the illusion that by creating a certificate of entitlement it automatically creates that physical resource as well.  Nobody imagines that it will result in more paper chasing fewer services.

In money as in insurance this can result in the debasement of the coinage. People are vaguely aware that adding a zero to all the dollar bill denominations will not make them ten times richer. But many have not yet realized there is a difference between having an insurance certificate ‘entitling’ them to medical care and the actual existence of that medical care resource.

Obamacare, Obama Phones and other types of Obama Cheese are ultimately tickets of entitlement at a given price or gratis. But they are ‘free’ only in a manner of speaking.  They still require real goods and services to satisfy the certificate; they still have real costs. Reality, not the piece of paper is the final arbiter of actual meaning. You can have the ticket, but is there a bus?

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