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Posts Tagged ‘health care costs’

The monthly newsletter came from my medical specialty society.  There was an article on how much doctors are being paid, pointing out that in 2009 doctors in my specialty experienced an increase in average income of between 7-12 percent, though specialists in general saw a decrease of about 4 percent.

In a down economy with a lot of people hurting and roughly 10 percent unemployment, doctors have been relatively spared from financial pain. As the deficit commission looks into ways to cut costs, reducing payments to doctors will be considered.  I suspect physician organizations will aggressively fight such cuts, pointing out that potential cuts in Medicare would hurt patients.

I don’t want to see patients hurt, but the patriotic side of me says that we doctors shouldn’t be completely spared from the effects of a down economy that is causing our patients to suffer.

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Apparently there are senators from both parties seeking to remove a ban on generic drug settlements from an upcoming appropriations bill. The proposal would stop brand-name drug makers from making deals with generic manufacturers to keep generics off the market.

I’m not sure why we would need such legislation. That kind of deal sounds like the kind of collusion that should be impermissible under competition/anti-trust law.

Here are some of my other blogs on generic drugs:

It’s unfair to keep generics off the market

Pay for delay in generic drugs isn’t good for the patient


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Health care costs continue to spiral upward. This can’t go on forever.  Health care reform measures that give the government more power to keep health care costs down is one approach, but another word for this is rationing.  Are we ready for that?  Maybe.

The alternative is to for patients to get more involved in paying for and controlling health care costs.  Are we ready for that?  We have to realize there is no free lunch.  We can’t expect to everyone to get all the health care they can use and not have to pay for it somehow.

I’ve written a lot about how we need to use incentives to control our health care costs, focusing primarily on how insurance takes away patients’ incentives to be mindful of the cost of care.

But financial incentives undoubtedly affect physician behavior, too.  A new study found that physicians who own their own practices are more likely to order patient tests that will make the physician practice more money when compared with physicians who are on a salary (Hollingsworth JM, Birkmeyer JD, Zhang YS, Zhang L, Hollenbeck BK. Imaging Use Among Employed and Self-Employed Urologists. J Urol. 2010 Oct 16).  The study used nationally representative data collected by the Federal government and found that self-employed urologists ordered more imaging tests on their patients than did salaried urologists.

I don’t know what the right amount of testing is, but it is clear from high school economics and confirmed by this study that financial incentives affect the way people — including doctors — behave.  Combine these two ingredients:

  1. Financial incentives for doctors to increase use of care, and
  2. The removal of incentives from patients to conserve on the cost of care.

What do you get?  A recipe for a high cost disaster — unless we are willing to cede to insurance companies or government regulators the control to ration our care, a less palatable solution.

To bring down the cost of health care, we need to make sure our incentives are set up to give people high quality medical care at affordable prices.

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The Wall Street Journal (10/27, A1, Mathews, McGinty) reported a committee of doctors called the Relative Value Scale Update Committee (RUC) decides how much Medicare pays for various medical procedures. This committee wields considerable power over how Medicare dollars are spent.

It is good to have doctors deciding this?  Who would be better?  Government regulators?  In private insurance plans, the insurer and the doctor contract for what those prices should be.

We now have a health care system that largely removes from patients the direct responsibility of paying for care.  So if patients aren’t going to decide how much they will pay, it’s left to someone else — either the insurer or the government.  It may seem that leaving this in the hands of doctors may not be a great idea, but the RUC can’t pay doctors whatever it wants. It just sets the relative amount that one procedure gets paid vs. another.  It’s a zero-sum game, so that if one procedure is paid more, another is paid less.

So while the RUC is controlled by physicians, those physicians don’t change Medicare’s overall costs.

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With the recent election, it seems everything is up in the air with regards to putting into place any substantive measures to reign in health costs. I encourage consumers to just take a do-it-yourself approach.  Dr. Cynthia Koelker has a new book out, 101 Ways to Save Money on Healthcare, that can show you how.

The big bucks are spent on hospitalization.  On the Getting Better Healthcare radio show, I talk with Dr. Koelker on how to save on hospitalizations.

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The Financial Times reported on September 30, 2010, that England will try to revise drug prices to get them in alignment with their value for patients. That sounds good, but can governments and regulators really make good decisions about this?

In a socialist world where government takes responsibility for providing medical care, government has to decide what it will and won’t pay, and what it will and won’t cover.  Another approach is for patients to decide how much to pay by deciding how much a drug treatment is worth to them.  That system seems to work well in the rest of the economy.

So many of us have come to rely on others — insurers or the government — to make our health care decisions for us.  I’m not saying whether that’s good or bad, just that it is.  If we want to control the cost of health care, we’re either going to have to let insurers or the government make those decisions for us, or we’re going to have to change to a system in which we make those decisions for ourselves.  But to do that, we have to be responsible for paying for our health care.  I discuss this in more detail in my Primer on Health Care Reform, available for free by clicking here.

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A generic manufacturer received tentative approval from the FDA to market at generic version of the cholesterol controlling drug Crestor — a multi-billion dollar product — that’s right, a multi-billion dollar product.  Crestor’s manufacturer will likely try to fight off generic competition for as long as possible.

Like so many other issues in medicine, a balance is needed to promote the development of new products while still allowing generics to bring down the cost of treatment. While people can argue about whether or not our current system is optimal, the system has worked rather well. We have so many great products that we didn’t have 20 years ago. As the new products go generic, the medical miracles become even more affordable.

There have been other stories in the news about brand name drug manufacturers paying generic companies to keep the generic off the market.  This is unfair.  Perhaps there should be a law against it.

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