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U.S. Health Care Industry

 
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PostPosted: Sat Jul 04, 2009 10:29 pm    Post subject: U.S. Health Care Industry Reply with quote

Article: One reason we might have a "health care crisis" due to rising medical costs, and the world's highest physician salaries is that we turn away 57.3% of the applicants to medical schools. What we have is a form of a "medical cartel,: which significantly restricts the supply of physicians, and thereby gives its members monopoly power to charge above-market prices for their services.

Dr T: Here are a few key points:

1. There is no medical cartel. The American Medical Association, the largest physician organization, represents fewer than one-fourth of all physicians. It has a lobbying group that has only modest influence on the government. (The Milton Friedman quote was from long ago, and it was wrong even then.)

2. Medical licensure is controlled by each state, not the federal government. Almost no physician except those who committed felonies or many cases of malpractice is denied licenses.

3. The numbers of medical schools and the size of their classes are not controlled by Joe and Jane practicing physicians. The numbers are controlled by the federal government. The class sizes are indirectly controlled by the federal government because the schools are dependent on federal funding, and the feds decide how many students they will support at each school. The federal government thinks we have too many physicians, not too few. It thinks that we should eliminate almost all specialists in favor of family practice doctors. The field of medicine is so vast that it is hard to keep up with a single subspecialty. The belief that care will be better with 600,000 Marcus Welbys is worse than naive. If the US believes that we need many more doctors, all the federal government has to do is help fund the expansion of our existing schools and the creation of new schools.

4. We are experiencing a cyclical rise in medical school applications. So what. Most of the applicants are unqualified and/or unsuitable. Their advisors should have steered them into different careers.

5. US doctors earn more than in other countries because the vast majority of our pre-med and medical students don't get funding from the government. The average medical school graduate has accumulated over $120,000 in debt. She will spend the next 3-7 years as a low-paid resident or fellow, but will have to pay the interest on the loans throughout this training. When a doctor finishes training and joins a practice, she has no patients yet and no revenue stream. She has to acquire patients, pay student loans, and often pay a buy-in fee to the group. Is she supposed to do all this on $75,000 a year?

Never has an article on Carpe Diem angered me as much as this one. Greg Mankiew obviously didn't talk with physicians and medical educators. He just took some raw facts on numbers of schools, numbers of students, and numbers of applicants and started screaming about a price-gouging medical cartel.

Private note: I'm a pathologist who always had salaried positions and who still teaches medical school part-time. I know that there are plenty of greedy physicians. But, there are greedy people in every field (You should see the ridiculous home repair estimate I just got--the workers think they're worth $75 an hour.).

PeakTrader: The data for 2008 show:

Number of applicants to U.S. medical schools is 42,000.

Percent of applicants accepted at U.S medical schools is 43%.

It's also important what percentage of the 42,000 applicants graduate (in contrast, roughly 800 economics Ph.Ds and 2,000 economics MAs are awarded in the U.S. each year).

Also, it seems, a 43% acceptance rate is high for such a high-skilled position (it seems a much smaller percentage is accepted in graduate economics).

There doesn't seem to be enough applicants to U.S. medical schools, given the health needs of the U.S. population.

PeakTrader: Peter said it best:

"How do you incentivize someone to take on 12 years of post-high school education, take on over $100,000 in education debt, work 80+ hour weeks, be responsible for life and death decisions for patients every day, pay for medical malpractice insurance, and work every day knowing that you can lose everything you worked for if the patient you are seeing right now sues you?"

PeakTrader: The U.S. needs to lower its standards and quality, e.g. to the Canadian or European levels, to make health care more affordable. Also, millions of Americans are free riders, who receive free medical care that other Americans pay for. A large proportion of them are Third World immigrants and their children, who would have earned $3 a day in their home countries, if they could get a job.

The Happy Hospitalists: How many physicians we have has nothing to do with how much they are paid. Physicians are paid based on the relative value unit scale (RVU) which is determined by the RUC committee, sponsored by the AMA , a secretive committee of about 27 members, with members of most specialty society, who create a value on every possible CPT service you can encounter with your doctor. Every service encounter has an RVU value. And that RVU value is given an actual dollar value by the federal government by way of SGR economics. Currently, every RVU is worth approximately $35.

It doesn't matter if you have 2 doctors in this country or 200 million doctors in this country. How they are paid is determined by the RUC committee (under AMA control), who makes recommendations to CMS, who then makes it law. And that law is then used by all private insurance companies to set their prices as well. And it has nothing to do with how many doctors there are. Or how many medical students there are. Or how many residency slots there are. There is no market for pricing physician services. The cartel is the RUC committee and the federal government that sets the price. Physicians take it or leave it. Thus is the nature of third party economics.

It's not about a physician cartel or too few doctors, it's about the RUC committee and the power they have in determining the value of physician services, which is then codified into law and established a per RVU price through the sustainable growth rate formulas. (SGR economics).

Dr Perry, it's embarrassing to read what you are suggesting. If you want to change how much physicians make under the current third party payment model we live in, you will have to change the RUC, and that has absolutely nothing to do with how many medical students we have or how many residency slots we have. Politics is politics. And economics is economics. And physicians are stuck in between both processes.

Now, if you abandon third party payment models and true market pricing could occur, the number of doctors would mean everything. But at this moment in time, it means nothing.

Walker: This article is possibly one of the most idiotic attempts to identify the problems with the healthcare situation in our country.

1)Increase the number of physicians does not decrease the COST of healthcare. Healthcare costs are increasing because we have an increasingly aging population. Individuals who would have died in earlier years are now living well into their sixties. These are also the individuals that need the greatest amount of care. Any individual who is moderately knowledgeable about the societal dynamics within our country would be able to identify the fact that our society in and of itself is less healthy when compared to European countries and therefore require more medical attention.

2)Medical schools must be limited and exclusive because doctors do not deal with contracts such as lawyers, but with life. There are NO bad medical schools, but there are several bad law schools. The reason behind this is not with the AMA (which the author of this article fails to realize but rather with the medical accreditation board or the AMCAS). This agency imposes strict limits not because they want physicians to have high compensation but rather because every person in this country should have the peace of mind of knowing that when they see their doctor they are not seeing someone incompetent.

3) Moreover the author seems to be completely reducing the complexity of the healthcare system by only focusing on physicians (who alone have almost no control over compensation reimbursement that belongs to insurance companies and the federal government via Medicare and Medicaid). Therefore there is a misplaced blame and an attempt to reduce a complex issue to a simple blame the doctor argument.


While reading the academic credentials of the author of this article it raises serious questions as to the veracity of the didactic methods of higher education within our society. This article is a prime reason why space in medical school should be limited. The faulty logic and absolute absurdity of the arguments by a person who is "well educated" brings into question the admission standards of the higher education systems that are not within the medical profession.

This article is sad and I say that as someone with only a high school education. Who by the way will be attending Yale University next fall and will eventually become a doctor.

Don: My dad practiced orthopedics for 20 years. He had a PhD in ortho from U of Iowa, and served as a Navy surgeon in Viet Nam. He specialized in artificial knees and hips.

He and a couple colleagues invented the orthoscope, a gadget that radically improved the quality of care for his sports medicine patients and reduced surgical/hospital costs.

Dad worked 80 hours a week on average, including three weekends a month on call. Few breaks for holidays. We rarely saw him during the week. Divide $250k a year (just guessing - he wasn't one to talk about money) into 4,000 hours a year and you get about 60 bucks an hour. Out of that salary:

- 25% or more went to taxes

- $70-80k a year for malpractice insurance to protect his family and practice from all the worthless patient lawsuits by crooked lawyers

- Salary for his administrative staff to process and follow up on reams of insurance and government paperwork.

- Costs of OSHA and other compliance overhead to run his clinic and x-ray machine.

I'm not saying we didn't live comfortably. He took good care of us. Rather than credit his salary, I'd say God blessed him for all the pro-bono work he did for patients that couldn't afford care but still took up his time. And trips to Africa on his own dime for medical missions. I heard once that our church was waiting on my dad for his tithe plan so it could figure out its annual budget.

I don't know if these MD's in other countries are as overlawyered and overregulated as US doctors are. Could be the reason why ours seem more expensive.

Final shot: Dad's a humble guy. Often jokes that orthopedics was basically carpentry, and that he would have made more money and had less liability as a carpenter. But he couldn't get into the union.
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