Physician payment reform is the key to fixing the health care system


Changing the way doctors are paid is more important than the debate over the public insurance option, or the arguments over whether we should adopt a single-payer system or not.

Atul Gawande’s recent New Yorker article is a tour de force, and gets down to the core of why American health care is so expensive. I won’t bother summarizing it here – it deserves to be read in its entirety – but I’ll highlight one of the bottom lines.

Dr. Gawande travels to McAllen, Texas, where the most expensive care in the country is being practiced. Doctors there act like businesspeople, which, as the payment system is currently constructed, is the natural thing to do. After all, if you pay physicians to do more, that’s exactly what they’ll do.

In fact, there are tremendous economic barriers to forming the types of integrated low-cost, high-quaility health systems that policy experts love, such as Kaiser Permanente or the Mayo Clinic.

With that in mind, the health care debate that’s currently dominating the media airwaves entirely misses the point:

Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. Here’s how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some “skin in the game,” and then they’ll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen.

Changing how doctors are paid is the key to health care reform. We’re now arguing about who does it, and that won’t address the central problem of cost.

This is the best article on the cost of health care that I’ve read.  As I mentioned on Twitter the other day, if you choose to read one health policy article in your lifetime, this one is it.