Minor Thoughts from me to you

How Medicare Killed the Family Doctor

Richard Hannon, an executive for Blue Cross Blue Shield of Arizona, wrote an opinion editorial for the Wall Street Journal yesterday. In How Medicare Killed the Family Doctor he talked about how Medicare's costs exploded between 1965 (when it was created) and 1990. In 1966, the Medicare budget was a mere $3 billion. At that time, the House Ways and Means Committee estimated that the budget would grow to only $12 billion by 1990. Instead, it was $107 billion by 1990.

To fix the cost problem, Medicare in 1992 began using the "resource based relative value system" (RBRVS), a way of evaluating doctors based on factors such as education, effort and specialized training. But the system didn't consider factors such as outcomes, quality of service, severity or demand.

Today most insurance companies use the Medicare RBRVS because it is perceived as objective. As a result of RBRVS, specialists--especially those who perform a lot of procedures--do extremely well. Primary-care doctors do not.

In short, this is one of the major problems of a third-party payment system. Doctors aren't evaluated and paid by patients based on how good they are, how popular they are, or how effective they are. Instead, someone other than the patient judges a doctor's value and pays him according to a strict pay scale. Doctors have little to no ability to raise or lower prices or to set one price for a bundle of services.

This third party payment system sharply limits the way doctors can compete for patients or appeal to patients for business. It also sharply limits the ability of the patient to reward the doctor for good service or punish the doctor for poor service. When that kind of feedback is eliminated, is it any wonder that we spend more time waiting in clinic waiting rooms than we do actually seeing the doctor? Or that the doctor can often seem more interested in hustling us out the door instead of listening to our medical history?

Our doctors do not work for us, they work for the insurance companies. And that's a big problem with third-party payment for medical care.

Obamacare delenda est