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The Great Unmentionable

The role of high salaries and wages in health care inflation.

Jul 30, 2012, Vol. 17, No. 43 • By ELI LEHRER
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Still, there’s little reason to think any practicable public policy course could bring medical wages under control quickly. And the list grows even shorter if one discards heavy-handed, big-government approaches such as creating a single-payer system that sets all medical wages by central fiat. Still, two possibilities that rely on market mechanisms and deregulation deserve consideration from small-government advocates who want to get serious about health care costs. 

First and most important, private insurers should have a stronger hand with which to negotiate prices. While insurers already have a very limited antitrust exemption to share consumer data, they are currently in a very weak bargaining position with regard to medical professionals. Almost all consumers want to be able to select their own doctors. Both employers and individuals pick insurance plans largely on that basis. (Managed care systems contained medical costs for a few years in the 1990s by strictly limiting the doctors people could see, but proved enormously unpopular when they did this and have largely given it up.) Even the biggest individual insurance plans rarely cover even half of the population of a given area, and no single plan extends its core network beyond a pretty narrow metropolitan region. This has let doctors and hospitals play insurers against one another and stopped them from negotiating prices effectively. 

This should change. In countries like Japan, Germany, and the Netherlands, which also administer many health benefits through private parties, insurers have much broader latitude to cooperate in setting prices. Since doctors typically have the ability to opt out of accepting insurance altogether if these prices are too low to cover costs and retain talent, such a system isn’t necessarily unfair to them. But it does level the playing field. 

Likewise, the supply of people needed to do medical tasks needs to be increased. The way to do this isn’t to lower standards, but rather to let medical professionals other than physicians do more useful work. Current law, correctly, lets all doctors who pass internal medicine boards treat all sorts of conditions. Internists, for example, can prescribe antidepressants and, if they want to, even develop special expertise in treating psychiatric symptoms. While it is permissive with regard to doctors, however, the range of tasks allowed to other medical professionals is very limited. 

Hardly anyone doubts the overwhelming majority of veteran registered nurses could—with a little more training—do a fine job setting broken bones, stitching wounds, and even dispensing drugs for common ailments. But laws and regulations limit almost all of these things to physicians and nurse practitioners, who must complete a graduate-level course of study similar to medical school. Among less-skilled medical workers, the current certification requirements border on the absurd. Licensed practical nurses are essentially menial hospital workers who collect vital signs, change bedpans, and bathe patients. To do this, however, they need more than a year of full-time schooling and, even so, generally can’t even give hospital patients aspirin a doctor has not already prescribed. Some work of LPNs might be done by people trained mostly on the job and those with LPN training should be able to do more than they do now. And so forth. 

These solutions aren’t a total fix. Medical wages are high in part because medical care is so important. It’s vital that medical professionals get fair pay. But their pay cannot and should not rise at a rate so much faster than everyone else’s. Achieving the health care goals of both the left and the right is eventually going to require doing something about the wages paid to medical professionals.

Eli Lehrer is president of R Street.

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