The Blog

The Doctor Won’t See You Now

What controlling health care costs really means.

4:59 PM, Jan 7, 2010 • By STANLEY GOLDFARB
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts
The Doctor Won’t See You Now

The only way to control the cost of health care is to spend less on health care, not less on health care insurance. The only thing that lowering health care insurance costs will accomplish is to reduce overall access to care as providers of care will not be able to afford to treat as many patients who want care if reimbursements are reduced. If reimbursements are not reduced, then insurance companies will go bankrupt. The idea that bringing 30 million people into insurance plans, particularly into Medicaid, the central idea of the Senate bill, will lower costs by spreading administrative costs over a larger population is appealing to economists but it does not take reality into consideration. It might work if the health care delivery system were able to accommodate all the new demand at the lower reimbursements. It is not. There are not enough primary care doctors, specialists, and hospitals with enough spare revenue to treat patients for minimal payments.


The new mantra, according to Atul Gawande, who wrote about it in a recent essay in The New Yorker, is that the various demonstration projects in both the Senate and the House bills will show the way to cost controls. These proposals do have the potential to lower costs--but patients are not going to like the new mechanisms. The country experienced the approach once before in the form of true managed care in the 1990s. Health care costs did fall in the mid 90s but Americans hated it--really hated it. They did not like gatekeepers preventing access to medical specialists and high tech care. Prepaid healthcare and tight budgets, the essence of the demonstration projects can be effective at holding down costs but they give physicians a strong economic incentive to limit care. In these models, physicians can have a perverse incentive as their net income rises when they provide less care and restrict access to high cost tests and therapies.  Organizations like Kaiser Permanante on the west coast have been able to succeed with this model but it is the exception that proves the rule. Overall the PPO (preferred provider organizations) have been much more popular as an insurance model given its fee for service payment mechanism.  Most European countries have rejected the pre-paid care approach just for the reason that it tends to undermine trust between doctors and patients.

Another factor that arises along with these experimental approaches is the need for a new paradigm for the physician’s career. Physicians will all need to become employees of large health care enterprises. This is because the prepayment for health care will require the capacity to provide comprehensive care in a cost efficient manner and the physician in private practice by him/herself will not be a credible provider of such care. Again there are those who will applaud this development. President Obama will likely be upset about all this as he promised that health care reform would not come between you and your doctor.  Your doctor may not be all that thrilled either.

The trouble is that even if one desires these new developments, there are very few health care enterprises that can manage large populations of patients in prepaid plans. Tremendous development of information systems and other approaches to care will be required to make these demonstration projects applicable to large populations. The few enterprises in the country that have this form of health care delivery like the Kaiser system have taken decades to develop. Middle East peace may occur more quickly.

How about the possibility that the new Medicare commission will control costs? All you have to do is consider the recent flap regarding mammography screening to see the impact of quasi- or real governmental entities on health care practices. There is tremendous push back whenever there is an announcement of reduced provision of some clinical service. It comes not only from patient groups but also from professional societies that read the same studies but differ in their interpretation and assessment.

Is there waste in patient care? Sure, but when the physicians have to worry about a lawsuit if they fail to order the MRI, refer to a specialist in a timely fashion, or fail to provide patients with every potentially useful treatment, then waste will persist.

In fact, all this talk about bending the health care cost curve by controlling private health insurance and expanding health insurance is pretty ridiculous given the overwhelming issue of Medicare’s pending bankruptcy. Here is what David Walker of the Pete Peterson Foundation told the Institute of Medicine of the National Academy of Sciences just a few weeks ago:


“I want to address the 800 pound gorilla in the room that too many politicians are trying to ignore as they debate health care reform. Medicare.

Recent Blog Posts