It’s Physician Income, Stupid

The Simply Appalling Blog which provides “A jaundiced eye on the news” wonders why everyone tip-toes around one of the most obvious reasons for the high cost of medical care in the U.S.

Healthcare costs: The deception continues focuses on physician income.

An editorial in the British medical journal The Lancet casts a skeptical eye on the universal health insurance plan recently enacted by the state of Massachusetts.

“[T]he greatest weakness of the bill is that it does little to tackle the biggest challenge facing the US health-care system and the reason why health insurance is unaffordable: cost. US health-care spending continues to spiral upwards, far outpacing inflation, and now consumes 16% of US gross domestic product, far more than is spent by other developed nations. Even the supporters of the Massachusetts reform acknowledge that their programme will run short of money in its third year. Unless some way is found to control costs, by reducing unnecessary and wasteful care, for example, and driving down the high administrative costs of private health insurance, the Massachusetts reform plan will likely collapse in a few years as other celebrated state reform initiatives have done before.”

There are a number of factors that contribute to the high cost of medical care, so I was interested in which factors The Lancet had selected: (1) unnecessary and wasteful care and (2) high administrative costs of private health insurance….

Now let me mention another factor in high healthcare costs that slipped the editorial mind of The Lancet: physician income….

A year ago Princeton economist and NY Times columnist Paul Krugman wrote in “The Medical Money Pit,”

“Why is the price of U.S. health care so high? One answer is doctors’ salaries: although average wages in France and the United States are similar, American doctors are paid much more than their French counterparts. Another answer is that America’s health care system drives a poor bargain with the pharmaceutical industry. Above all, a large part of America’s health care spending goes into paperwork. A 2003 study in The New England Journal of Medicine estimated that administrative costs took 31 cents out of every dollar the United States spent on health care, compared with only 17 cents in Canada.”