I blog about free markets in medical care and transparent pricing.
When I first entered private medical practice in 1990, Medicare paid me about $1100 for anesthetizing a patient for an open heart procedure. Most of the time, my time commitment for one of these operations was about 3 to 3 1/2 hours. This was about half what a reasonable private insurer paid for the same thing. On an average day, I would do two anesthetics like this. I was making about $300/hour doing these cases! I wasn’t yet savvy enough to factor overhead, malpractice and taxes in to the equation to come up with the real number.
I knew attorneys who charged $300/hour and were unapologetic about it. They would tell me that if people didn’t want to pay that they could go see someone else who was cheaper. One attorney told me that when he didn’t have all the business he could handle he would revisit his hourly rates. I began to wonder what a patient’s reaction would be to an arrangement like that. Could I look a patient in the eye and talk to them about money? Would the average patient think that I was worth $300/hour to anesthetize them? What about $300/hour to anesthetize their child? If not, what was the “right” number? How did Medicare come up with their numbers? This all seemed arbitrary to me. Could it work like my lawyer friends’ practices, where if the service delivered was judged to be less than the price charged, the service was forced to improve or the price to fall?
When Medicare cut anesthesiologist’s fees to half of the 1990 rates, I took a harder look at overhead, malpractice and taxes (now increased thanks to King George the First). Was I only worth $150/hour, half my lawyer friends’ rate? It was beginning to dawn on me that the market was not working, and that I needed to set some boundaries myself, rather than allow some faceless bureaucrat to determine my wages. Refusal to do this seemed like a dangerous precedent. This was the beginning of my desire to display my prices.
Then the unbelievable happened. Medicare cut the rates in half again. I am no mathematician, but I knew what this meant. A 31% federal tax rate plus our Oklahoma state 7% rate plus 13% social security rate plus 3% Medicare rate was 54%. That left $40.50/hour to cover overhead and malpractice. I stopped dealing with Medicare or Medicaid (their rates were actually worse) in 1994. I continued to see these patients, just never dealt with their “insurer.”
If you are a non-physician reading this, imagine for a moment that your employer tells you that you are going to take a 30% cut in your wage next year (this is what is going to happen to Medicare payments to physicians in January). Furthermore, in order to avoid a 40% cut in your wage (rather than the 30%) you must purchase a $75,000 computer system to get paid. What would you do? Keep in mind that as a physician, you would have endured the cuts of the early nineties and these new cuts are on top of past ones.
Many of the poor and elderly are about to discover what a mistake it was to believe the lies told to them about how government would take care of them. I’m afraid that FEMA’s locking folks in the Superdome without food or water during Katrina will seem like a cake walk compared to what the shortages of physician manpower will represent. The most incredible part of the suffering that people will endure is that it is intentional. Creation of a health care crisis is necessary in order for the “government” to rescue us from it.
Readers of this blog know by now that I am not one to advocate for physicians being paid more by the federal government. I don’t think the government has any place in medical care at all. Their presence inevitably results in the politicization of medical care, price controls, fraud and poor quality (I could go on but that’s enough). Government intervention in healthcare (always to route money to the source of their bribes) has created the cartel-like mess we now know. Less, not more government is the approach that will result in an honest evaluation of the costs of care, an approach that reveals the value of the service and an approach the current regime along with its cronies wants desperately to avoid.
Reducing payment below the market-clearing price will result in shortages of care, but that isn’t the worst outcome. Worse will be the government’s reaction: they will force physicians to see patients for payment physicians consider grossly unfair. Do you want to be the patient of a physician who has a gun pointed at his head to see you? If you were a doctor, would you quit?
G. Keith Smith, M.D.