Doctors and the Cost of Health Care

I was listening to talk radio on the way to the gym the other morning. No doubt many of you are surprised to read the pronoun “I” in the same sentence with gym, but it’s true nonetheless.

Anyway, talk radio. This fellow who called in posited as his basic premise that part of the issue with health care reform and why so many people were for it was that doctors make too much money. The host immediately took the caller to task and asked a series of penetrating questions. They ranged from how much is too much, to if we tell the doctor how much he can charge then shouldn’t we also tell the farmer and Dell, and on and on. The host’s point was that the free market and not some government regulatory body should dictate doctor’s fees.

Too bad for the caller, since he was semi-inarticulate and the host had the better of him. For the most part, the host was right on the money, pun intended. Of course, the host completely jumped over the caller’s point that the reason so many people are for Obama’s idea of health reform is that those same people perceive in their own minds that doctors charge too much. It doesn’t matter if they do or not, only whether the rest of us think they do or not.

But, you know, conservative free marketer that I am, I must still take issue with the host’s point and stick up for the hick, who probably really was complaining that doctor’ charge too much. They do.

Gasp! Shudder! What’s that Wilson guy drinking now?

Let’s start with the host’s point. The free market should decide the cost of health care. Great. I’m all for it. Except the free market hasn’t dictated medical pricing for the last hundred years or more. Why not?

Well, there is the big problem of the intervening player in the cost of medical care, our good friends the lawyers and courts. Part of the reason doctor’s charge so much is because their medical malpractice insurance is so expensive. It is so expensive because juries, at the urging of greedy-guts attorneys, and with the connivance of courts and tort friendly laws, all too often render runaway verdicts against the doctor. Don’t get me wrong, doctors who make mistakes should be just as liable as the rest of us are for our mistakes. Let’s also give a nod to reality, however, and agree that far too often, the awards against them are all out of proportion to the wrong they did or the duty they owed. Further, these guys and gals are not all seeing and all-knowing, and they can’t always fix everything that goes wrong with us, or that we do to ourselves. We shouldn’t hold them to some unattainable standard and then take their money away when they don’t meet it. Medical malpractice, either in the form of insurance or verdicts, is a huge driver of the cost of medical care.

On the other hand, let’s give another nod to reality that often those same juries see a very wealthy and arrogant doctor acting like God and they want to take ol’ doc down a few pegs. So part of the problem with the cost of medical malpractice forcing doctors to charge so much is that the doctors charge so much and get rich doing it. I don’t want to say it’s the chicken and egg thing (oops, I just did), but many doctors get wealthy in spite of the plaintiff’s bar.

The doctors will argue, logically and with much justification, that they spend the first 30 or more years of their lives engaged in a brutal educational environment just learning to be doctors while making barely more than subsistence wages. The education of doctors is long, tortuous, competitive in the extreme, and survived by only the brightest and most dedicated. All of this, they say, means that they should be entitled to make a lot of money once they pass successfully through the process. I know if I was a doctor I would feel that way. So would everyone else in this country, save for a few who would be saints in another time and place.

The talk show host’s strong argument related to this point in several ways. Consider Economics 101. The availability of a good relates directly to the cost of the good. Supply of the good in relation to the demand for the good determines how much the seller can charge that a buyer is willing to pay. There aren’t that many doctors because the process for becoming one limits their number. Meanwhile, there is a strong demand for their services. We all want or need a doctor from time to time. When we really need one, cost is usually not a consideration.

So, we should blame the educational system? Maybe we should blame the high standards of knowledge and intelligence we hold our doctors to have? Perhaps, but I’m not buying it.

A study published in 2005 in the Journal of the American Medical Association noted that for that year there were 67,000 medical school students in the US. The number had not changed for 10 years, being 67,000 in 1995.

This is a profession that, albeit with a grueling educational and on the job training program, tends to make most of its practitioners wealthy. In 1994, the average annual salary was regularly reported as $186,000. You will find many asterisks next to doctor salaries, however, if you Google it, and I for one think that is a PR number put out by the AMA to make it look like doctors aren’t really making so much. The qualifiers include whether the doctor works in a salaried position, such as NASA, a private company like a pharmaceutical lab, as a professor, or chucked it all 10 years ago and lives in the jungle healing
Amazonian Indians in exchange for fish out of some wealth inspired guilt complex. Other factors determining a doctor’s pay include whether he/she is the owner or partner in a private practice or clinic, his/her years of experience, specialty (spinal surgeons average salary was 1.32 million by one report I read), and others.

The point is that doctors make a lot of money and most of them get rich by the standards of the rest of us. How is it that out of 300 million people in the US, only 67,000 of them at any given time are in medical school to learn a profession that will make them rich? Shouldn’t people be pounding on the gates to be let in?

In fact they are. I read a statistic, who knows if it is accurate, that only 1 of every 100 who apply to medical school ever gets in. Part of the reason there are so few doctors is that there are so few medical schools and teaching hospitals. It would be reasonable to conclude that a whole lot of folks who could be successful doctors never get the chance. It is not that the entry requirements are so high, it is because the available slots are so few.

The same JAMA article that said there were 67,000 medical students at any given time also referenced that there were 125 LCME (Liaison Committee of Medical Education, a branch of the American Medical Association) accredited medical schools, or an average of 536 students per school. Another number I saw in another source said there were 150 medical schools. Still, that is a surprisingly small number to my way of thinking.

We could build more medical schools and teaching hospitals. If we doubled the number, all by itself that would double the number of doctors in just a few years. More doctors equals more competition equals lower doctor’s fees. Economics 101.

There is no reason to suspect that the quality of medical care would go down in this event, either. I’ll come back to this point in a bit.

The reason we don’t have more doctors is the doctors themselves. Through the American Medical Association and other political affiliations, doctors have artificially restricted their number. One of the easiest ways to do that is restrict the number of medical schools and the number of students. Keep a lid on the number of doctors in the pot at any given time keeps the demand for them high. Indeed, restricting access to their profession is one of the principle agendas of the AMA, despite all their protestations and PR to the contrary.

Others will argue that only a small number of people have the intelligence to become a doctor. Really?

Remember the numbers above, 300 million population and 67,000 medical students at any given time? That’s 0.02%, or 1 medical student for every 5,000 population. The chances of a baby being born autistic in 2005 were 35 in 5,000. For mothers under the age of 30, the chances are 5 in 5,000 that their child will be born with Down’s syndrome. For mothers aged 36, the chances of a Downs birth was almost 17 in 5,000, and that’s after many mothers abort their Downs fetus after being tested for it. Do we really believe that only 1 person in 5,000 is smart enough to go to medical school and be a doctor, yet 5 will be Down’s syndrome babies?

Remember that 1 in 100 accepted to medical school number? You might think that 99 of them just couldn’t cut the mustard. Any number of articles are available that talk about how medical schools are doing various things to increase the diversity of their students. Let’s be honest and simply admit that what we are really talking about is they want to accept more blacks and Hispanics. So, let’s take the high road and say there were all these deserving blacks and Hispanics who before were being denied the opportunity to attend medical school because of their race. So now, in our enlightened society, medical schools are atoning for their evil ways. Atonement, however, judging by the 1995 and 2005 numbers, does not include increasing the available number of medical student slots. No sir, we are only going to put more black kids into medical school by seeing to it that some white kids are not going to get in who would have previously. Are those white kids suddenly less capable or not so smart? No. All it means is that the availability is artificially restricted.

Another thing the AMA has successfully lobbied for is government controls that force up the cost of care. Here is one that caught my eye, and illustrates exactly the point I want to make.

I saw an advertisement on TV for a company that offers stroke screening. They do it by taking an ultra-sound of the major arteries. The theory is that blockage in these arteries are the chief causes of strokes. They look and if they see a blockage then you know to seek treatment to do something about it. Now, this company doesn’t offer any treatment, just the screening. However, they promise that a “board certified” physician will do the screening. The kicker for me was a little text tag at the bottom of the screen that said in effect that in Texas a Texas licensed physician must first refer you before this company could do your screening.

Why would the State of Texas require that a Texas doctor refer you to the screening that is done by a board certified doctor? The obvious answer is the screening doctor doesn’t have a Texas license, and this is one way for Texas to get their licensing fees. Still, what does the State of Texas care? It’s not as if you are going to receive any treatment or prescription drugs. All that’s going to happen is that someone will press an ultra sound wand to various places on your body and take some pictures. Your Texas doctor isn’t going to read these pictures or interpret them. Most of them aren’t trained to do that, not like the “board certified” doctors who are doing the ultrasounds. No, your doctor’s only involvement in this process is to give you permission to get your picture taken, and for that permission he charges you for the referral. See, it’s as if you’re too stupid to figure it out for yourself, so you have to get a doctor to tell you its okay.

Come on. Who’s that stupid? It’s like requiring you to pay your barber for a referral to a store so you can buy some Rogaine.

The truth is the Texas doctors got the State of Texas to enact some laws to protect their cash flow. Do you think that adds to the cost of medical care in Texas? You bet, and it happens in most other states in one way or another.

I can just hear the doctors screaming about protecting us from unscrupulous, fly by night, shysters who are going to sell us arsenic laden snake oil. (Have you ever seen an oily snake? They are quite dry in my experience.) In some cases that is undoubtedly true. But, as my example above illustrates, that is not the only reason, and in cases like this, not any part of the reason.

I like my personal physician. I think he is a square guy. Honest, personable, funny and decent. I have had great experience with just about every doctor I have had. I think we are better off with the system we have in place now, than with some of the others being proposed. Government run health care? Please, 99% of bureaucrats couldn’t stick a stapler up their ass without hiring three government employed experts to tell them how to do it, so how are they supposed to determine whether I need a prostate exam or not?

Nevertheless, come on doctors, you caused a lot of this anxiety about the cost of health care yourselves. All of your self-righteous indignation aside, the rest of us are not stupid, and we can see who are the haves and who are the have-nots. Doctors do make a lot of money, and they do it by holding us hostage to our mortality. For a lot of people, that just tastes bad.

So, do they charge “too much?”

If doctors were a Standard Oil or Microsoft what they do would be called restraint of trade, a violation of the anti-trust laws. But, they do it with the connivance of government, so there’s nothing illegal here. Yet, it does mean they are able in many cases to charge whatever they want and we are compelled to pay it, one way or another. I think when that happens it amounts to “too much.”