Health Care - Defining More Problems

Part II

No debate on health care can be complete without a discussion of physician and drug costs. In a Congressional Research Service report dated September 17, 2007, the following table shows the compensation for specialist and general physicians for five countries whose health care we are often compared to (Japan was not listed in the report).

Country - Specialists - General Practice
United States - $230,000 - $161,000
Australia - $247,000 - $ 91,000
Canada - $161,000 - $107,000
UK - $150,000 - $118,000
France - $149,000 - $ 92,000
Germany - $ 77,000

These figures were adjusted for cost of living and normalized for lifestyle opportunities. On average, we pay our physicians 50% more than other developed countries. However, there are some mitigating factors that cause this. First, the cost of education in this country is quite a bit higher than anywhere else in the world. In France, for instance, I’ve been reading that the cost of medical school is only 150 Euro and subsidized heavily by the government. It’s not surprising that the competition is very fierce to get in for this nearly free education. In Canada, a Quebec resident going to medical school in that province does attend for free.

In the U.S., the typical cost of medical school is $150,000 to $300,000. If you are a medical student graduating with a debt of $200,000, then you will need to make sufficient salary to retire the debt. To pay this off in 10 years at 9% interest rates means our physicians start out needing $30,000 a year salary just to cover this debt. (I used an interest rate of 9% in order to give the student a slight return on his medical school educational investment).

In addition, we have the most expensive medical malpractice insurance costs in the world. Without major tort reform, it will mean physicians will have to continue to carry very expensive malpractice insurance to cover the risks of litigation. The cost of premiums varies greatly depending on the type of specialty and which state you are in. Premiums range from $50,000 to $200,000 per year. While a practice may pay some or all of these premiums as part of the benefits offered to its physicians, it does add to our overall medical costs.

It is my belief that these two areas alone make up the difference between the cost of our physicians and those in other developed nations.

One way to keep physician costs down would be to greatly subsidize their education. Graduating more physicians would increase competition and help to keep prices in check.

The second thing would be to cap litigation claims. Under a universal health program, ongoing care would be provided so there would not have to be any payments for treatment under any litigated settlement. The only damages left would be for pain and suffering, and loss of income. What I would suggest investigating is a formula that provides long term disability insurance coverage for the patient to cover their loss of future income, and a cap on pain and suffering in the range of $250,000 to $500,000.

Another area that needs review is what we pay for drugs in this country. Recent studies find that most developed countries pay about 70% of the price we pay for the same on-patent drugs. For generic drugs we pay about the same or a bit less than other countries.

Also, the number of drugs prescribed in other developed countries is about 40% less than in the U.S. This suggests that the perks many doctors receive from drug companies are causing a conflict of interest and the public is paying for it. It seems obvious that we need to have the government be able to negotiate drug prices, and to provide better oversight on the relationships between doctors and drug companies. It is also my opinion that fear of litigation also causes an excess of ordered tests and drug prescriptions as an anticipated defense in the event of a malpractice claim.

There is a lot of overpricing and abuse in our health care industry. There have also been numerous reports of massive amounts of fraud in the Medicare program and the cost to taxpayers is in the billions of dollars. Government oversight and enforcement is woefully inadequate. Any health care bill must provide for increased personnel for audit review and fraud investigations. If there has been a fault in Medicare it is in this area.

My final posting on health care is my solution to the health care crisis.