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American Academy of Family Physicians
Monday Oct 12, 2009

The economics of the health care industry

On Sept. 25, I referred readers to an article I wrote on the health care debate for Front Porch Republic. It was an overview, and as such made no attempt to provide background material supporting or clarifying my views. It sparked a healthy debate, revealing to me how woefully ignorant even intelligent Americans are about the economics of our profession.  

Following a recommendation from reader Dan Schmidt, I just read a long article from The Atlantic entitled “How American Health Care Killed My Father.” Don’t be put off by the title; it isn’t a rant. Rather, it is as close to perfection as anything I’ve ever read on the subject of health care economics. Every point and every example rings true to my experience.

If you have any interest in the subject, which will determine the future of our profession and now controls 18 percent of our economy, please – read this article.  

When you do, you’ll realize the futility of any attempts to shoulder family medicine to the front of the federal trough. Oh, I know; at the moment, current legislation will give me an 8 percent raise in RVU compensation next year, probably to be snatched away the year after. Instead, our specialty's leaders should be the voice in the wilderness crying for a free market in health care services, where we would quickly demonstrate our indispensability.

Sometimes it takes a famine for people to appreciate farmers.

Fascinating excerpt: “Let’s say you’re a 22-year-old single employee at my company today, starting out at a $30,000 annual salary. Let’s assume you’ll get married in six years, support two children for 20 years, retire at 65, and die at 80. Now let’s make a crazy assumption: insurance premiums, Medicare taxes and premiums, and out-of-pocket costs will grow no faster than your earnings – say, 3 percent a year. By the end of your working days, your annual salary will be up to $107,000. And over your lifetime, you and your employer together will have paid $1.77 million for your family’s health care. $1.77 million! And that’s only after assuming the taming of costs! In recent years, health-care costs have actually grown 2 to 3 percent faster than the economy. If that continues, your 22-year-old self is looking at an additional $2 million or so in expenses over your lifetime — roughly $4 million in total.”

And on the other hand, we have a Wall Street Journal lead editorial that can’t discern its terminal colon from a terrestrial excavation.

The editors are upset that the Senate Finance Committee bill authored by Democrat Max Baucus would increase primary care compensation at the expense of specialists. This is an assault on the free market, they opine, blissfully unaware that it was federal regulators who created the income disparities that Sen. Baucus is attempting to scale back.

Tell you what: Sometimes the ignorance of educated friends makes me want to weep.  

However, I’m sure the AAFP leadership has ripped off a stunning riposte to the Journal, which is always willing to print a letter from the loyal opposition. I’ll let you know how it turns out next week.

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