Another Reminder: Health Care Spending = Health Care Revenue

Miles Kimball has a good summary of the ways in which the characteristics of the health care market are not the characteristics of a classical free market system. When talking about how other countries reduce health care spending, Kimball reminds us that other countries

[u]se the fact that most of the money for health care runs through the government as leverage to push down the pay of doctors and other health care workers.

In other words, if we really want to control spending, doctors are going to have to be paid less. The New York Times Economix blog has an excellent piece by Catherine Rampell on doctor pay in the US and other developed countries. After accounting for difference in currency and cost of living, the US ranks 3rd in specialist pay and is an overwhelming number one in general practitioner pay.

Of course, as Rampell notes: 

it’s important to keep in mind, the report notes, that health care professionals in other O.E.C.D. countries pay much less (if anything) for their medical educations than do their American counterparts.

Not to mention, doctors in other countries pay much less in malpractice insurance.

One of the reasons that doctors are paid so much in the US is that they are able to create their own demand. Every time a doctor orders a test or a procedure, that doctor is increasing his/her income. However, this is becoming less common as more and more doctors are forgoing private practice in favor of hospital employment. Unfortunately, this will not directly translate to lower health care costs as the result of this increased concentration in market share, leading to higher negotiated payments to hospitals - which brings me back to my earlier post regarding budget cuts at the Cleveland Clinic. If we're going to control costs, a lot of people are going to have to make less money.