Liberating the Doctors

13 Jun 2023 | HEALTH, John Goodman

For almost half a century, this country has been seriously engaged in efforts to reform our health care system ­ to reduce costs, improve quality and expand access to care.

Participants in the effort have included politicians representing all points of view in Congress and in state legislatures, bureaucrats of all stripes and varieties, business executives, labor leaders, insurance company reps, hospital execs, academic health economists and a slew of nonprofit foundations.

The one group that has been noticeably absent from these discussions are the doctors who actually deliver care. That’s not an accident. Everyone else has decided that doctors are the problem, not the solution. They don’t practice medicine the right way; they don’t bill the right way; they don’t keep medical records the right way; etc., etc.

That’s why virtually every solution that has been tried involves people who don’t practice medicine telling the doctors who do practice medicine how to manage their affairs. And none of these solutions appears to work. Costs keep rising. Quality of care is not measurably improving. And, access to care (as measured, say, by per-capita doctor visits or the length of time needed to see a doctor) seems to be getting worse.

So why not try something different? Why not allow the folks who practice medicine and who are in the best position to eliminate waste, improve quality and expand access to care to solve the very problems no one else seems able to solve?

For that effort to be successful, we need to follow four principles:

Give doctors the freedom to repackage and reprice their services.

Doctors are the only professionals in our society who do not have the freedom to repackage and reprice the services they offer in the marketplace. All the other professionals – lawyers, accountants, architects, engineers, etc. – are free to change the services they offer and the fees they charge whenever technology changes, whenever science changes or whenever there is a change in customer preferences.

Currently, there are 10,000 tasks that Medicare pays doctors to do. If there is a service that a patient needs that is not on the list, the doctor doesn’t get paid anything. If the service is on the list, the doctor only gets paid Medicare’s fixed price. There is no negotiation of these prices. The doctor has to take it or leave it.

Large private insurance companies tend to pay the same way Medicare pays – using the same list. Their rates tend to be a percentage of what Medicare pays (e.g., 150 percent), and again there is no negotiation. It’s take it or leave it.

No other professional is paid this way, and for good reason. Imagine you were charged with a crime and an outside entity set the fees your lawyer gets for different tasks. Just to make up an example, suppose the lawyer gets paid $50 an hour for jury selection and $500 an hour for preparing a final summation of your case. You might get a really excellent summation at the end of your trial – one that would ordinarily get you off scott free – but (unfortunately for you) it’s delivered to the wrong jury!

Even worse than mispricing is the presumption that anyone could think of everything a professional might do to help a customer and then put it on a written list. Until the Covid pandemic, for example, consultations by phone, email, Zoom Skype, etc., were not even on the list of services Medicare paid for – except in rare circumstances.

Encourage supply-side innovation.

How do we know that practicing doctors could improve on the current system? Because that is what happens whenever they provide services outside the third-party payer system. In the fields of cosmetic and Lasik surgery, for example, we see transparent package prices that have declined in real terms over the last two decades – even as the cost of every other type of surgery kept on rising.

Further, this happened even as there was a huge increase in demand and all manner of technological changes – which we are told raise costs everywhere else in medicine.

Direct Primary Care (DPC) is another example. DPC doctors provide all primary care for reasonable monthly fees (say, $50 a month for a mother and $10 for her child) and patients are usually able to reach their doctor by phone at nights and on weekends as an alternative to visiting the emergency room.

There are endless possibilities here. Giving doctors freedom to offer different services to the market for different prices not only promises less expensive, higher quality care, it should be the goal of any responsible health reform.

Start with private sector opportunities.

In an ideal world, doctors would be able to approach Medicare and make a deal. In return for being paid in a different way, they would guarantee lower costs and a higher quality of patient care. We shouldn’t give up on that idea, but the odds will be much better if the payer is a private entity.

For example, DPC doctors initially refused to deal with any third-party payers. That has changed. One of the fastest-growing trends in private insurance is employer payment for direct primary care.

To my knowledge there is no public sector insurance plan that has taken advantage of this opportunity. Certainly not Medicare or Medicaid. That is not surprising. Medicare was the last insurer to cover prescription drugs. It has been way behind the private sector in many other ways – including adopting the opportunities created by telemedicine. Yet, there is an exception to this generalization. That is the Medicare Advantage (MA) program – where roughly half the beneficiaries are enrolled in private insurance plans. MA plans are allowed to specialize and become centers of excellence for specific types of care.

For example, there are special insurance plans for diabetes, for congestive heart failure, for lung disease, etc. These plans are becoming innovators in chronic disease management. Some doctor-run MA plans, for example, make insulin free—as well as consultations with an endocrinologist. By investing in these upfront costs, the plans avoid the greater costs of emergency room visits and hospitalization.

One way to think of these special-needs plans is to see them as an extension of the DPC model applied to specialty care. There is no reason in principle why doctor-run centers could not provide specialist services to all private sector insurance plans.

Deregulate the medical marketplace.

Before seniors were allowed to talk to their doctors by phone, Medicare bureaucrats spent thousands of hours trying to decide what tasks were appropriate for phone consultations and what fee should be charged in each case. Now that the Covid medical emergency is officially over, they are at it again.

If a doctor calls a patient with the results of a blood test, should that count as a consultation? How much should be charged? Somehow, lawyers, accountants and other professionals manage to resolve issues like these without an army of bureaucrats looking over their shoulders.

The medical marketplace is by far the most regulated of any consumer market. That is unfortunate. Almost any good idea that really would lower costs, improve quality and expand access to care is likely to face regulatory barriers. Here are a few changes that would liberate doctors and patients for the benefit of both:

  • Allow employers to put money in a Health Savings Account (HSA), from which employees could make a monthly payment to a DPC doctor of their choosing.
  • Allow employers to provide free services to the chronically ill without making employees ineligible to have an HSA.
  • Allow doctor-run specialty plans to have access to the (Obamacare) exchanges and to the employer market in the same way they are available in the Medicare Advantage program.
  • Allow enrollees in traditional Medicare and in Medicaid to have access to DPC services and to doctor-run special- needs plans for the chronically ill.

These are only a few of the ways in which overcoming regulatory obstacles could solve health policy problems. We should ask the practicing doctors to suggest many more.

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John C. Goodman is President of the Goodman Institute and Senior Fellow at The Independent Institute. His books include the soon-to-be-published updated edition of Priceless: Curing the Healthcare Crisis, the widely acclaimed A Better Choice: Healthcare Solutions for America, and New Way to Care: Social Protections that Put Families First. The Wall Street Journal and National Journal, among other media, have called him the “Father of Health Savings Accounts.”

1 Comment

  1. “The medical marketplace is by far the most regulated of any consumer market. “

    It is also the most secretive market. Could the day arrive when people will be informed so that go to the internet to get ratings and prices for medical services? We do it now for travel insurance, for not-medical services, for products (see Amazon), etc. Is there a reason that medical services based on quality and prices not be readily available in the public domain?


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