By Arnold Kling
Alex Berenson thinks that he has gotten to the crux of America’s health care spending problem.
the partisan fight over insurers and drug makers is a distraction from a bigger problem: the relatively high salaries paid to American doctors, and even more importantly, the way they are compensated.
Berenson notes that American doctors earn more than doctors in other countries. However, average incomes in general (for non-doctors) are higher in the U.S. Also, doctors tend to work more hours in the U.S., and we tend to have more specialists. Adjusting for these factors, the “excess pay” of U.S. doctors is probably not enough to account for more than a small portion of our higher medical spending.
Berenson points out that fee-for-service medicine creates an incentive for doctors to offer more procedures. However, there is no perfect compensation scheme. Other approaches, such as fixed-salary systems or compensation tied to outcomes, reduce the incentive for doctors to deal with sick patients.
The biggest incentive problem in health care is the insulation from costs under comprehensive health insurance. Without changing that, it is almost impossible to reduce spending on physicians. My expectation is that under a government-run health system in the U.S., doctors would be even more powerful than they are today.