Medical Care, Medical Training and Financial Incentives

Two new essays in Washington Monthly examine the inbuilt financial advantage of medical specialist reimbursement and residency training

Phil Longman, author of a coruscating book on the Veterans Health Administration has penned an extended critique of the current system of U.S. medical education. He questions the return on investment from the federal dollars that academic medical centers receive to train the next generation of physicians:

[Residency] programs turn out too many specialists who go on to practice in places where such doctors are already in oversupply, and where, according to numerous studies, they often inflate health care spending by engaging in massive amounts of unnecessary surgery and other forms of over-treatment. Meanwhile, residency programs are producing a dwindling number of primary care physicians and other generalists, who are already in chronically short supply in most parts of the country and are desperately needed to implement the kind of reforms to the health care delivery system necessary to improve its quality and efficiency.

Longman believes that putting conditions on the medical training subsidy is a good way to force residency programs to train more primary care docs. I agree with much of what Longman says, but doubt that this is where the public policy leverage truly resides. The preference of many aspiring doctors-to-be and academic medical centers for specialist training has little to do with the subsidy for residency training and a lot to do with specialist care being reimbursed at a much higher rate than primary care. Until that is changed, tinkering with the comparatively small amount of money that is devoted to medical education ($19 billion) is not going to motivate much reform in a three trillion dollar health care system.

I raised this in a friendly email exchange with Longman, and he helpfully directed me to another essay on this very point in the same issue of Washington Monthly. In it, Haley Sweetland Edwards makes the case that the reason why specialist care is so much more richly compensated than primary care is simple: The reimbursement rates are set by a Medicare advisory committee composed largely of specialists.

Author: Keith Humphreys

Keith Humphreys is the Esther Ting Memorial Professor of Psychiatry at Stanford University and an Honorary Professor of Psychiatry at Kings College Lonon. His research, teaching and writing have focused on addictive disorders, self-help organizations (e.g., breast cancer support groups, Alcoholics Anonymous), evaluation research methods, and public policy related to health care, mental illness, veterans, drugs, crime and correctional systems. Professor Humphreys' over 300 scholarly articles, monographs and books have been cited over ten thousand times by scientific colleagues. He is a regular contributor to Washington Post and has also written for the New York Times, Wall Street Journal, Washington Monthly, San Francisco Chronicle, The Guardian (UK), The Telegraph (UK), Times Higher Education (UK), Crossbow (UK) and other media outlets.

6 thoughts on “Medical Care, Medical Training and Financial Incentives”

  1. I saw the WM article and it was a ‘well duh’ moment. It is short and to the point showing just another of those big problems that could be changed if only the powers that be weren’t the powers that be.
    Bottom line seems to be that this AMA appointed board meets in super secret session to set the prices for procedures and then submits it’s findings to Medicare and Medicaid for scrutiny. M&M just rubber stamp the mess and that becomes the standard that all insurers go with. Gee, if only We the People had some elected body with authority over these government funded programs. But I’m just dreaming but… What if?
    Where’s the Tea Party when we need them? Oh yeah, screwin’ with womens’ health care.

  2. And this is the silliness that make the health care advisory panel component of PPACA so crucial.

  3. How much of this problem results from doctors gravitating to places Richard Florida says attract educated, high-achieving people with culture and variety of experience (namely certain big cities) and away from places that can support a GP but not specialists (namely small towns and moribund cities)?

    1. Michael — those same places are highly expensive ares in which to live. If specialists didn’t make such high salaries, they could not afford to gravitate as they do to San Francisco, West Palm Beach etc.

  4. Specialist bias is not unique to the US: the socialist English NHS has recently been accused by the House of Commons Public Accounts Committee for padding consultants’ pay. The difference is that £200,000 is seen is Britain as astronomical pay for a doctor, and only a tiny minority get it.

    1. If my google checking is accurate, £200,000 in Britain would be well into the top 1% of incomes. A doctor with a percentile-comparable income in the US (over $500,000) would also be in a small minority (based on my guess, given that the highest-paid specialties average around $300,000 and are very small.)

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