Tuesday, January 08, 2013

Efficiency and rationing

What will happen if the government institutes universal coverage, while trying to contain costs? The system will become more efficient, but not in the way the government intends. Take for example ear nose and throat specialists. Right now, such pracitce involves ear tubes, tonsillectomies, thyroid surgery, neck dissections to remove tumors, sinus surgery and more specialized procedures involving the inner ear, trachea and larynx. Much of the ear tubes and tonsillectomies are performed on pediatric patients, and involve a disproportionate number of medicaid recipients. If you give everyone coverage and begin to limit reimbursement for particular services, say for example, ear tubes, otolaryngologists will respond by making their pracitces more efficient; not more efficient in terms of performing more procedures in a given amount of time, but more efficient in terms of concentrating their time in other procedures. If a physician can get the same reimbursement for doing two hours worth of sinus surgery that he does for three hours worth of ear tubes, that physician will eventually focus on the former procedures and do less and less of the latter. He will focus his marketing efforts and networking to the more lucrative procedure, leaving the less remunerative surgeries to less senior surgeons or less established practices. Micro-specialization will occur, with the result that the less remunerative procedures will experience longer wait times, and less choice of qualified physicians. This has already happened to some extent in neurology, where physicians discovered that their time was much better compensated doing nerve conduction studies in thier offices than in doing inpatinet consultations. As a result, many hospitals had no emergency department coverage for neuroly patients. Pulmonary specialists also gravitate to bronchoscopy or sleep specialties at the expense of intensive care unit coverage.

This phenomenon is also observable in the growth of boutique practices, where physicians decide that it is better to get reasonable compensation for reasonable services than to get paid a little more for a lot more effort.

If the government provides universal coverage with price controls, it will not discourage unnecessary or inefficient care, it will discourage access to time-intensive and poorly-reimbursed care. The incentives will be such that costs will be saved, not by discouraging patients from seeking care, but in discouraging doctors from providing it.

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