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Doctors as Crony Capitalists

By Josh Barro
December 14, 2012 1:05 PM EST

Reading Christopher Flavelle’s Bloomberg View piece on the importance of lowering doctors' compensation to control health-care costs, I come away with two reactions. One, this is an ideal issue for Republicans to capitalize on. Two, Republicans will never capitalize on it.

Republicans love to fight "crony capitalism," and doctors are the ultimate crony capitalists. Their high salaries -- more than double the Organization for Economic Cooperation and Development average for physicians -- are driven almost entirely by government policy. The government accounts for about half of all health-care spending in the U.S., and the government agrees to pay doctors well.

And then the government interferes in the private market in all sorts of ways that encourage high payments to doctors. Health spending is tax-subsidized such that people are encouraged to buy even routine health care through "insurance" mechanisms that make the consumer place little concern on cost.

All of this is incredibly burdensome to the public. Rising health-care costs are the key driver of the long-term trend of rising government spending, imposing added burdens on taxpayers. And the rising cost of private health plans is holding back wage growth. Stopping the doctor-government complex ought to be a great populist issue for conservatives concerned about raising real incomes.

But Republicans are unwilling to take up this mantle in a serious way, for two reasons. One is that Republicans have decided, for strategic reasons, to cast doctors as the oppressed heroes in the health-reform debate. The government, they say, wants to get in between you and your doctor.

Even as Democrats have worked hard to appease doctors (producing a universal health-care plan that earned support from most medical-industry stakeholders because it was light on cost control), Republicans have sought to be the even more pro-doctor party. That prevents them from taking the fight to the doctors.

And addressing the excessive doctor cost problem will require a mix of market and non-market solutions. The government cannot stop doing all the things it does that push doctors’ wages up. Any public policy aimed at getting health care to people who cannot afford it will require subsidies, and subsidies push up wages. A key part of cost control will have to be offsetting, top-down efforts to hold down doctors' wages, akin to the Independent Payment Advisory Board, which Republicans abhor.

Market-based approaches to cost control should be part of the solution, too. Putting more Americans on high-deductible health plans would tend to push down doctors' compensation, especially if coupled with regulations that force medical practices to clearly disclose their prices so that consumers are empowered to comparison-shop. Breaking down barriers to competition, for example by abolishing state-level medical licensing and expanding the scope of practice for physician assistants, would also push down doctors' wages and health costs.

A serious cost-control agenda will meld these market-based solutions with bureaucratic ones and will surely make doctors scream. Republicans aren't interested in doing either of those things. But they should be.

(Josh Barro is lead writer for the Ticker. E-mail him and follow him on Twitter.)

Read more breaking commentary from Bloomberg View at the Ticker.

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