What’s Wrong With the Way We Pay Doctors

End-of-life counseling. Death panels. Pulling the plug on Gramma. Putting her on the ice. Some of this is amusing. Some good theater. Some over the top.

But there is a serious issue here that everyone is overlooking. The only reason we are even discussing whether Medicare should pay doctors for end-of-life counseling is because of the totally dysfunctional way doctors are paid in the first place.

Imagine a discussion with a lawyer. The conversation might begin with life insurance, move to annuity contracts, ease over into living wills, jump to the problem of your worthless heirs, segue into legal issues surrounding cremation and perhaps end with you questioning whether you can require your surviving spouse to keep the urn with your ashes on the mantel over the fireplace, next to your photograph.

You would expect to pay your lawyer for the time you spent in consultation. Right? But what if lawyers were paid the way doctors are paid?

Knockin’ on Heaven’s Door

If Medicare were paying lawyers, there would be a long list of approved consultation services, and next to each service there would be an approved fee. There would be one fee, say, for advice on insurance contracts, another for annuities, and yet another for living wills. But if a service were not on the list at all (say, advice on worthless heirs or urns on mantel shelves) the lawyer would get nothing whatsoever for those parts of the conversation.

If you think that sounds wacky, it gets even worse. But let’s turn to doctors for a moment. Medicare has about 7,500 tasks it will pay doctors to perform and it has an approved fee for each task. As everyone knows by now, end-of-life counseling is not among them. But that’s not surprising. There are all kinds of useful doctor services that aren’t on Medicare’s list. For example:

  • For all practical purposes, Medicare doesn’t pay for telephone consultations.
  • For all practical purposes, it doesn’t pay for e-mail.
  • It won’t pay your doctor to advise you on how to shop for drugs; where to find the best prices and how to economize by quantity-buying and pill-splitting, for example.
  • It doesn’t pay for your doctor’s assistance in getting a low price for a CT scan or for negotiating on your behalf for specialist services.
  • It won’t pay your doctor to teach you how to use the Internet — to get free advice, buy supplies or compare notes with other patients.
  • It won’t pay a doctor to teach a diabetic how to monitor his own glucose level and in other ways manage his own diabetes.
  • Ditto for asthma.
  • Ditto for heart disease.
  • Ditto for all chronic illnesses — even though that’s where most of the money goes and even though studies show that well-trained patients can manage much of their own care, with lower costs and higher quality outcomes.

In addition, seniors have special needs that fall through the gaps in Medicare’s payment structure. Many older patients, for example, have five or six medical problems rather than just one. Yet for the most part, Medicare regards doctors as cost center silos and doesn’t pay anyone to coordinate care between the silos. In addition, many older patients are taking as many as a dozen different medicines or more. Yet Medicare won’t pay a doctor to reconcile the pills — determining how they interact and which ones should or shouldn’t be taken in combination.

So what’s the solution? It’s not to start adding more things to the list of approved tasks. That list will never be complete; and even if it were, the approved fees would always be wrong.

To appreciate the problem, let’s return to lawyering. Suppose you are accused of a crime and you pay your defense attorney by task. To make up some numbers, let’s say the fee for jury selection is $20 per hour and the fee for preparation and delivery of a final summation speech at the trial’s end is $500 an hour. What would happen?

Your lawyer’s final speech to the jury would be eloquent, persuasive, compelling and masterfully delivered. It would be so impactful that it might get you off scot-free, if only it were delivered to the right set of jurors. But of course it isn’t because you skimped on paying for that set of services. That’s why you don’t want to pay your lawyer by task. You should pay in a way that encourages him to devote his last hour to that aspect of your case that promises the highest return. The same principle applies in medicine.

In my review of Clay Christensen’s book, The Innovator’s Prescription, I reported his observation that doctors should probably be paid in different ways, depending on the service. For some services, payment by the hour (like lawyers) makes sense. For others, a flat fee for a bundle of services seems better.

It goes without saying that the market will sort these things out much better than a political bureaucracy.

Comments (10)

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  1. Patrick Skinner says:

    I would love to see more on the pay by the hour and or a retainer basis. I’ll pay $25/m for access to my doc when I need them, then an additional 15 minute interval for actual time consulted. Somewhat like the HMO Capitation’s were, except you can’t blame the HMO for trying to keep costs down – you are doing it yourself as it’s your money.

  2. Larry C. says:

    Great post. Very insightful.

  3. Ben Sasse says:

    Well put, John.

  4. Vicki says:

    Nice song pairing — at least now. I like Bob Dylan much better than Guns N Roses.

  5. [...] head of the Dallas-based National Center for Policy Analysis compares how we pay doctors to how we pay lawyers. Leave a [...]

  6. Ken says:

    Nice comparison between doctors and lawyers. I’ve never seen that before.

  7. mark fahey says:

    Several years ago a professor in med school proposed a payment plan for trauma and injuries to deal with the uninsured.
    He proposed that we docs work on the same system as the personal inury bar does.
    We should do contingency – maybe only 10% of the next 5 or 1 years of the persons earning if we fix them well enough to rerurn to work, nothing and nofault if they do not return to work

    Sounds pretty fair to me in light of the 33 plus percent for the trial bar

    Mark Fahey MD

  8. Stephen C. says:

    I like the idea of paying doctors for their time. That’s the way other professionals are paid and it makes a lot of sense.

  9. Laurence Brody MD says:

    John can you imagine a scenario where the government in power wants senior citizens to die early so they can collect estate taxes?

  10. Catherine says:

    There are more comments on this Health Alert at D Magazine’s Frontburner blog:
    http://frontburner.dmagazine.com/2009/12/07/john-goodman-doctors-comp-is-stupid/