Some Flaws in Health Care

Recently the Obama Administration announced the time has arrived to appoint health care experts to an Independent Payment Advisory Board as part of its duties under the Affordable Care Act. The legislation gives the advisory board authority to change Medicare reimbursements for doctors and determine new ways to deliver quality health care. The flaws in health care go much deeper than reimbursements.

One of the flaws the advisory board cannot address with reimbursements comes because physician services operate as a separate component of the health care industry. Some of America’s physicians work as salaried employees. However, Bureau of Labor Statistics reports almost 67 percent of physicians practice medicine at over 306 thousand offices of physicians, not including 123 thousand offices of dentists, and still more offices of chiropractors, podiatrists, and a few others. These offices function as independent small businesses where physicians double as doctors and entrepreneurs in a physician services industry.

Combining business and medicine not only diverts physician time and energy away from medicine, it generates many small establishments that need a steady volume of patients to cover overhead expenses for office space, equipment and supplies, to minimize costs and to keep their business financially solvent.

A separate and decentralized physician services industry negotiates billions of transactions, first to provide necessary services, and then to collect payment from patient health care plans. Patients have no incentive, or ability, to be consumers when patient charges will be small co-pays or deductibles. Physician entrepreneurs avoid quoting prices when so many payments come from billed charges to a health plan rather than patients. Physicians decide necessary services and patients generally go along, but suspicion runs high that questionable tests and procedures might be ordered to maintain steady revenues into the firm.

The 306 thousand offices of physicians had employment of 2.3 million in 2011 with almost 820 thousand jobs in office and administrative support. The 820 thousand are more office and administrative support jobs than those reported for the entire hospital industry that has 5.7 million jobs; the 820 thousand are more the 4 times the office and administrative support jobs for the entire nursing and residential health care industry that has 3.1 million jobs.

Offices of physicians have 35 percent of staffing in office and administration support occupations, higher than any other sector or sub sector in health care. By comparison, outpatient care centers have 18.8 percent in office staff. With 2.3 million jobs spread among 306 thousand offices the average office has 7 or 8 staff including physicians. Out of 534.6 thousand physicians working in the health care industry 355 thousand work in offices of physicians suggesting the typical office has a doctor and 6 or 7 support staff. Staffing data implies a sub sector bloated with office staff, much of it underutilized.

Physicians services and all the other disparate sectors could be merged into regional or metropolitan health care providers like we organize school districts. Combining the offices of physicians and dentists with medical laboratories, imaging centers, blood banks, dialysis centers, urgent care clinics, hospitals and other services would eliminate billions of unnecessary transactions between bureaucratic offices of strategizing adversaries.

Regional health care helps squeeze bloated overhead office staff and allows health care providers to concentrate on combining necessary services to fully utilize equipment and personal to minimize costs. Regional health care with salaried physicians and staff available to discuss medical options with other salaried physicians and staff helps reduce the incentive to over prescribe tests or treatment and makes second and third opinions readily available. Regional health care has the potential to introduce a measure of choice like public school choice as long as residents can compare annual or monthly premiums, co-pays and deductibles with neighboring districts.

Solving America’s health care problems will require significant changes in health care delivery such as medical school tuition at public expense, converting doctors to salaried employment and expanding regional health care into HMO style delivery systems. But if the appointed advisory board members are really experts, they will know how hard and how frustrating the job will be.

Unemployment Benefits in North Carolina

A Washington Post article [N.C. looks to cut jobless benefits, WP, 2/13/13] describes cuts in unemployment benefits as a drastic proposal from North Carolina lawmakers. Under the new plan benefits would drop from 26 weeks to 20 and the maximum benefits from $535 a week to $350.

The governor believes they have little choice, they have a budget crisis, but the quotations from business supporters give another reason: cuts are needed to improve the economic climate and rebuild unemployment insurance funds. Lew Ebert, the president of the North Carolina Chamber of Commerce told journalist Michael Fletcher “Everywhere I travel, there are companies that have jobs and want to hire, but I hear two things: people don’t have the skills, or that it is tough to compete with $500 plus per week in benefits.”

Unemployment benefits are always competition for employers while the unemployed receive benefits. Therefore the duration and amount of the benefits reflect a states political attitude and policy toward cheap labor. If benefits are $535 per week for 26 weeks then the unemployed have incentive to stay on unemployment for wages under $13.37 an hour and for the whole 26 weeks. They will be unlikely to become a part of the labor force until after 26 weeks unless an offer comes above $13.37, assuming a 40 hour week. If the benefits are $350 per week for 20 weeks then the unemployed have incentive to stay on unemployment but only for wages under $8.75 an hour for 20 weeks.

By lowering the benefits North Carolina will, as they intend to do, increase the supply of cheap labor. However, $350 is the maximum when few make the maximum. Benefits are always scaled back for filers who had lower wages than those eligible for the maximum. The article cites $296 a week as the average benefit, which is $7.40 an hour. The Bureau of Labor Statistics reports the median wage for cashiers was $8.80 an hour in 2011. At $7.40 an hour we can be sure the Chamber of Commerce has jobs as their president told the Washington Post, but only if the Legislature will help them to hire at lower wages.