How Policies Tie Together – And Problems Compound

Drug Production

Hi Folks.  Due to my practice changes I have been away from my blog post for The Doctors Report.

As I and my medical team get our new “project under construction” worked out, I hope to be able to get back to writing on various topics.  I am excited to report to our local market that the Independent Physician’s Association of Lee County is having an inaugural public event on March 21st, 2015.  I hope we see a good audience so that people can learn about this patient-centered association of providers.

In Feb of 2014 I got involved in a “Linked In” conversation that centered around the question “what does the group think about a Universal Payer for health care”.  There were over 200 comments on this discussion thread and at one point I felt compelled to tie in some things that I don’t believe most of us have even remotely put together.  What follows is my contribution to this discussion after several points had been made. The issue of market distortions by the present model had been brought up.

I would like to try to tie in a few connections regarding how Government policies are significant contributors to many of the distortions we have all been discussing. David discussed how Medicare costs rise faster than inputs. This is true and it is linked to monetary policy. The Fed has a mandate to keep inflation targeted at 2% or better (and it historically has been higher). This guarantees that the purchasing power of a payer beneficiary will be much weaker at the time a person hits Medicare age and begins consuming their health care. 2% annual drop in purchasing power over a period of an adult workers lifetime results in chump change at the end; talk about a tax! I believe recent reports have indicated we are using appx 3 dollars of services for each one we put in. Monetary policy is assuring this account deficit.

Now let’s look at Education and the cost of such. Many have indicated it is a good thing to bring in the foreign talent because the cost of education is so much out of proportion to expected physician incomes. Again, what has the history of education and loans for education been? Subsidized and below market debt issuances backed by Federal policies. This is distorting the education prices – upwards. Its very similar to the housing bubble. Make debt cheap and watch folks reach for a bigger and more expensive house than if the debt market/interest rates were “natural”. We now require Master degrees for Physical and Occupational Therapy- really? The average therapist is lucky to make 60K in a full time employed position. It won’t be long and these positions will also be imported from abroad. We are educating ourselves out of the market. I think we are presently in a phase where the average American is facing the reality that the cost of pursuing this dream isn’t held up in the marketplace, especially for health care.

By the way, the IPAB board is set up to be federally empowered under the direction and supervision of the Executive branch as soon as the actual health care inflation exceeds a slight threshold over CPI. This is again a federally generated policy (when coupled with the Fed mandate to keep an inflationary dollar policy) to guarantee IPAB’s involvement in further socializing/limiting the marketplace for health services. I don’t know when everyone decided but apparently our leaders do not wish to ever let a normal business cycle and normal supply and demand dynamics play out. Instead, we pretend there is never any downside to a buyer and seller market, only upside. If the market changes to the detriment of either side of the market, we create another law and policy. Its lunacy, arrogant and dangerous in the end game. 

If the cost of education is artificially high and you combine a government policy of artificially keeping Medicare reimbursement to zero growth (essentially there has been no increase in the RVU value over the past decade) you get what we are getting. US students realizing the investment of education and deferred compensation cannot be matched by a payment/labor market that entices that investment with commensurate reward. I don’t think it is a good thing for our country to have our aspirations of entering medical school artificially quashed by foreign students who got less expensive education coming and filling those spots.

The sad thing is that the physician lobbies such as the AMA and ACP are addressing the education dilemma with requests for subsidized Medical school schemes. This just re- enforces more bad policy.

These outcomes are what happens when we allow our Federal government to step so far away from its primary, constitutional duty. The marketplace is supposed to be facilitated by our Federation, not manipulated and distorted. The problem with the politics of all this (as I see it) is no one is willing to get to the root causes. “

Think about it folks and feel free to comment.

Ray Kordonowy MD