The other day, I wrote a post whose thrust was that central planning never works as well as the market (in health care or any other industry) because no group of experts can possibly possess all the information conveyed in a market-determined price.
Kevin Pho has written an excellent op-ed that illustrates the folly of central planning. Dr. Pho points out that, while politicians debate various approaches to health care reform, one of the most important crises facing American health care is being overlooked:
The candidates are missing the bigger picture. We need to address the fundamental issue at the root of our problems: the primary care shortage.
And why are primary care physicians a vanishing breed?
The key is how doctors are paid … A specialist who performs a procedure in a 30-minute visit can be paid three times more than a primary care physician using that same 30 minutes to discuss a patient’s hypertension, diabetes or heart disease.
And who decides how much primary care doctors get paid? Physician payment in the U.S. is, for all intents and purposes, set by a group of experts called the “RBRVS Update Committee” (RUC). The gory details of this process can be found here.
RUC recommendations drive government reimbursement rates, which in turn drive the payment rates of the health insurance industry. The predictable result of this de facto central planning mechanism is the grotesque misallocation of resources described above.
Dr. Pho understandably wants this situation rectified. He wants the rate calculation system reformed so that PCPs are rewarded for spending the proper amount of time with their patients. But sending the RUC back the drawing board won’t fix the problem.
Why? Because the problem isn’t that RUC has made a miscalculation. It is rather that the RUC exists at all. No group of experts will ever be able to brainstorm us out of the primary care shortage. The probem won’t be solved until we allow the market set the price of primary care.
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