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Study finds high doctor fees to blame for growing U.S. health care costs

A doctor conducts a checkup in Florida.

Steve Chiotakis: At last night's Republican presidential debate, all 8 candidates were quick to criticize President Obama's health care overhaul. Former Utah Gov. Jon Huntsman said health care can save money by cutting costs and computerizing medical records.

But a study out today in the journal Health Affairs says a big reason Americans pay more for health care is because doctors get paid so much.

Marketplace's Amy Scott is with us live now to talk about it. Morning, Amy.

Amy Scott: Morning, Steve.

Chiotakis: How much more for health care are we paying?

Scott: Well let's take the example of hip surgery -- a pretty common procedure in this country. With private insurance, it's nearly $4,000 in fees per procedure here -- and that's about twice as much as in other countries. Medicare gets a cheaper rate, but still is paying 70 percent more than public insurance in other countries. And that's why U.S. doctors have much higher incomes than their counterparts elsewhere. The average orthopedic surgeon here makes almost half a million dollars before taxes.

Chiotakis: So what does that mean, Amy, for overall health care spending?

Scott: The study says those higher fees are the main drivers of higher overall U.S. spending on health care -- as opposed to things like practice costs or med school tuition.

Here's what JB Silvers, a health finance professor at Case Western, had to say about the findings.

JB Silvers: One lesson might be, if we ever want to control costs on this side, we need to regulate more, and that's anathema to most physicians. They just wouldn't even consider that as a possibility.

As you mention, we just had a major health insurance overall. And it didn't do much to address doctors' fees.

Chiotakis: Marketplace's Amy Scott reporting live. Amy, thanks.

Scott: You're. welcome.

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Doctors in this country also need to pay much higher tuition for medical education than in other countries. They graduate with 200,000 dollars in debt, then accumulate interest as they live on a resident's salary for 3-7 years. Surgeons have longer residencies, and accumulate more interest in their loans. If we want to cut salaries of physicians, we need to cut tuition of medical education as well.

"JB Silvers: One lesson might be, if we ever want to control costs on this side, we need to regulate more..." But that would be wrong since one of the big reasons for such high costs is the regulation we already have that serves to restrict competition for medical goods and services. Of course the entrenched providers like it the way it is. We need to let the market work by legalizing a variety of standards of care just like the other things we depend on for our lives. Some people such as poster Kate Williams may want to pay double for an English speaking doctor, another person might only be able to afford the foreign trained doctor, or might even be from that same country themselves.

Has any one looked into the salaries paid to the CEO's and other hight rank employees of the health care insurance industry? They alledge to cut cost by lowering reimbursment to Doctors and Hospitals and by denying coverage to their suscribers. However their rates are increased at 6 to 7 times rate of inflation. Wher is the money going?

Sounds to me like this study failed to consider the full picture. While doctor fees (especially for specialists) have increased over the last couple of decades, INSURANCE fees have exploded logarithmically. Since it missed this obvious conclusion, I'm betting that the study you cite was probably paid for by the insurance industry. Tell me if I'm wrong.

ps. in other countries, where as you say the doctors get paid less? Yeah, those doctors don't have to pay for their own medical school. They have this crazy thing called "public funding" so that doctors don't start their careers with a quarter million dollars in debt.

Full disclosure: my wife is a doctor, and the quarter million dollar estimate for medical school is actually a bit low.

This story is very misleading. I work for surgeons who fix a lot of botched hip replacements and the fee that is charged for the surgery is very reasonable. Remember these physicians have overhead costs for their high practice that come out of those fees.

I cringed when I heard your story this morning and thought about all the bright minds out there considering medicine, finance, law. It sounds like a lot when you say some doctors make $500,000 per year. But really, these same top-of-their-class people can often choose any profession they want. Their intellectual peers might make millions on Wall Street, or as corporate lawyers, or CEOs. Some pharma sales reps make more than $500,000 per year. What's more, you did not even take the time to report what a top administrator might make working in the same hospital as the surgeon in question. I sat with at Columbia Presbyterian last year while a friend of mine had her second hip replaced. She is a cashed out software entrepreneur and I am sure she would want the surgeon operating on her to have the same standard of living as she does. The story you should do is: "Who should be paid what?" Is the work of the CEO of a Fortune 500 worth 10x that of the surgeon who saves his life when he has a heart attack? (I am a print journalist, happy to help with the research.) We need good doctors. Please do not chase them away. And who paid for that study?

The original study analyzed national cost differences in only two categories of medical service: primary care office visits and hip replacements. A few points:

1. Primary care and orthopedics are about as different as apples and oranges. And fees to U.S. orthopedic surgeons were much higher than fees to U.S. primary care physicians.

2. Surgical specialties pay much higher malpractice fees. How does the U.S. medical litigation environment affect doctor fees? And how does it affect them by specialty?

3. The study attempts to account for input of medical school loans into doctor fees. Because doctors in any given specialty are compensated the same whether they have $200,000 in medical school loans or not, however, the study fails physicians who must budget $1200 per month to repay these loans.

4. More and more physicians are working for large corporations. Thus, they do not receive the full "doctor fee" that is billed to the patient. To what extent might such corporations inflate (or for that matter, reduce) the cost of medical care?

5. Disparities were far greater for private than for public insurances. In what ways might our private insurance system unnecessarily inflate medical fees? (And does this say anything about Medicare/Medicaid's efficiency/desirability?)

Any story about this study, rather than sensationalizing that all "doctor fees" are equally to blame, should use this study as a starting point to dig deeper.

Disclaimer: I am a primary care physician.

When the standard of care is perfection in every case, you need a doctor with the training and ability to achieve that lofty goal. Not every case will have a perfect outcome despite perfect procedure. Doctors deal with a 1954 human, not Ford. There are few, if any, interchangable parts. I won't mind paying $4000 for a competent, qualified, experienced, English speaking surgeon if the choice is a $2000 foreign trained, inexperienced, underqualified surgeon in whose hands I place my life.

"we need to regulate more"? How about: consumers need to see and feel the money they are paying for services. A more diverse set of opinions for solving the problem would be nice.

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