No announcement yet.

Does competition really work?

  • Filter
  • Time
  • Show
Clear All
new posts

  • Does competition really work?

    Dr J, VOLUME 22 ? ISSUE 3 ? SPRING 2004

    Coming in to a Federal election
    campaign, we are reminded how
    much emphasis is placed on both
    the economy and health care. Bill
    Clinton?s campaign slogan was ?It?s
    the economy, stupid?, whereas
    the 2004 Australian election seems
    to be as much about auctioning
    off greater Medicare benefits than
    about economic management.
    Medicare is almost directly analogous
    to taxation from a government
    publicity viewpoint. With tax, you
    let bracket creep slowly increase the
    amount that Treasury is taking in
    and then you give parts of it back
    in one hit (accompanied by a large
    announcement suggesting this is a
    ?tax cut?). With Medicare, you let the
    rebate fall way behind not only health
    ination but general ination, and
    then in one hit you miraculously ?give?
    a billion extra dollars to Medicare.

    Despite both parties claiming they are
    going to spend unbelievable amounts
    on Medicare and health care, we still
    seem to have a health system that is
    performing no better than it was ve
    years ago. It is also frustrating for
    many professionals working in the
    health care sector how hard the work
    is for limited money, when there seem
    to be nearby examples of others who
    might be working equally hard but
    earning a lot more cash.

    Why do some practitioners do
    so much better nancially than
    others? By this I don?t mean more
    experienced and/or popular clinicians
    within the same discipline. I am
    asking the fundamental question
    about why an average surgeon makes
    20 times the income of an average
    physiotherapist, even though both
    of them (nowadays) probably were
    equally academically talented and
    studied just as hard as each other
    at school and university. I?d like
    to continue the analogy between
    surgeons and physiotherapists, whilst
    recognising that surgery is one of the
    most demanding and critical areas
    of health care that I don?t wish to
    devalue. I merely want to point out
    something that surgeons have in
    common with podiatrists, dentists,
    bankers and mechanics, which
    contrasts them with physiotherapists,
    physicians, psychologists, nurses and

    One answer that a surgeon might
    give to justify his (let?s not waste
    time with his or her in this situation,
    as we know how many females the
    College of Surgeons actually lets on
    the program) much higher income
    than that of a physiotherapist is the
    response, ?surgeons actually make
    an important difference to patients,
    whereas many physios just hook
    patients up to machines?. Yes, it?s true
    that there are physios around who
    don?t listen to their patients and just
    hook them up to electrotherapy. I
    would call these ?bad? physios. There
    are also bad surgeons around. Bad
    surgeons perform surgery that isn?t
    needed, or use techniques that are
    outdated, or offer to do procedures
    that they aren?t doing regularly when
    there are other surgeons nearby who
    are more procient in that procedure.
    Bad surgeons don?t examine patients,
    and when the results aren?t good they
    blame the patient and then refuse to
    follow them up. Just because there
    are some bad surgeons around,
    doesn?t mean there aren?t plenty of
    good surgeons, and that these good
    surgeons shouldn?t make a very high
    income for being good at what they
    do in a very important eld.

    My complaint here is that surgery is a
    very lucrative eld for good and bad
    surgeons alike. The worst surgeon
    in any given city is still probably
    making more than twice as much
    as the best physiotherapist, even
    though the excellent physiotherapist
    is doing far more good for his or her
    patients. The excellent physiotherapist
    is probably curing most of his or
    her patellofemoral pain patients,
    and referring the ones with meniscal
    tears on to the best knee surgeons
    around, whereas the terrible
    surgeon is probably operating on
    his patellofemoral pain patients and
    making them worse, but getting by on
    the fact that he gets a few meniscal
    tear patients a reasonable result (even
    though his success rates might be
    worse than his colleagues).

    The next answer that a surgeon might
    give you as to why his field is so
    lucrative is that we live in a capitalist
    society and it is market forces that
    show how much people value surgery
    as opposed to physiotherapy. I think
    this is actually the correct answer,
    but it is slightly incomplete. Market
    forces are the darling of right-wing
    economists, but I believe that the
    market actually forces prices down in
    some professions and forces prices up
    in others.

    Let be begin to illustrate with an
    anecdote from fteen years ago, when
    I first visited the USA (the country
    most in love with ?free? market
    forces) and rented my first car. I was
    travelling on a student budget, so
    when I arrived at LA airport at 5pm I
    was looking around for fairly cheap
    car rental options. I saw a bus drive
    past with the slogan painted on it,
    ?RENTAL CARS - $7 per day?. This
    was 15 years ago, of course, but it
    still seemed dirt cheap at the time. I
    thought the cars might be bombs and
    there might be some fine print, but I
    thought it was a good start. I got on
    the bus and was driven a long way
    to the car rental office in a different

    Guess what, if you wanted a car that
    actually had locks in it (and they
    didn?t recommend driving around LA
    in a car where the locks didn?t work)
    you had to move up to the $30 per
    day base price. If you wanted a car
    that took regular petrol and not LPG
    (which was only available at a few
    gas stations) the price went up further.
    If you wanted an automatic (and,
    guess what, the gear boxes on their
    stick-shifts weren?t too flash), extra
    money. If you wanted the car to start
    with a full tank of gas, rather than on
    empty, more money. If you wanted
    insurance, it was more money still,
    and there were 4 types of insurance,
    for the 4 different types of person
    who could sue you. ?We recommend
    getting the top type of insurance in
    the States, as our lawyers are pretty
    fierce?. Then of course there was
    a type of GST which hadn?t been
    included in the quoted price. And I
    was expected to tip the dude who
    drove me to the rental office.

    By the time I had asked all the
    questions and had been presented
    with all of the options, it was a
    minimum of $70 per day to rent the
    cheapest car that I could actually drive
    out of the yard, almost exactly ten
    times what I thought I was going to
    pay. It was also now getting dark and
    there were angry black dudes walking
    the street outside the car rental place.
    I signed up for $70 per day.

    Just to show that despite this lesson
    I was completely powerless to stop
    something similar happening to me
    in 2004, I put my car in for routine
    service (with nothing wrong with
    it) during the State of Origin series
    this year (when I was even more
    ridiculously busy than I normally am)
    and was quoted a price of $200-300
    for the service (including the $30
    fee for a roadworthy inspection). I
    finished up paying $1300.

    I didn?t notice anything different with
    my car when I finally got it back,
    three visits later, but they had itemised
    7 pages worth of stuff that they had
    to do to parts of my car that I didn?t
    consider had anything wrong with
    them, but which weren?t included
    in the original quote. The $30
    roadworthy inspection fee was their
    ammunition to list compulsory service
    items that amounted to about $1000.
    I was rude and looked very pissed
    off but I was too busy to take the car
    elsewhere and go through the process
    of being ripped off by a different
    company in the same industry.

    There are some industries that don?t
    rip you off: airlines, for example. You
    can go online and find a $49 fare
    from Sydney to Melbourne and that
    is all you will pay to get there. (Just
    like when you visit a physiotherapist
    where you only pay for the quoted
    visit amount?.). In an industry that
    isn?t based on hidden extras, you
    only actually need two competitors
    (Qantas and Virgin) to create a market
    that is a fantastic environment for the

    In a different industry, say banking,
    you can have dozens of different
    competitors, and they can all manage
    to rip you off. How much do you pay
    in bank fees, and would you pay any
    less by changing to a different bank?
    Wouldn?t have a clue and wouldn?t
    have a clue are my two answers to
    these two questions, and I?m sure
    they are yours as well. Your bank is
    doing beautifully, and they are slowly
    sucking enough money out of your
    account to keep the industry as one
    of the most lucrative there is. The
    reason why is that there are so many
    different ways that a bank can charge
    you a fee, that the average consumer
    is never any chance to price compare
    two different bank accounts.

    Buy bank shares, they will just keep
    going up, and you can feel better
    about the fact that they rip you off
    when you are a consumer. Just make
    sure you never buy airline shares:
    you won?t make any money, and it
    will destroy the buzz you get from
    travelling from Sydney to Melbourne
    for $49.

    So how do surgeons make all of their
    money? Obviously part of this is by
    doing a very important job, but have
    you ever had to pay for surgery? If
    you have, you probably struggled,
    and you are probably someone who
    knows the health system pretty well.
    What does the average patient do?
    After waiting a few weeks to finally
    get an appointment, he or she is told
    that surgery is required.

    How much is it going to cost? Well we
    can give you the surgeon?s fee, which
    is $xxx, and which is $yyy above all
    of the insurance rebates. However,
    if we have to do something different
    when we get inside, then the fees
    could be more. Also, you will need
    to speak to the anaesthetist and the
    assistant surgeon, and the pathologist
    and the radiologist to find out what
    their fees are going to be.

    The funny thing is that the
    anaesthetist will tell you
    approximately what the charge might
    be, but will say that it will depend
    on the surgeon, depending on how
    long he takes for the operation. The
    pathologist can?t give you a quote at
    all, because he or she doesn?t know
    what tests the surgeon is going to
    order, and at this stage neither does
    the surgeon. Your health insurance
    company may tell you that certain
    parts or braces from the surgery may
    not be covered under the plan you
    are on but that, since they don?t know
    what the surgeon is going to do, they
    can?t tell you whether you will have
    to pay any of these extras.

    At the end of all of this, you either
    just decide you are going to cop a
    massive set of bills or you go back
    to your GP, ask for a referral to a
    different surgeon, wait another few
    weeks to see the new surgeon, and
    get told exactly the same story. Which
    surgeon is going to be cheaper? You
    don?t know and you don?t care, you
    just decide you will pay whatever it
    takes to get the operation done. If the
    surgeon ended up doing a good job,
    you don?t care that that you ended up
    a few thousand out of pocket on top
    of your private health premiums.

    After the saga is finished, you decide
    you are spending too much on health
    care. To cut back, you are going to
    change GPs from the one that charged
    you $40 to write the referral to the
    surgeon (which Medicare only gave
    you $25 back from) to a different
    one down the road who bulk bills.
    However, the bulk-billing GP down
    the road will refer you to a bad
    surgeon next time, who will do a
    worse job on the surgery, but due to
    the beautiful system that we have for
    paying surgical fees, will be living
    in a house on the same street as the
    good surgeon and driving the same
    expensive car. He?ll get sued a few
    more times that the good surgeon,
    but he is paying exactly the same
    malpractice premium. And there are
    plenty of bulk-billing GPs out there
    who are too busy to listen to their
    patients, so they aren?t going to stop
    referring to him.

    Without wanting to repeat myself
    too much, let me stress that I don?t
    think that good surgeons are charging
    too little or not earning enough.
    Actually by international standards
    our surgeons are quite cheap. I just
    think that the reason why they can
    successfully maintain high charges in
    a so-called ?free? market is that no one
    can price compare.

    The average person who, say, called
    up a physiotherapist?s office and got
    told it was $220 for the initial consult
    is going to say that this is a rip off
    and that they would shop around
    for a physio with more reasonable
    charges, and this fact is going to keep
    physios? prices down forever. The
    same average person who calls up
    a surgeon?s office or a car mechanic
    is rarely going to get a straight and
    simple quote about the total service
    price, making it impossible to price
    compare and making the same so-
    called ?free? market very much a
    seller?s one.

    If you don?t believe me that it is fair to
    compare the value of physiotherapists
    to surgeons, do you really think that
    a physiotherapist should earn a lot
    less per year than a car mechanic? Are
    there fewer dodgy physios around
    than dodgy car mechanics? Who is
    doing a more difficult and/or more
    important job?

    There are plenty of other ways to rip
    people off and defy what are meant
    to be the pure free-market forces of
    capitalism. Kickbacks are another
    good way (ask your accountant
    about this one). Restrictions on
    licensing are another (if you don?t
    want to ask your surgeon about this,
    try your pharmacist). But having a
    complicated billing system seems to
    be just about the best way possible. It
    explains why podiatrists can do better
    than physiotherapists (?you wanted
    padding on your orthotic, that will be
    a bit extra??) and why lawyers can do
    better than just about anyone (it was
    50 cents a sheet for the paper in the
    photocopying, and the labour time of
    an article clerk, who is worth $220 an
    hour, to pass the pile of sheets on to
    a secretary, who is worth $30 an hour,
    and then there were the phone calls
    between the junior solicitor, who is
    worth $300 an hour, and the partner,
    who is worth $500 an hour, yada yada
    yada, your bill for the case is $30,000).

    The last point: no matter how well
    you write or speak, there is very little
    money in straight publishing and/or
    broadcasting. Cash-for-comment,
    now that?s a different matter. If you
    want me to get up at a dinner and
    talk about this issue, I?d be yours
    for a good bottle of wine. If you
    wanted Alan Jones as your after-
    dinner speaker, he would set you
    back $5000. That?s market forces. His
    time is worth more than mine. I don?t
    get thousands of dollars to endorse
    products under the guise of editorial,
    so my time isn?t worth as much. I?m
    Dr. J.
    The staff of injury update are not responsible for views of other users posted in this forum.

  • #2
    Does competition really work

    Spoke too soon in my previous post.
    Dead lifting last week and things went badly= bulged disk still in a lot of discomfort
    from russia wih love


    • #3

      and considering how tough med school is, how much years of study it takes to specialise, and compared to other jobs which are much easier and pay more.... not to mention overheads like insurance is VERY expensive for private practice surgeons, the rest is taxed heavily

      i think your article misses the point, although some good points like why does income vary so much between different specialists