Does competition really work?

[injuryupdate]

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
dieticians.

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
suburb.

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
consumer.

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.

[D.Query]

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

[markg]

http://www.medstudentsonline.com.au/...read.php?t=266

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