How can America cut its healthcare costs? The question is generating political heat in Washington right now. No wonder. Healthcare spending now stands at an eye-popping 17 per cent of US gross domestic product. And next year, President Barack Obama’s divisive “Obamacare” reforms will take effect, extending insurance to a much wider part of the population than ever before.
But as politicians trade ideas (and insults) about cutting costs – with proposals ranging from better use of information technology through to insurance exchanges – there is another issue that needs to be discussed: doctors’ pay.
In recent years, doctors in America have received relatively high levels of remuneration, running about 60 per cent higher than the industrialised world average, according to data from the Paris-based OECD. But the absolute pay level is not the key issue at stake. What really needs to be debated is the system of incentives.
Most notably, in recent years about two-thirds of US doctors have been paid according to a “fee-for-service” system, meaning that they receive remuneration every time they see a patient or provide a treatment.