Thanks to my partner, Michael N. Abrams, M.A., for his contribution to this post.
In a recent New York Times blog post, esteemed healthcare economist Uwe Reinhardt recently proffered a solution to the challenge of encouraging more medical students to become primary care physicians (PCPs) over more lucrative specialty options. I'm reassured to see that someone is paying attention to this problem. The Association of American Medical Colleges estimates that in 2015 the country will have 62,900 fewer doctors than needed. That number will more than double by 2025, as expanded insurance coverage and aging baby boomers drive up demand for care. And this just when we've rediscovered the idea that coordination of care is a keystone to increased quality and reduced cost!
Bearing in mind that his audience is not made up of Princeton Ph.D.s like himself, Dr. Reinhart kept the possibilities simple; make it cheaper to become a PCP, or tax PCPs less once they begin earning money. Dismissing the first solution as too complicated, he proposed using a feature of the current tax law as a vehicle to lower the tax burden on PCPs.
Oddly enough, Dr. Reinhardt drew a parallel between PCPs and hedge fund managers. Hedge fund managers (who manage the investment of other peoples' capital) are compensated on the returns they achieve. When the fund yields capital gains, the manager receives a percentage of those gains. Current tax law treats that compensation as a capital gain rather than as wages, and at least at the moment, taxes it at a lower rate. Dr. Reinhardt suggests that net profit in a PCP's practice be treated in the same way to encourage medical students to choose this career path.
With all due respect to Dr. Reinhardt, neither his analogy nor his solution stands up to scrutiny. Hedge fund managers are compensated and taxed in the same way as their clients (investors) so that their interests are exactly aligned. If PCPs were compensated in the same way, they'd be paid based on the health status of the patients that they manage. The fact that they're not is part of the incentive misalignment problem that has our healthcare system speeding over its own fiscal cliff.
Instead of rewarding PCPs for improving health outcomes, the current fee-for-service model encourages them to perform and charge for services that may not be absolutely necessary, and to use the vagaries of the payment system to maximize revenue. A reimbursement system based on coding services provided at the level of minutiae, and not compensating for planning or coordination discourages doctors from spending significant time with their patients in order to really get to understand their health situation or develop a preventative care plan.
Using the tax code to lighten PCPs' tax burden will not discourage such practices, nor will it better align the interests of physicians with those they treat than they are now. This recommendation also ignores the fact that constraints of the reimbursement system on their ability to practice medicine has played as great - if not a greater - role in the exodus of PCPs than dissatisfaction with the financial rewards.
Although I've not detected much urgency around the subject, all of us -- government, payers, providers, and, last but not least, consumers - have a significant stake in building the capacity of our healthcare system to coordinate care. Since we already have a shortfall in the number of available PCPs, if the increased coverage provided by the ACA translates into utilization, we can expect an access crisis. If we started tomorrow, we might see increases in the supply of PCPs in a decade. So the question is, what should we do now to improve the capacity of the system in the short and the longer term? If we want to focus PCPs on keeping their patients well, we should reform the payment system so that their compensation reflects the health results they achieve. Are there other things we can do to make a career in primary care more attractive, while still working toward the overall goal of better health outcomes at lower cost? What do you think?