Often, doctors are thought to be selfless healers who always put the health and consideration of their patients in front of their own. In many situations, doctors live up to this image. However, accepting this as universal masks the economic and political structures that pit doctors’ self-interest against those of their patients. Indeed, the incentive systems that determine doctor compensation, job allocation, and healthcare prices create conflicts of interest for doctors.
The ways doctors are compensated can have adverse effects on how they prescribe treatments for their patients. In the United States, there are two main methods by which doctors are compensated. The traditional “fee-for-service” method compensates doctors for each healthcare treatment service provided. Under such a method, the profit-maximizing action for the doctor is to oversubscribe patients to treatments and medications, even if they are not in the patient’s best interest.
The second method by which doctors have been compensated is by capitation. Under this method, doctors are provided a lump sum of cash for their pool of patients, and any leftover savings are not used in treating patients. Compared to the “fee-for-service,” this method incentivizes doctors to undersubscribe their patients to medications and treatments because they pocket any saved expenses. Indeed, one study found that capitation in primary care markets leads primary physicians to make excess, unnecessary specialist referrals to create added savings.
Under both scenarios, the payment scheme of doctors does not necessarily align with the best interest of their patients. Indeed, certain doctors will act ethically and make medical decisions based solely on the needs of their patients. However, many will act as rational, self-interested agents, making decisions that do not directly improve our health. The problem here is the asymmetry of information between doctors and patients. Without a working knowledge of medical issues, patients cannot distinguish between ethical doctors and those who masquerade as ethical ones.
In addition to individual doctors, professional medical associations yield significant authority over healthcare outcomes, even though their financial incentives work against the social good. In the United States, the American Medical Association (AMA) has considerable influence over the price of various treatments paid for under Medicare. Since 1991, a group of physicians from all specialties meet regularly to submit a recommendation of prices to the Center for Medicaid and Medical Services (CMS). These recommendations, historically, have heavily determined the actual value the government ascribes to various treatments. Given that Medicare accounts for roughly 20% of national health expenditures, we are essentially trusting our doctors to freely set prices for services for which they know the government will pay them. This is the very definition of conflicting interests.
Moreover, the AMA has had a history of sacrificing their integrity for financial gain. In 1997, the AMA was involved in a scandal with Sunbeam Corporation, a small appliance company. The AMA provided its stamp of approval on Sunbeam’s products in exchange for royalties. In more recent years, the AMA, which is the second-largest lobbying group measured in expenditure, has fought to maintain inflated physician wages by ensuring a shortage of doctors through residency caps. The AMA has lobbied for this even as a chronic undersupply of doctors is stretching healthcare services thin. The AMA’s track record proves that when put in a position to increase doctors’ wellbeing, it will advocate for doctors even if that comes at a cost to society.
When thinking about the healthcare profession, we would like to imagine that our caretakers are altruistic and noble. However, it would be naïve to believe that doctors and professional groups are not motivated by self-interest. Doctors may be performing life-saving operations, but it would be erroneous to assume that they do it only out of the kindness of their heart rather than for any external incentives. Similarly, doctor associations like the AMA have been put in positions of power even as they continue to act in ways that derail their integrity. If we truly want care that produces the best outcomes for patients and society, we need to restructure the incentive systems that doctors and professional organizations face.
Contact Neil Chaudhary at [email protected].