Medicare Costs and the Income Trap
Tuesday, November 25th, 2008Paying Doctors Less Is the Key to Better Coverage
Conservatives propose to control healthcare costs by bringing the discipline of the free market to bear upon the healthcare system. Some progressive groups advocate controlling costs with a more interventionist plan. But neither approach, as far as I have seen, adequately confronts one of the biggest barriers to controlling healthcare costs—the strong psychological desire physicians like me have to maintain our often phenomenally high incomes.
To help you understand this psychological phenomenon, I want you to imagine that you have ten years left in your career, and can choose between the following two income streams over those ten years: In the rising salary stream, you would start at salary X, and then receive a steady raise in your salary over the next ten years till you finish at salary X+Y. In the falling salary stream, you’d start right now at an salary of X+Y, and your salary would steadily decline across the ten years to end at salary X. Both choices would leave you with the exact same amount of salary over these ten years, only differing on whether your salary grows over time or declines.
What would you choose? (more…)
