Boutique Medicine: Tax it, Don’t Ax It
posted by Frank Pasquale
Sick of waiting weeks for a doctor’s appointment? Or hurried visits? Well, “concierge physicians” have got a deal for you. Just pay a retainer to a practice (usually between $2,000 and $5,000 annually), and you’ll get immediate attention, long visits, and personalized preventive care. There’s just one catch—when you and, say, 400 other health care “consumers” sign-up at a given practice, it drops the other 1500 patients it had been serving to concentrate solely on retainer patients.
Is this problematic? Some important Democrats say yes, and have moved to kick “concierge physicians” out of the Medicare program. Tommy Thompson resisted that move when he headed HHS—and now he’s on a leading concierge franchise’s board. But since he’s left, some lower level officials at HHS have been raising concerns about “boutique medicine.”
After thinking about retainer care for a while, I have a few conclusions about these efforts. In a nutshell: I think it’s unwise to try to ban concierge care outright. But I do worry about it. It’s consonant with a larger movement that TNR describes: “to radically transform health insurance altogether, so that risk is gradually transferred away from large groups ( i.e., the government and large employers) and onto individuals (i.e., you).” If health insurance starts to move from a “defined benefit” to a “defined contribution” model, we can count on a diversion of scarce medical resources from a common risk pool to pockets of well-heeled consumers. Here’s why I think so…
There’s been a lot of controversy over boutique medicine because people haven’t been disaggregating the services it covers. Retainer contracts cover preventive care, queue-jumping, and amenity-bundling. Most commendably, concierge physicians are aggressively counseling their patients on how to avoid getting ill. More questionably, they are trading enhanced access for cash—a clear example of queue-jumping relative to their previous business practices and the standard of primary care prevalent in the US. Most troublingly, they are bundling medical care with unrelated amenity services (such as lavish waiting rooms and comfort for the “worried well”) in order to avoid legal and regulatory bars on “balance billing” and multiple standards of care.
My take is: encourage the preventive care, and tax the “queue-jumping” and amenities. After my ventilator post, I can just hear the protests now—why tax health care?! If you care about access, subsidize it via other means!
I disagree because I think retainer care takes physicians out of the general pool and puts them at the disposal of a very small group of patrons. The supply of doctors is basically fixed by the Council on Graduate Medical Action and aggressive lobbying by the AMA to prevent more immigration of doctors to the U.S. (While I worry a lot about the former strategy of physician-income-maximization, I don’t oppose the latter policy—it’s very troubling how many LDCs are losing medical personnel to the “highest bidder.”)
As this article notes, “the top 10 percent of income earners now take in an extra $750 billion a year because of their increased share of national income.” I don’t mind if this group uses that cash to buy 90% of golf courses, Jaguars, or plover’s eggs. But I do care when doctors are brought off line just to specially serve a small class. The diversion of resources reminds me of the rise of cosmetic surgery, and I base some policy prescriptions on New Jersey’s recent tax of plastic surgery. I also see promise in Oklahoma’s approach to the rise of specialty hospitals (which only take on the most lucrative types of medical interventions, and leave ER and costly cases to public institutions).
March 15, 2006 at 9:16 pm
Posted in: Current Events, Economic Analysis of Law, Politics, Technology
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Responses (7)
Daniel J. Solove - March 16, 2006 at 12:12 am
I wonder to what extent your solution is just a bandaid for the symptoms of how sick our health care system is. Why not address the problems more directly? Isn’t the real problem that we don’t have national health insurance? And to the extent the problem is caused by too few doctors, then the policy solution is to increase the numbers.
The rich will always get better everything — this is perhaps as ineluctable as the law of gravity. We need to focus on enhancing the quality and affordability of health care for everybody else, and I don’t think that your system is the most effective way to do that. It would be one thing if your solution were politically feasible, but I doubt it is. Therefore, if we’re talking about ideal solutions, then perhaps we should go all the way and address the elephant in the room — we need some system of national health insurance.
Maryland Conservatarian - March 16, 2006 at 12:20 am
“But I do care when doctors are brought off line just to specially serve a small class. The diversion of resources reminds me of the rise of cosmetic surgery….”
How is this “diversion of resources” you worry will be specially serving a small class any different than the top graded students out of law schools going to work for 120k+ on Wall or K Street. (Salaries top med students never see after 4!! years of school)
Many of the problems you listed above (specialty hospitals, queue jumping and “diversion of scarce medical resources from a common risk pool to pockets of well-heeled consumers” have direct analogies to law practice in the US. (Public Defenders, Legal Aid etc.) Why don’t we worry about how our house looks before we start telling doctors how to keep their’s clean.
Frank - March 16, 2006 at 8:13 am
Two very good comments…I have a few thoughts.
First, to Dan: yes, I agree, national health insurance would be best. But I have the strong suspicion that in the current political climate, it would end up looking a lot like Medicare Part D, which is not making anyone happy. I just think that in the time between now and “single-payor,” we’re all obliged to think about creative “second-best” solutions.
My solution is not meant to “lop off the tall poppy”–i.e., to punish the wealthy just for being wealthy. Rather, it’s trying to solve a problem that participants in boutique medicine themselves are directly contributing to–to make it more expensive for them to divert doctors from the common pool.
Even conservative commentators like Newt Gingrich have been alarmed by this trend in the form of specialty hospitals…and that’s why a Republican congress and Republican president agreed to a moratorium on their construction in 2003 (which may have expired by now–I need to check that)…
As for Conservatarian’s comments–I put some figures on physician incomes in my paper. They are 2 to 3 times higher here than in many comparable European countries.
I’m not saying American doctors don’t deserve to make this much–perhaps they deserve even more. But in a world in which doctors themselves limit their supply, and taxpayers subsidize medical education to a great, great extent, we deserve some answers when the profession goes “boutique.” If taxpayers subsidized legal education to the extent they subsidize medical education, I’d put the same challenge to lawyers.
Maryland Conservatarian - March 16, 2006 at 1:24 pm
Painting with a very broad brush: Were we to wake tomorrow with no government, the medical profession would still have a market for its services but what would be the market for a law-school trained attorney that couldn’t be met by other well-educated people. My point: no other profession is so dependent on the existence of government and yet it is practioners of our profession that are leading the charge to regulate the how & how much of medicine seemingly in excess of the limits on our own profession.
While many of us may perceive certain current medical service trends and believe they represent poor public policy, the fact remains we did nothing to counteract them with our own actions: instead of three years of law school, we did not engage in 4 years of pre-med followed by 4 years at med school followed by a brutal 2-6 year residency (where you would probably start out making little more for a year than what many summer associates can make in a summer). In other words, we did not eschew a nice life on a law school campus or as a well-paid practioner so that we could then practice ER medicine in downtown Baltimore.
Our choices were not bad or immoral but they hardly put us in a position to second-guess what these other professionals are doing.
Doctors, like lawyers, limit supply only with the complicity of government. If we have a problem with the supply of doctors than taxing a certain segment of them will do little to encourage their overall increase. And if we’re already subsidizing medicine to a “great,great extent”(and you gotta believe the vast majority of taxpayers would still say better medical education than law)and we’re still not happy with the supply then either we’re not subsidizing enough or we’re not placing enough quid-pro-quos on the subsidies. Governments can even expand on a USUHS-like program or simply pay top dollar for practioners to provide needed services. Taxing, however, shouldn’t become our default cure-all.
Amy Tuteur, MD - March 16, 2006 at 4:33 pm
The rise of concierge medical practices is a direct result of the managed care revolution. A significant amount of healthcare dollars have been transferred from providers to administrators. The administrators have produced no improvement in the cost or delivery of healthcare.
In the meantime, doctors have been forced to see more patients in less time than ever before, in order to maintain an income level comensurate with their level of education. You can debate all you want about the appropriate income level for a physician, but the fact is that physicians are going to expect to make the same amount of money as their law school and business school educated peers. Anything else will simply cause the best physicians to leave the practice of medicine (which is already happening).
The managed care revolution encouraged doctors to behave like business people, and so they have. The obvious business solution for a doctor is to escape the bondage of self-enriching insurance companies and strike out on their own. At the same time, they can give their patients the time and attention that patients expect and deserve.
To claim that doctors not be allowed to open concierge practices is tantamount to saying that doctors much remain in thrall to insurance companies, institutions that do not have anyone’s health at heart.
If you want to obviate the need for concierge practices, restore doctor’s compensation for visits and procedures to previous levels (corrected for inflation). Both doctors and patients will be happier. The cost of healthcare won’t need to rise to compensate, because the money can be taken directly from the administrators who add no value and suck up cash.
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