How do HMO’s work?  Physicians are paid a “capitated rate.”  That means that for every patient (capitated means “head”) the physician receives a set amount of money….regardless of the care rendered to the patient.  Typically at the end of the year, the extent to which the physician has been successful in limiting the patient’s health costs results in a bonus…to the physician that denied them care!  The patient typically has no “out of pocket” expense.  What sort of incentives are produced by a system like this?  If you said,” the patient is likely to seek the physician regularly because it doesn’t cost them anything,” go to the head of the class!  If you said,”the physician doesn’t want to see any patients because he has already been paid for seeing them whether he sees them or not,”  you too, go to the head of the class.  So the patients can’t get an appointment and the physician’s waiting room is empty!!  Who wins?  The insurance company or employer that offers this “insurance product” wins because no one gets any care and costs are minimal!

Several different versions of this abomination have been tried.  Sometimes it is just called something else.  The lesson is that if your physician is paid the same whether they see you or not you are going to have a more difficult time getting in to see them (and if you do, good luck getting them to give a flip about your condition).  It is interesting that this type of medical economic system was invented in fascist Germany in the 1930′s.  One new twist on this is the physician hospital employee.  A colleague of mine told me last week that he had difficulty at a local hospital getting a pulmonologist (lung doctor) to see one of his patients because….you guessed it!…he and all of the other lung doctors had recently become salaried employees and are paid the same regardless of whether they see 1 or 100 patients a day.  What a great way to eliminate customer service.

Can you imagine how motivated a restaurant would be to serve you if they were paid the same regardless of the number of patrons entering their establishment?  Or the plumber or electrician that is paid the same regardless of how much work he does? What insanity!  What is it that leads people to believe that the same market forces that shape our behavior and discipline everyone involved in commerce don’t apply to medical service?

True competition and the free market will lower costs and lead to an improvement in the quality of medical care for everyone just as these concepts and market forces have for every other economic aspect of our lives.

G. Keith Smith, M.D.