Leonhardt seconds Gawande: put doctors on salary

David Leonhardt has joined Atul Gawande in pointing toward what should be the central front in the war on health care costs:

put doctors on salary.

Leonhardt prices four ways of treating prostate cancer: watchful waiting ("a few thousand dollars"), prostate removal ($23,000), I.M.R.T. radiation ($50,000), and the latest, proton radiation (often over $100,000).

Which one works best? “No therapy has been shown superior to another,” an analysis by the RAND Corporation found. Which treatments are growing fastest? "Use of I.M.R.T. rose tenfold from 2002 to 2006, according to unpublished RAND data." Proton radiation is newer, but treatment centers, which require "a proton accelerator that can be as big as a football field," are springing up left and right.

Why do the most expensive treatments always gain traction, whether or not there's any evidence that they're effective, or more effective than cheaper treatments? Insurers -- all insurers, including Medicare -- pay per procedure. At the center of the skewed incentive system, as Gawande showed, are doctors -- who are not only paid by the procedure, but in too many cases own all or part of the treatment facilities such as medical imaging centers.

OMB Director Peter Orzag, in his drive to shape health care reform, has tried on a couple of mantras since taking office. The first was "healthcare reform is entitlement reform" -- because problems with the social security trust fund are miniscule compared with the problem of runaway health care costs. Another was "the Mayos, not the McAllens" -- framing Gawande's contrast of a county where the doctors have "gone entrepreneurial" with the Mayo Clinic, where doctors are on salary. And when ticking off the administration's proposed reforms, Orzag generally tucks in "changes in provider incentives."

The nub of incentive reform is pretty simple: put doctors on salary. Good salaries. High salaries. Sweeten the pill with tort reform, reducing the defensive medicine imperative. But remove the incentive for prescribing the most expensive care.