By Victor Morawski
Scarcely does a week roll by without a human interest story appearing somewhere in the news about a child with an unusual and rare ailment being flown to the United States to see a medical specialist. Often the story features a prominent person or even a government official of his or her particular homeland making a medical pilgrimage here to take advantage of medical expertise that can be found nowhere else.
Our free market health care system furnishes an environment within which medical specialists can flourish. It rewards their unique and rare levels of skill and expertise handsomely via the law of supply and demand. As these sorts of highly qualified specialists are in short supply relative to the demand for their services, those services when performed reap high monetary rewards.
Unfortunately, not everyone esteems these specialized services. And, hence, they have come up with other ways of setting the value of a medical service or procedure besides those of the free market.
Medicare (and Medicaid) has for years used such an alternative method and, shocking though it may be to some, critics charge that this method is nothing more than a revival of the old “Labor Theory of Value” championed most notably by Karl Marx. In fact, a Harvard team in the 1980s set out to study and discern the “value” of a physician’s “work” and subsequently created a fee schedule based on this theory, which has governed Medicare payments to physicians since January 1, 1992.
Quite simply, the centralized planners of Medicare — as Robert Emmet Moffit puts it in his insightful Heritage Foundation study “Back to the Future” — wished to use Medicare not only to provide health services to the elderly, but also as “a powerful engine of income redistribution and social justice among American physicians.”
They developed their “relative value scale” as a means of leveling the compensation playing field between what they deemed to be overvalued and overpriced surgeons and other specialists and allegedly undervalued and underpriced general and family practitioners.
A prime feature of the Labor Theory of Value is that it values a product or service according to the amount of labor that went into it, independent of market forces. Accordingly, Medicare and Medicaid’s relative value scale pays for a procedure based on how hard it is—i.e., based on the amount of labor that went into it—not based on the level of skill and knowledge needed to perform it.
So less highly skilled procedures performed by primary care physicians or general practitioners, if deemed to require the same amount of work as more intricate services that can only be competently performed by highly skilled specialists, will—in theory—be rewarded with equivalent compensation by the relative value scale. Note how this decidedly goes against trends in the free market which value rarer, more highly skilled work by specialists over the simple hard work of family physicians.
What is the relevance of this for current health care “reform” legislation? In an early white paper giving the essentials of what became the Senate health care bill; its architects remarked that they spent much time focusing on Medicare “because of its unique ability to lead the way for system-wide changes.” Their conclusion: “Increasing the supply of primary care practitioners and redefining their role in the health system — by using Federal reimbursement systems and other means to improve the value placed on their work — is a necessary step toward meaningful reform.”
Given that proposals in the Senate version of the bill are likely to be given preference in any final compromise version of the legislation, it is wise that we take this claim to heart as showing the direction in which the Democrats would like the health care system in the coming years. It is a direction that does not bode well for medical specialists – nor for their patients, few of whom, one assumes will travel from afar to seek highly specialized treatment from government-spawned general practitioners.
Victor Morawski, professor at Coppin State University, is a Liberty Features Syndicated writer for Americans for Limited Government.
