Does a Subsidy Impact a Desire to Change?

Is a system that largely depends on a third party payor, read Medicare, a subsidized model?

Investopedia explains a subsidy here.  The definition is:

A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.

Politics play an important part in subsidization. In general, the left is more in favor of having subsidized industries, while the right feels that industry should stand on its own without public funds.

Does cataract surgery fall under this category?  How should we think about a system where a person must utilize a service from a provider who has agreed to provide that service at a certain price, given a specific set of criteria for the components of the procedure with no specific outcome required?

That’s not meant as an incendiary question by any means.  We have a good system, it works well and, for the most part, provider and beneficiary are both pleased with how it functions.  Where the question arises for me is when the lens of a free market is applied?

Economists have demonstrated in myriad models and explanations that free markets work for many reasons.   So let’s just leave that out there as an identity.  My question more stems from a conversation that I had with an ophthalmologist who was listening to right-leaning talk radio in his OR and, after the case was over, began talking  about free markets and government subsidies.  He finished his rant with, “everyone should have to go out and make it on their own like we do in ophthalmology, then they’ll see how hard it is to grow a business.”

I wholeheartedly agree with him that growing a business is tough work.  What I asked him was how he thought about the fact that around 80% of cataract surgeries performed in the United States are reimbursed by Medicare at a pre-determined price?  I’m not an Economist, but to me that seems like a pretty solid price floor on the model set by the government.  “Where does this diverge from a say, a crop subsidy,” I asked?

He thought that it was an interesting question but didn’t feel the need to explore it any further.  For some reason, I have thought about it.  More and more as of late, in fact.

I wonder if a model like we have does not diminish the providers desire to change?  Why would they, they don’t get paid any more and their outcomes are still good?  This is what I hear all of the time regarding femto-assisted cataract surgery.  “I do a great capsulotomy and the laser has not been shown to be any better.”

Perhaps.  What if people want it, though?  Demand is a central tenet of a free market.  In a subsidized market, there is no incentive to break from the crowd because you’re protected by the subsidy.

And if, by chance, you are satisfied with what the current system is delivering to you to support whatever means you have chosen, there really is no incentive to change.  I am not suggesting that the Medicare system is bad or broken.  What I do believe, though is that it has created a market that is by no means “free.”

Wading into the topic of consumer products as it relates to cataract surgery even makes how one thinks about this market even more complex.   Thinking about the non-covered service of presbyopia correction is a prime example.  Many Ophthalmologists would like the manufacturers to advertise to consumers about the benefits of upgraded cataract surgery so that they come to them armed with the notion that they have choices.  This is a wonderful idea, in theory.

The concept falls apart because the goal of consumer advertising is to generate some sort of action coupled with awareness and our system places a provider in the middle of the transaction who may not be on the same page.   After all, presbyopia correcting procedures are performed on less than 10% of the market.

A good marketeer, with sufficient capital, can fairly easily accomplish this goal of action and awareness.  But what happens is that one of these people may arrive at an ophthalmologists’ office who is happy with the current, subsidized payment offered by the government and convinces that patient to accept the “standard offering?”   In fact, many surgeons see this as a benefit because they want to do as many of these standard cases as fast as possible.  They have systems in place to efficiently deliver these procedures and any change to this may cause inefficiencies somewhere else in their model.

What happens is a conversation that goes something like this:

Patient:  “Do you offer that new laser cataract surgery?”

MD’s staff who doesn’t do laser cataract surgery or offer upgraded IOL technology:  “No, our doctor has done thousands of cataract procedures, gets great results and doesn’t want to charge you extra for using a laser.”

Patient:  “Oh, okay.  What about wearing glasses after surgery, I hear there may be some options there, too.”

Staff:  “There are some options out there, but our surgeon believes that the technology for IOLs to do that is not quite there yet and what we use will get you excellent distance vision.  You’ll need to wear glasses for up-close things like reading.  Plus, you won’t have to pay extra.”

The above conversation is a gross simplification, but it’s not hard to see where the investment in consumer advertising for cataract surgery loses a bit of its’ luster and why ATIOLs have not succeeded as predicted.   And our system that is stressed by an increasing supply of patients with a decreasing supply of providers encourages a line of thinking like what is reflected in the conversation above.  Sometimes out of necessity, one just needs to do what must be done to get through what can be a very long day for doctors.  As long as the system is set-up this way, things will remain largely the same as they are today.

There are those who innovate and capture the opportunity that is present in the market and I have written about this in previous posts.   I guess what it comes down to is that practices must change to adapt to the retail component of ophthalmology if they want to release the shackles of a third party payor.

I still believe that patient shared billing is one of the greatest and most forward thinking things that I have seen our government do.  While our market may have a price floor subsidy in the form of standard cataract surgery, the gift of improved vision is priceless.  What I wonder, is at what point will the decline in this subsidy cause the provider to say, “enough?”  This is why I applaud and admire those who have seized the opportunity to break away from the pack by enacting significant change within both their practices and thinking to influence their own destiny.

 

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