/ Modified mar 23, 2012 6:11 p.m.

AZ Week: Health Care Costs Unsustainable

Return to free market, economist says; fix Medicare, Medicaid, others say

The federal Affordable Care Act is not the panacea for health care reform that some say it is, although it has some positives, say several industry professionals. But an economist says it continues the current flawed system.

With the U.S. Supreme Court scheduled to hold hearings Monday, Tuesday and Wednesday on challenges to the law, Arizona Week looked at health care issues from economic and provider points of view for Friday's program.

The result was a diversity of thoughts, with agreement on the singular issue that the law doesn't solve the nation's problems, especially when it comes to health care costs.

"Let's keep in mind that health care is pretty expensive, partly because of the insurance model," said economist Byron Schlomach, director of the Center for Economic Prosperity at the Goldwater Institute in Phoenix.

Schlomach argued for doing away with the third-party payer model, which he said isn't true health insurance but rather a prepaid system that helps drive costs.

The Affordable Care Act continues that model, he said.

He likened the system to the idea of a benefactor agreeing to pay for everyone's meals at a high-end restaurant. Because price isn't a factor, everyone orders the most expensive meal, and the restaurant pushes the meals that get it the highest profit margins, Schlomach said. That, he said, is what happens under the current health care insurance model.

"There's no incentive ... for patients to do anything to control costs, and consequently, no incentive for the caregiver to control costs," he said. Everyone pays for that, but it is so indirect -- through employers and state and federal programs -- that the immediate impact is not felt.

Robert P. Goldfarb, a neurosurgeon and chairman of the Carondelet Neurological Institute in Tucson, said the high costs in the system are especially hurting physicians.

Those costs are not being covered by Medicare payments, something Congress knows but doesn't fix, he said. The problems are exacerbated as more people become eligible for Medicare, he said.

"When the Congress in its wise decisions about the ... act, forgot about who's going to take care of these patients. They seem to forget about the physicians, and they forgot about the hospitals," Goldfarb said. "We have a number of problems as you add more and more people to the roles. You obviously have to have physicians to take care of these patients."

The costs are helping drive an acute shortage of physicians, especially primary care physicians, that will only get worse over time, Goldfarb said.

James E. Dalen, a cardiologist who is dean emeritus of the University of Arizona College of Medicine, agreed.

"We need more primary care physicians," Dalen said. "That's an economic issue. We pay specialists more than we pay primary care physicians. ... One possibility is to pay primary care physicians more for having what we call a medical home, where they coordinate care. They can save millions of dollars for Medicare by coordinating care."

Dalen said that while economics play a part, some of the physician shortage is because medical schools have not produced enough physicians.

"For many, many years we didn't increase the number of M.D. graduates in medical schools, in fact for 20 years, because we had several studies saying there would be a surplus," he said. "All those studies were wrong. In the past few years, we've expanded the class size, we have a branch in Phoenix and many other schools are expanding. But it's going to take a while to catch up."

The new law, if it remains in effect, could drive the need for physicians even higher, suggested Nancy Johnson, a registered nurse and chief operating officer of El Rio Community Health Center in Tucson.

"They're estimating nationally another 16 million added to the Medicaid rosters," Johnson said. "So primary care and physician shortages are really a legitimate concern for everyone in the community."

That could affect El Rio, which serves nearly 75,000 patients a year at 17 clinics. A majority of those patients are Medicaid eligible.

Reporter Michael Chihak further explores health care issues on Arizona Week. Watch it here.

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