How does the physician affect the cost of health care for insurance? 

Asked on by chrisns

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The main way in which the physician does this is through ordering the tests and procedures that can help to run up the cost of health care that must typically be paid by the insurance companies.

To some degree, physicians affect the costs through the salaries they are able to command.  American physicians are paid relatively more than those in other countries, though this may be due at least in part to factors such as the higher cost of medical schooling in the US.  But, in terms of the cost to the insurance company, the actual salary of the physician is not as important as the procedures that are ordered.

In our system, insurance companies pay fees for services rendered.  They do not typically ask if the service was necessary.  They leave that to the discretion of the doctor.  Therefore, there is an incentive for doctors to order more procedures because patients then feel that they are getting better care.  There is essentially no disincentive against this.



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