^{Posted on March 26, 2002}

The Rise of For Profit Medicine

By Uwe E. Reinhardt

FROM THE perspective of someone whose social ethic was forged first in Europe and then in Canada, the current brouhaha over ''boutique medicine'' in the United States is amusing.

The critics of boutique medicine deem it un-American to let the individual's health care experience vary by ability to pay. Yet it seems only natural in a country that countenances boutique education and the enduring tradition of rationing by income the health care of some 7 million uninsured children and 12 million elderly Medicare beneficiaries without coverage for prescription drugs.

The boutique physicians protest that they merely seek to restore the overall quality of health care to the allegedly high level it had before the onset of managed care - which is in itself a hypothesis, not a fact. If they sincerely believe in their theory, they must be arithmetically challenged.

There are, in the Boston area, only so many physicians and so many patients. Suppose half of those physicians switched to boutique medicine and reduced their patient loads to spend more time with patients who can afford their fees. Former patients now price-rationed out of these physicians' practices would then either have to go without care or be loaded onto the 50 percent of physicians not yet engaged in boutique medicine.

Either way, the quality of these patients' health care would deteriorate. In effect, boutique physicians do not enhance the overall quality of care. Wittingly or not, they merely redistribute superior quality toward patients thought to deserve it, because they can and will pay for it.

Boutique physicians are perfectly in keeping with certain sacred tenets of normative economic theory. For decades economics professors have drummed into students the ''marginal productivity theory of income,'' according to which a person's position in our nation's income distribution largely reflects that person's marginal contribution to society. From that theory it is but a small step to the ethical doctrine that wealthy persons ''deserve'' better housing, education, justice, and, yes, health care than do persons of lesser means. It is their reward for their superior social contribution.

This doctrine extends even to a person's financial wealth, whether inherited or however else begotten. To illustrate, if a person possesses $100 million and invests it in the economy, his or her marginal social contribution is said by economists to exceed by many multiples that of, say, a soldier in the 101st US Airborne Division fighting for America in the mountains of Afghanistan or of a firefighter standing ready daily to risk his or her life for fellow citizens. It is so, say economists, because the marginal social contribution made by the millionaire's capital is judged by ''the American people'' (i.e., the market) to be far above the soldier's or firefighter's, whose modest salaries represent the valuations put upon their marginal contributions to society. Consequently, according to economic doctrine, the financier's family deserves higher quality of the basic things in life.

Nobel Laureate economist Milton Friedman has articulated the implication of this doctrine for health care more clearly than anyone else. During the health reform debate of the 1990s, Friedman proposed the complete abolition of the federal Medicare program for the elderly and the state-federal Medicaid program for the poor. A better approach, in his view, would be for families to have only catastrophic health insurance, with an up-front, out-of-pocket deductible of $20,000 per year or 30 percent of the family's income during the last two years, whichever is lower. At the time of his writing, the median pretax family income in the United States was $35,000, which means that he had in mind a $10,500 deductible for such a family.

Friedman's vision for American health care has made substantial inroads into the medical profession - perhaps even to Boston's boutique physicians. For example, when I questioned in the Journal of the American Medical Association whether, as a matter of national policy, children of low-income families in this country should be offered the same health care experience as that enjoyed by children of well-to-do parents, this was decried as ''socialism'' by a good number of irate physicians. Physicians inclined to answer my question in the affirmative remained silent. Friedman's disciple, Richard A. Epstein, distinguished law professor of the University of Chicago, answered my question with a crisp ''No!'' and went so far as to call the very idea of equality ''perverse.''

Recent health insurance reforms embraced by the American Medical Association are in line with Friedman's vision for health care, as are many of the novel health insurance products now on the drawing boards of the private health insurance sector. Boutique medicine is merely a natural and rather innocent expression of that ethic.

Some folks in Boston may as yet feel uncomfortable with that approach to medicine. Their children and grandchildren will view it as American as apple pie - as we now do boutique education.

Uwe E. Reinhardt is a professor of economics and public affairs at Princeton University.

http://www.boston.com/dailyglobe2/085/oped/The_rise_of_for_profit_medicineP.shtml� -- Boston Globe Online