There is actually an economic theory that says that as productivity reduces the costs of producing most goods and services like consumer electronics, food production, clothing and so on, the costs of services that depend upon large amounts of labor like healthcare and education would go up proportionately - otherwise you would have economic deflation.
The problem for the government is that it doesn't buy much in the way of clothing or consumer electronics, but it buys a lot of healthcare and education.
On a side note, what do you think about healthcare systems like Kaiser Permanente where everyone is salaried rather than fee-for-service?
To answer your question on Kaiser Permanente.
Its still fee for service. the only difference is that now Kaiser gets the money instead of the physicians.
There really is no way to get away from fee for service. Oh there are all schemes like DRG's .. Prospective payment systems, and bundled payments. but the reality is that in some fashion it still boils down to getting paid to provide a service. It all boils down to utilization.. and eventually it boils down to costs (utilization) which sets what we get paid.
So.. whether the way to make more money is to provide more utilization of services (more labs etc).. or make more money by increasing your costs (and thus reimbursement) through more buildings and equipment and thus getting more reimbursement when you see patients.. utilization is always factor.
Now.. on to Kaiser Permanente and hiring physicians.
In the big picture.. it ends up costing people more. The reason that places like Kaiser can hire physicians is because physician per patient reimbursement has declined and keeps declining. While billing costs etc keep rising.
To some degree.. especially with specialists.. more independent offices increase costs because of inefficiency.
So Kaiser does gain in efficiency when they hire a bunch of docs.. many docs working under one building. with one billing office etc.. means more efficiency and they can pass that savings on to the insurance company and accept a lower reimbursement per procedure rate.
BUT.... also now Kaiser owns the referral source. So utilization can go up. Now Kaiser is paying these docs and monitoring their productivity. So they see more patients than before.. and because they spend less time.. they are more apt to order more tests.. Not to mention Kaiser is assessing their productivity.. how many labs per patient they order, how many therapy visists. x rays, MRI.. prescriptions... and all those orders/referrals are for things in house with Kaiser.
So Kaiser makes its money on the back end with more tests ordered. more MRI's, X rays etc.
