Wednesday, October 28, 2009

Taxpayers Ultimately Shortchanged By Cost Cuts

The move by the government to reduce the Medicare rebate for cataract surgery has resulted in a stand off in the senate, with opposition and independent senators moving to disallow the bill. While it is their intention to prevent the rebate form being reduced, it seems that such a motion could actually result in the existing rebate being disallowed altogether. Regardless of the outcome of that particular dilemma, the question remains why should the rebate be reduced at all? The government claims that advances in medical technology mean that the procedure should now be cheaper, but the Australian Medical Association says that the government doesn’t understand the cost structure involved.

Of course the government has a responsibility to spend taxpayers’ money wisely and it is wrong to pay too much for services. But it is also important not to pay too little. Just ask anybody who has tried to save money on servicing their car only to have to pay more when the engine seizes up. I can’t help but wonder if the real motivation is just good old fashioned cost cutting. After all, the government is now confronted with the task of dealing with an unprecedented deficit in the wake of the Global Financial Crisis. As a result, the government will be looking for expenditure cuts anywhere it can and we are going to see a lot of that in the next couple of years. I suspect that this is not just about cataracts, but about the government’s overall efficiency drive, and that’s why the wisdom should be questioned.

It’s all very well to be cutting costs to save money, but in the end you tend to get what you pay for. The trouble is that the bottom line thinking which has been a feature of the prevailing business philosophy of the past decade or so has infected both corporate culture and government policy. It is the philosophy which seeks to achieve profit by removing all unnecessary expense, leaving no margin for error, no capacity for contingency, and no reward for employees who do the actual work. Quality and customer service, along with employees, are seen as an expense rather than an investment. The irony is that when taken to extremes this approach will cripple any enterprise and sometimes even destroy it. In the corporate world, that means that the cowboys at the top walk away with their multi million dollar payouts without a care for the carnage they have left behind, because they have got what they were after, which is maximum profits for themselves. When the same philosophy is applied to government, the result is that taxpayers are actually denied the services they have paid for. Ironically, cutting costs in this way doesn’t really save money for taxpayers at all. Instead, it shortchanges them.

In the case of the Medicare rebate for cataract surgery, there has been criticism leveled at doctors seeking to retain high incomes for themselves at the expense of consumers. I believe that the criticism is misdirected. I believe that there is nothing wrong with ophthalmologists receiving high incomes. They are highly skilled, highly trained, highly talented people who deliver a highly specialized service which is of great value. It is not only right to pay them well for that service, it is essential that the value of what they do is properly recognized. That is the basis of our market based economy, as well as the foundation of our society, that a person’s contribution to society should be appropriately rewarded. On that basis, it is vastly more appropriate that an ophthalmologist earn four or five hundred thousand dollars a year than it is for the corporate cowboys to be paid ten or fifteen million dollars a year, and even more in termination payments to get rid of them when they screw up.

In contrast, money paid to surgeons who save people’s eyesight, or who save people’s lives, is worth every cent.

No comments: