US's For-Profit Medical Care and Obama-Care Are Antithetical

Cross-posted at Now Public .

First posted as a more limited discussion
at the Francis L. Holland blog.

[Update:] Someone at an Obama health care forum asked the President "where the nation would find the additional doctors and nurses it needs," which is a supply and demand problem that has hardly been discussed at all in recent debates.

For-profit health care is simple: you can only get health care if you can find providers who can make more money providing health care to you than they could earn providing health care to somebody else. It's like a car auction: the auctioneer publicizes the auction and then sells the cars to the highest bidders.

With US for-profit health care, the rules that control the auction are written by the sellers while the buyers have input on . . . virtually nothing at all. It's like a mall at Christmas time. Pay up or leave the goods on the shelf. Except that the demand for health care never decreases after-Christmas, there are no after-Christmas sales. The demand is constant and the price just keeps going up.

The United States spends a lot on medical care, but that’s directly related to the low number of doctors we have per capita, compared to many other countries. According to the Organization for Economic Cooperation and Development,

The United States also ranks far ahead of other OECD countries in terms of total health spending per capita, with spending of 5,635 USD (adjusted for purchasing power parity), more than twice the OECD average of 2,307 USD in 2003. Switzerland and Norway come just after with spending of about 3,800 USD per capita. Differences in health spending across countries may reflect differences in price, volume and quality of medical goods and services consumed.

( . . . )

Despite the relatively high level of health expenditure in the United States, there are fewer physicians per capita than in most other OECD countries. In 2002, the United States had 2.3 practising physicians per 1,000 population, below the OECD average of 2.9. http://www.oecd.org/dataoecd/15/23/34970246.pdf

It stands to reason, based simply on the laws of supply and demand, that in a market-based medical system that hás fewer doctors than other systems that are not market-based, US doctors and medical institutions will increase their prices, have no incentive to curb profitable waste, and there will be little or no competition in the market to keep prices in check.

In 2008, 18,000 new students matriculated at US medical schools, compared to 17,000 in 2005 and 16,600 in 2004.Table 1. U.S. Medical School Applications and Matriculants by School, State of Legal Residence, and Sex, 2004 The number of enrollees increased by about 1,500 (9%) over a four year period, or an average of 3% per year.

While that may seem reassuring in terms of the ration of doctors to patients, nonetheless the elder population in United States is aging and will need more consistently more medical care.

The increase in median age from 32.9 years in 1990 to 35.3 in 2000 reflects a 4-percent drop in the number of persons between 18 to 34 years old combined with a 28-percent increase in the population between 35 to 64 years of age. http://usgovinfo.about.com/library/weekly/aa051801a.htm

So, the demand will continue to increase, but medical schools are not increasing their enrollees sufficiently to meet the increased demand. (Why would they when their exalted role and compensation in our society are based partly on the scarcity of doctors?) If the laws of supply and demand operate as expected in a market based system, the cost of medical care will continue to increase and the cost of Government expansion of access to medical care will increase Government expenditures more still.

To curb this cycle, the US Government should encourage medical schools to enroll more future doctors, through, e.g. by providing more research funding and other support to schools that are educating more future doctors.

Unfortunately, the plans in the US Congress seem to do little or nothing to address this problem of lack doctor supply and stampeding patient demand. Therefore, the cost of health care will continue to rise, and the rise of universal health care will make supply scarcer still, spreading what few doctors we have among 15% more patients (those now uninsured).

If it takes us six weeks to get an appointment with a dentist or psychiatrist now, imagne how long will take with 15% more patients in the market.

This is not to say that we shouldn't implement national health care. Rather, the point is that far more fundamental changes to US health care culture will be needed to make even the present level of care sustainable, much less increasing the number of patients.

Medical schools can no longer make doctors rare in order to increase the prestige and lucre involved in practicing medicine. We need to encourage doctors to enter the field when they do so to provide care in exchange for a salary, and we need to encourage venal medical entrepreneurs to go to business school instead.

Medical schools need to graduate more doctors. The obvious market-based solution to high prices for services is to increase the number of professionals providing those services so that competition will drive the prices down. So far, in spite of statistics showing that we have less doctors per capitã than many other nations, I have not heard a single source suggest that we simply need more doctors.

Meanwhile, competition among insurance companies (which are monopolistic, with no end in sight) will not change the fact that fewer doctors means longer waits and higher fee for services prices. In all likelihood, doctors will offer shorter waiting lines to those who pay in cash, and even those with “good” insurance will find waiting times greater and greater, if there is someone will to pay the doctor more in cash than the insurance company will pay.

An alternative would be for the Federal Government to underwrite the medical educations of future doctors who want to work on a salaried basis, creating and expanded Public Health Service which already operates on this basis.

The Government could further assume the hundreds of thousands of dollars of educational loans that many doctors are in exchange for doctors working on a salaried basis for government-sponsored medical facilities. (I personally know doctors who hate having to ration services and medications based on patients’ ability to pay. Many physicians would much prefer to be salaried than to be medical entrepreneurs.)

In exchange for these doctors working on a salaried basis, the Government should provide free malpractice insurance for these doctors and patients should be compensated not with huge awards but rather with a legal right to medical care that corrects mistakes, as well as income and replacement, just as we now have under the Worker’s compensation scheme that limits lawsuits against employers in exchange for income during times of illness and medical care even when workers are too sick or disabled to be covered by employment-based medical insurance.

Here's another observation: Unless medical care is a right for all, then even those with excellent medical insurance will have to wait in line behind others while nurses dicker with insurance companies over the cost-effectiveness (for the insurance company) of the care that patients need. I even one person is in line having that experience EVERYONE in line has to wait while that question is resolved.

I’m afraid that without fundamental changes such as these, the current plans are bound to succeed only in demonstrating that fundament changes are really the only practicable solutions.