Dealing with Medical Shortages in the Future:
Two Potentially Helpful Policy Changes
Two Potentially Helpful Policy Changes
Medicare and Medicaid and similar universal health-care programmes will NOT help us deal with the expected medical shortages of the future that are certain to mushroom as baby boomers age and face increasing health problems. In fact all that those programmes, all that similar health programmes in Canada or the UK or elsewhere, and all that increased private insurance programmes will do... no surprise here... is increase the demand for health care.
But what is being done to increase the supply? After all, the supply side of the market plays a major (if not THE major) role in determining how much medical care is available. Sure, it is possible to build more hospitals and more medical clinics. Sure, it is possible to fob off a bunch of medical care onto para-physicians (nurse practitioners or "sisters" as they are referred to in the UK [query: what are male sisters called?]). Sure it is possible to implement some capital-labour substitution. So the supply curve of medical services is not perfectly inelastic. But that supply curve is probably pretty steep.
And if the supply curve is pretty steep, then increasing the demand will not induce much of an increase in the quantity supplied.... especially if the increased demand is not transmitted into higher prices and wages/salaries for physicians working in administered-price, regulated markets.
Worse, as my present colleague Brian Ferguson has been arguing for decades, the supply curve of physicians has been artificially kept way too far to the left. Medical schools have not been allowed to admit as many promising students as they would like, and so there just aren't enough doctors to provide all the services that people would like to buy today at the low (often zero) gubmnt-set prices. And it will get even worse in the future.
One part of the solution: let/encourage medical schools increase enrolments even more than they have in recent years. If they start doing this now, maybe the shortages of physicians will have diminished substantially within a decade or so.
Of course this plan will create additional shortages in the short-run as medskools fight to attract more physicians out of private practice and into teaching careers. That's an inter-generational transfer I'm willing to make even though it could easily affect Ms. Eclectic and me detrimentally.
Another part of the solution: make it illegal for companies of any sort to provide health insurance without at least a 10% co-payment for the first $1000 of services. My suspicion is that many of the demands on physicians' time would fall dramatically if people had to make even a 10% co-payment. I have no studies to cite here, but I guess I'm saying the price elasticity of demand is pretty high for many of the services sought by many patients in this zero-price and near-zero-price portion of the demand curve.
These are just two possibilities; the first one even has some political feasibility. When I look at all the MRI and other clinics in the US and the contrived shortages in Canada, though, I'm convinced that allowing/encouraging more private competition and entry into the markets will also have to be a part of the solution for Canada. Failing that, using our health care system to pay for trips to the US might be a stopgap measure for Canadians, but of course it will only increase the demand in the US.
But what is being done to increase the supply? After all, the supply side of the market plays a major (if not THE major) role in determining how much medical care is available. Sure, it is possible to build more hospitals and more medical clinics. Sure, it is possible to fob off a bunch of medical care onto para-physicians (nurse practitioners or "sisters" as they are referred to in the UK [query: what are male sisters called?]). Sure it is possible to implement some capital-labour substitution. So the supply curve of medical services is not perfectly inelastic. But that supply curve is probably pretty steep.
And if the supply curve is pretty steep, then increasing the demand will not induce much of an increase in the quantity supplied.... especially if the increased demand is not transmitted into higher prices and wages/salaries for physicians working in administered-price, regulated markets.
Worse, as my present colleague Brian Ferguson has been arguing for decades, the supply curve of physicians has been artificially kept way too far to the left. Medical schools have not been allowed to admit as many promising students as they would like, and so there just aren't enough doctors to provide all the services that people would like to buy today at the low (often zero) gubmnt-set prices. And it will get even worse in the future.
One part of the solution: let/encourage medical schools increase enrolments even more than they have in recent years. If they start doing this now, maybe the shortages of physicians will have diminished substantially within a decade or so.
Of course this plan will create additional shortages in the short-run as medskools fight to attract more physicians out of private practice and into teaching careers. That's an inter-generational transfer I'm willing to make even though it could easily affect Ms. Eclectic and me detrimentally.
Another part of the solution: make it illegal for companies of any sort to provide health insurance without at least a 10% co-payment for the first $1000 of services. My suspicion is that many of the demands on physicians' time would fall dramatically if people had to make even a 10% co-payment. I have no studies to cite here, but I guess I'm saying the price elasticity of demand is pretty high for many of the services sought by many patients in this zero-price and near-zero-price portion of the demand curve.
These are just two possibilities; the first one even has some political feasibility. When I look at all the MRI and other clinics in the US and the contrived shortages in Canada, though, I'm convinced that allowing/encouraging more private competition and entry into the markets will also have to be a part of the solution for Canada. Failing that, using our health care system to pay for trips to the US might be a stopgap measure for Canadians, but of course it will only increase the demand in the US.
Category: Economics, Health and Medicine Posted on
Friday, January 11, 2008 at 12:35am
<< main
A good example of this is Canada's comparative lack of medical imaging technology, such as MRIs, which have revolutionized the ability of doctors to diagnose and monitor the progression of many serious conditions throughout treatment. The net effect of this kind of underinvestment is to create bottlenecks that create queues, or rather, that delay effective treatment. And I should note, this underinvestment is not limited to medical imaging technology.
The best evidence for this underinvestment in health care capital is that Canada today has approximately the same proportion of both general practitioners and specialists with respect to its population as it did fifteen years ago. But, the time to go from general practitioner to specialist for treatment in Canada has increased dramatically, as has the waiting list. While an aging population requiring more medical care accounts for a small portion of this result, I suspect the much greater portion is due to health care capital resources being tied up treating other patients ahead of others in the queue.
The way to measure this effect is to look at the utilization rates for such things as MRIs (to keep with the same example.) Very high rates of utilization would be a sign that these facilities are in very short supply.
Part of the problem here is that Canada's nationalized health care system effectively hides the cost of patients waiting for treatment. Unlike inventory moving through a production process in a factory, there's no cost to the government associated with holding the inventory in an unfinished state. Most patients waiting for treatment store themselves in their own houses, instead of hospitals, for example! And even continue working, in many cases, although one suspects at a less productive pace.
There is, of course, a price to be paid for hiding that cost. In a manufacturing plant, a delay in producing an item means there is a delay in being able to receive revenue for having produced it, and in the case of a significant backlog, the risk of losing potential revenue altogether.
Here, that would manifest itself in lower health-care component of GDP than it would otherwise, as Canada's health care system is not meeting its potential.
I like the co-pay idea for addressing the surplus "trivial" demand issue, which could be partially addressed by entrepreneurial effort in the general market, kind of like Wal-Mart's foray into basic clinic services in the U.S. I would also argue that health care administrators should be "taxed" for the queues in the system to better communicate the hidden cost of Canada's patient "inventory."