The dangers of "Healthcare Reform"
In our attempts to "bend the cost curve" we need to be very, very cautious.
In our goal of expanding coverage to cover the 47 million uninsured in the US, we are creating a spike in demand for medical services of about 20% (47 million new consumers in a market currently of about 250 million currently insured).
We don't have 20% more doctors, hospitals, nurses, beds, pills, stethescopes, etc, etc sitting around in a bunker somewhere to account for that additional demand. In a free market, that additional demand would cause the fees for medical services to go up, which would incent more people to going into the medical profession until our supply balanced out to meet our demands.
But, at the same time we are looking to increase our consumption, we talk of "bending the cost curve" to reduce the rate of growth in our medical expenses. A part of this is to slow the rate of growth in Medicaid and Medicare reimbursements, which serve as a baseline for what insurance companies pay out to doctors.
So we are coupling an artificial 20% increase in consumers in the healthcare market with a decrease in the future earnings that would drive new doctors to enter the market and current doctors to stay there. That's creating a shortage that will have to be addressed somehow.
Does anyone know how those crossed up incentives are being addressed? Doctors can and will leave the market if they are pressed financially, (http://money.cnn.com/2009/09/14/news/economy/health_care_doctors_qu...), and I don't think we want to exacerbate our shortage of doctors here.
In our goal of expanding coverage to cover the 47 million uninsured in the US, we are creating a spike in demand for medical services of about 20% (47 million new consumers in a market currently of about 250 million currently insured).
We don't have 20% more doctors, hospitals, nurses, beds, pills, stethescopes, etc, etc sitting around in a bunker somewhere to account for that additional demand. In a free market, that additional demand would cause the fees for medical services to go up, which would incent more people to going into the medical profession until our supply balanced out to meet our demands.
But, at the same time we are looking to increase our consumption, we talk of "bending the cost curve" to reduce the rate of growth in our medical expenses. A part of this is to slow the rate of growth in Medicaid and Medicare reimbursements, which serve as a baseline for what insurance companies pay out to doctors.
So we are coupling an artificial 20% increase in consumers in the healthcare market with a decrease in the future earnings that would drive new doctors to enter the market and current doctors to stay there. That's creating a shortage that will have to be addressed somehow.
Does anyone know how those crossed up incentives are being addressed? Doctors can and will leave the market if they are pressed financially, (http://money.cnn.com/2009/09/14/news/economy/health_care_doctors_qu...), and I don't think we want to exacerbate our shortage of doctors here.
Replies to This Discussion
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Permalink Reply by Alex T on -
There was a great article in yesterday Wall Street Journal about How Alamabana Blue Cross Blue Shield has some of the best coverage and customer service in the nation. There administrative cost is 7% and there profit was 0.6%.
This doctor on the Diana Rehms shows does not give the whole story and neither does Diana. She forgets or so does he that profit is one of biggest motivators in innovation of new drugs, procedures, and treatments. Even myself I like to make money and don't want to be force to share it to the community.
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Permalink Reply by Jon McInnis on
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I would like to point out that just because we are not formally paying for these uninsured people does not mean that we are not paying for them. Does anyone actually believe that just because they don't have health care insurance they are not getting sick? Or that once they get sick, they are not getting treatment? So, they don't have insurance, but when they get sick, they put off going to a doctor or hospital until they are simply too ill not to. Then the treatment, whatever it may be, costs far more because they are now extremely ill than it would have cost if they had gone to a health care provider sooner. So who do you think pays for this treatment? I assure you, in one way or another, we do. We just don't know it. So not knowing makes it less expensive? Don't think so. I strongly suspect that these uninsured people are actually costing us much more because they are uninsured than they would cost us if we actually provided insurance for them. Then at least, we would have a handle on what is being done and who is doing it and how much it is costing us.
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Permalink Reply by Greg Boyd on
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Jon McInnis said:I would like to point out that just because we are not formally paying for these uninsured people does not mean that we are not paying for them. Does anyone actually believe that just because they don't have health care insurance they are not getting sick? Or that once they get sick, they are not getting treatment? So, they don't have insurance, but when they get sick, they put off going to a doctor or hospital until they are simply too ill not to. Then the treatment, whatever it may be, costs far more because they are now extremely ill than it would have cost if they had gone to a health care provider sooner. So who do you think pays for this treatment? I assure you, in one way or another, we do. We just don't know it. So not knowing makes it less expensive? Don't think so. I strongly suspect that these uninsured people are actually costing us much more because they are uninsured than they would cost us if we actually provided insurance for them. Then at least, we would have a handle on what is being done and who is doing it and how much it is costing us.
That sounds good and is one of the arguments put forth but it is not entirely clear that it is accurate which is one of the problems. This is one of those areas that there are supposed to be savings to help pay for the program but those savings may or may not materialize, if they do good but if they don't then what? There are good arguments on both sides of this one so I am not yet convinced one way or the other.
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Permalink Reply by Matthew - NC on
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Jon McInnis said:I would like to point out that just because we are not formally paying for these uninsured people does not mean that we are not paying for them. Does anyone actually believe that just because they don't have health care insurance they are not getting sick? Or that once they get sick, they are not getting treatment? So, they don't have insurance, but when they get sick, they put off going to a doctor or hospital until they are simply too ill not to. Then the treatment, whatever it may be, costs far more because they are now extremely ill than it would have cost if they had gone to a health care provider sooner. So who do you think pays for this treatment? I assure you, in one way or another, we do. We just don't know it. So not knowing makes it less expensive? Don't think so. I strongly suspect that these uninsured people are actually costing us much more because they are uninsured than they would cost us if we actually provided insurance for them. Then at least, we would have a handle on what is being done and who is doing it and how much it is costing us.
It is true that a the uninsured delay or ignore medical treatment, and only seek it if a problem worsens to the point that they need to go to the emergency room. It is also true that emergency rooms services cost more than preventative medicine.
However, it's a fallacy to say that therefore we save money if we provide preventative services to everyone. That assertion completely ignores the large number of people who get sick, don't see a doctor, and just get better. I myself have done this at times when I had catastrophe-only coverage - gotten the flu, or a strep throat, stayed home from work for a few days, and then gotten better.
While we may save money on the one side from preventing the catastrophic cases, we would also lose money on the other side from the 20% increase in the number of checkups, trips for smaller fevers or illnesses, etc. I don't have the data or financial analysis on hand to really assert whether we'd end up in the red or the black on that one.
However, that's not really what I was cautioning against in my first post. What I'm concerned about are the physical limits to our infrastructure and resources, and how those resources can hold up to a sudden increase in consumers. Price is a serious concern, but we also need to take a real look at what effect this will have on how easy it is to see a doctor, get a prescription filled, schedule a surgery, etc. The money issue may be blurry, but if we have the same number of family practice docs, and we increase our population of insured by 20%, we're all going to find it harder to get an appointment, and that's for absolute certain. The same would go for Ear, Nose, & Throat or any other kind of specialist services. We would see a drop in our emergency room visits, but those extra ER man-hours wouldn't apply or assist us in our subsequent shortage of Family Practice Docs or Pediatrists.
Now, in a real market, that would be a temporary disturbance that would work itself out naturally. The excess demand would empower doctors to charge more, which would incent more people to invest in the training to become doctors. There would be a rough adjustment period, but we would, in time, get more doctors in the market and end up with sufficient suppliers to meet our demands.
However, a key component of this plan is to keep costs down by slowing the growth in physician fees. That is going to disincent people from becoming doctors at exactly the time when we need more of them. The same goes for Nurse Practicioners, Registered Nurses, or any other healthcare provider who would be subject to the reductions in their expected future income. The tuition and startup costs aren't changing, so if my expected income is going down, I'm less likely to join the market as a potential supplier.
We also could expect to see a rise in the number of syringes, stethoscopes, tongue depressers, and other physical resources we'd need to service the new insured. That additional demand would create price increases for those goods, and thus a rise in the operating costs of running a medical practice. In a functioning market, they'd be able to charge their customers more to make up the cost, but remember, we're "bending the cost curve" to slow the rate at which their incomes increase. At exactly the moment where their operating costs are rising due to price increases for the tools they need, we'd be trying to hold their incomes down, keeping them from offsetting their increased costs.
The end result is providers leaving the market due to financial pressures, as referenced here: http://money.cnn.com/2009/09/14/news/economy/health_care_doctors_qu...
This legislation has the potential to create an artificial shortage of medical care that we can't resolve, all while driving our national debts up during a recession if we underestimate the potential costs.
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Permalink Reply by Leslie Monroe on -
My other concern is the shortage of primary care doctors in the field of medicine already. AARP realizes it's only going to get worse with or without healthcare reform.
How are going to get more students to enter the primary care field when their main reason now is "the pay is to low"?
I also read this:
One factor to the decline in primary caregivers is that fewer medical students are choosing primary care for a career because it pays less than other types of doctors. The average family doctor earns around $160,000 a year compared to the average specialist who earns $300,000 or more a year.
Dr. Paul Hochfeld, an emergency room physician at a Corvallis hospital said the incentive to go into primary care is not there.
“Why would you be stupid enough to go into primary care if you’re smart enough to go to medical school - just from a financial standpoint?” he said.
Leslie
JRS Medical Supplies
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Permalink Reply by Larry on
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I agree that classical economics mandates that increasing the demand while constraining the costs would inevitably create a shortage in a market. I also agree that it's a side effect that we need to be aware of, monitor and take active measures to mitigate.
However, the US health care market system is a very complex one, and cannot be really described as "free" in any meaningful sense. It has long been subject to artificial supply constraints (both well-intentioned and profit-maximizing), demand mandates and price distortions for decades from government(s), the insurance industry, the drug and medical supply industry, and trade associations (especially the AMA), Let's not forget the legal profession, either. These have been, and will continue to be the major forces that drive the "market", such as it is.
This is also true in much (most?) of the rest of the world. The quality and breadth of their health care systems are largely political decisions of resource allocation priorities and market structuring, not classical free market ones Market forces make adjustments based on these constraints, but the foundation of the market is a political construct.
The only places I've seen a true "free market" are some awful 3rd-world locations, where a few rich have access to decent care, the small middle class can afford primary care (and often not much else), and the poor suffer greatly. That's where I've seen the US heading for the past 20-30 years, while retaining some of the highest costs in the world and, and often mediocre quality - much like a state-subsidized luxury car maker that sells expensive, but unreliable cars, and has a service network that can never seem to fix them the first, second, or even third time). If Chrysler and GM don't seem appropriate analogies, try Alfa Romero (at least here in the US, a couple of decades back),
Arguments about "market driven" solutions to US health care issues are about as delusional as those that advocate universal disarmament as the path to world peace. Yes, we cannot ignore the classical economics of supply and demand, but ending politically-purchased supply constraints and useless (or counterproductive) insurance administrative overhead will easily overcome the increase in demand - especially in the mid- and long-term.
An instant 20% increase in patient load may cause some local disruptions, especially in primary care, especially in the short-term (it's often difficult to see a primary care practitioner on short notice now, especially if one seldom sees a doctor, except when absolutely necessary). However, the true "load" is unlikely to increase anything close to 20%, and these disruptions can be mitigated - say though incentives for the oversupply of specialists to begin/resume primary care practice. I've lived and worked in several countries with universal and near-universal coverage (in Europe, S. America and Asia) for years at a time, and had much less trouble seeing good primary care physicians than here in the US (at lower cost, than here, even though I wasn't covered by their systems). Sometimes, these physicians studied and had their residencies in the US. But, they chose to return to their home countries, and have had successful practices and comfortable, well-compensated lives (they are also often some of the most thoughtful critics of our system).
As for medical supplies, the yearly increase in demand in China or India will far outpace any increase in the US - 50 million patients more in a year is a comparative drop in the global medical supply market bucket.
I'm not a really strong advocate of any of the reform plans presently on the table, especially as many of them either ignore, or band-aid serious structural issues. However, almost any of them are better than where we are now. Most of them are much better than the trajectory we're on - yet another politically-purchased power-dive into an economic (and social) mountainside.
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Permalink Reply by John Antonelli on -
Better question, what are the dangers of not doing health care reform?
Larry said:I agree that classical economics mandates that increasing the demand while constraining the costs would inevitably create a shortage in a market. I also agree that it's a side effect that we need to be aware of, monitor and take active measures to mitigate.
However, the US health care market system is a very complex one, and cannot be really described as "free" in any meaningful sense. It has long been subject to artificial supply constraints (both well-intentioned and profit-maximizing), demand mandates and price distortions for decades from government(s), the insurance industry, the drug and medical supply industry, and trade associations (especially the AMA), Let's not forget the legal profession, either. These have been, and will continue to be the major forces that drive the "market", such as it is.
This is also true in much (most?) of the rest of the world. The quality and breadth of their health care systems are largely political decisions of resource allocation priorities and market structuring, not classical free market ones Market forces make adjustments based on these constraints, but the foundation of the market is a political construct.
The only places I've seen a true "free market" are some awful 3rd-world locations, where a few rich have access to decent care, the small middle class can afford primary care (and often not much else), and the poor suffer greatly. That's where I've seen the US heading for the past 20-30 years, while retaining some of the highest costs in the world and, and often mediocre quality - much like a state-subsidized luxury car maker that sells expensive, but unreliable cars, and has a service network that can never seem to fix them the first, second, or even third time). If Chrysler and GM don't seem appropriate analogies, try Alfa Romero (at least here in the US, a couple of decades back),
Arguments about "market driven" solutions to US health care issues are about as delusional as those that advocate universal disarmament as the path to world peace. Yes, we cannot ignore the classical economics of supply and demand, but ending politically-purchased supply constraints and useless (or counterproductive) insurance administrative overhead will easily overcome the increase in demand - especially in the mid- and long-term.
An instant 20% increase in patient load may cause some local disruptions, especially in primary care, especially in the short-term (it's often difficult to see a primary care practitioner on short notice now, especially if one seldom sees a doctor, except when absolutely necessary). However, the true "load" is unlikely to increase anything close to 20%, and these disruptions can be mitigated - say though incentives for the oversupply of specialists to begin/resume primary care practice. I've lived and worked in several countries with universal and near-universal coverage (in Europe, S. America and Asia) for years at a time, and had much less trouble seeing good primary care physicians than here in the US (at lower cost, than here, even though I wasn't covered by their systems). Sometimes, these physicians studied and had their residencies in the US. But, they chose to return to their home countries, and have had successful practices and comfortable, well-compensated lives (they are also often some of the most thoughtful critics of our system).
As for medical supplies, the yearly increase in demand in China or India will far outpace any increase in the US - 50 million patients more in a year is a comparative drop in the global medical supply market bucket.
I'm not a really strong advocate of any of the reform plans presently on the table, especially as many of them either ignore, or band-aid serious structural issues. However, almost any of them are better than where we are now. Most of them are much better than the trajectory we're on - yet another politically-purchased power-dive into an economic (and social) mountainside.
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