Bending the Cost Curve on Health Care

3909260420_d496c65222Brian Moore has been doing a fantastic job over at my previous blog, and his latest post on the doctor shortage is particularly good. Brian and I are both married to doctors who are currently suffering through residency, so we have a very personal perspective on what’s wrong with our medical system. Brian’s a little harsher than I would be, but this is basically right:

The medical profession is not very forgiving to part-time employment (there are high fixed operating costs). You can’t phase out slowly like you might be able to with other jobs — and being a physician in your 50’s means you have been working very hard for at least 28 solid years. The “lifestyle” issue is very big for both men and women.

As we value leisure and lifestyle more and more, becoming a doctor is becoming less and less appealing. Not everyone is willing to accept major curtailment of friends, family, hobbies, relaxation, sleep, dating and kids during the best years of their life — and make no mistake, that is what you accept if you are going to medical school and residency. Especially during internal medicine residencies (the one all those “primary care physicians” we want to have will be enduring) you are looking at 70-100 hour work weeks (yes, it’s “capped” at 80 hours officially, but that’s like saying drugs are illegal, so no one will have them).

At the most competitive residency programs, working 100 hours a week doesn’t mean just losing the things above, it means losing things like sitting down, eating, any sleep at all, and going to bathroom when you need to. If you want some scary statistics, look up how many residents abuse alcohol, prescription drugs, are on anti-depressants, are in therapy, etc…

The only reason we’re not facing an even more massive shortage right now is that residency programs are highly incentivized (up to including yearly 6 digit bribes from medicaid/care per resident) to retain residents they’ve conned into coming to their programs, and so have erected very high barriers to exit, or even changing specialties. Plus there are natural barriers, such as the sunk cost fallacy that “all those years would be wasted if I left” and your student loans, which can range up to a quarter of a million or more.

The sharp limits on the number of people who are permitted to be doctors means that they are simultaneously overworked and (after enduring 3-7 years of residency) overpaid. If they were given the option, many doctors would choose to work fewer hours in exchange for lower wages, but the way the medical profession is structured makes it difficult to do that. Meanwhile, there are lots of people, both here and abroad, who would like to enter the medical profession in the US but are prevented from doing so by a variety of legal restrictions. If Obama is serious about “bending the cost curve” over the long run, one of his top priorities ought to be expanding the number of doctors in the US—this could be accomplished both by liberalizing licensure here at home, and by liberalizing immigration rules to allow more foreign doctors to practice here. Of course, he won’t do anything of the sort because the medical profession is well-organized to resist any reforms that might place downward pressure on their wages.

This entry was posted in Uncategorized. Bookmark the permalink.

4 Responses to Bending the Cost Curve on Health Care

  1. Sigh. I suppose the polite way to respond to this is to say that you are half right. Under the current reimbursement system, more doctors would simply lead to more care provided and higher costs. Whatever downward pressure would be applied to physician wages (which is probably not much, considering that Medicare acts as a floor for reimbursement, and which probably would not amount to that much of a savings respective to other health-system costs) would be more than made up for by an increase in costly medical interventions.

  2. And, in fact, physician organizations are virtually unanimous in calling for more federal funding to train more doctors because they all now predict major shortages. Think about it: as long as a third party is perceived as paying the bill, why would *more* doctors lead to *less* health spending? If people only paid 10% or 20% out-of-pocket for ice cream, would we expect *more* Baskin-Robbins locations to lead to less overall spending on ice cream?

  3. Kevin,

    You know more about the details of the payment system than I do, but I think one key variable is that reimbursement rates are not fixed. Reimbursement rates are determined at least in part by negotiations between insurance companies and health care providers. The providers’ bargaining position is determined in part by the relative scarcity of what they’re offering. If you suddenly have a bunch more doctors in the market, insurance companies may feel more comfortable walking away from the table with any given provider, because they know there are other providers waiting in the wings willing to do the same job for a lower rate.

    As you point out, Medicare may be a different situation, since Medicare doesn’t necessarily have the option of walking away from the table. But even here, Medicare reimbursement rates have to have some connection to private-sector reimbursement rates. If increased supply of doctors pushes down private sector reimbursement rates, Medicare administrators will, on the margin, increase their own reimbursements more slowly than they would have otherwise.

    Obviously the total amount of medical services consumed may nevertheless go up, and this may very well lead to higher overall health care spending. I was probably too hasty in declaring this a mechanism for reducing overall health care spending. I think it’s probable that admitting more doctors would at least reduce the per-unit cost of health care. That’s a good thing regardless of whether the effect is enough to bring down the costs of health care overall.

  4. I agree with everything you said in your comment.

Leave a Reply

Your email address will not be published.