Is There a Doctor In the House?

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A lot of liberal blogs, and a few conservative ones, are discussing this article from the New York Times, which points out that if you look at actual economic resources, instead of prices, increasing health care utilitization isn't going to be so easy, because there's not a lot of spare capacity in the system.  Gee, where have I heard this before?

The core problem is that we don't actually have a ton more doctors and nurses.  Libertarians (and I think some liberals) argue that the problem is the AMA cartel:  they control the number of med school admissions slots.  But when I look at the numbers, I don't see all that much room to believe that getting rid of the AMA would let a thousand flowers bloom.  In 2008, 42,000 people applied to medical school, and 18,000 enrolled.  Presumably some who were admitted decided not to go, and some who weren't shouldn't be doctors.  There don't seem to be, say, 10 qualified people for every slot.  And nursing schools aren't swamped by more qualified applicants they can handle, yet there's a nursing shortage. 

Another problem is that a teaching hospital is a hard thing to construct--given how much training doctors need, we won't do that overnight. Teaching hospitals are very expensive, and receive heavy government subsidies.  Obviously, we could increase the number of doctors by some amount, but it wouldn't take care of the supply problem.

It's more reasonable to note that reimbursement structures are creating an undersupply of primary care physicians, compared to the number of specialists.  We reimburse for procedures, not wellness, so surgeons are well paid and GPs aren't.  This has led to the bizarre fact that Medicare chronically underreimburses (and thus insures an undersupply of) geriatricians, which should be the one doctor a program like Medicare produces a lot of.

Most commentators who note this seem to think they have discovered a miraculous new fact.  Unfortunately, this has been true for decades, and generations of wonks and policymakers have also lamented it in their time.  It's a lot harder to change than it sounds.

First of all, thanks to previous generations of these reimbursement policies, the AMA is dominated by specialists.  It's a democratic organization, and there are more specialists than GPs, so guess who wins?  They will launch an all-out war against any politician who changes the reimbursement policy, and the politician will lose, because they can't fight ads featuring sad, sick, telegenic grannies.

Second of all, it's actually really, really hard to pay GPs well, at least in the context of cutting overall costs.  Note that private insurers, who are presumably not attempting to ingratiate themselves with the AMA, also reimburse procedures, not wellness.  That's because procedures can be monitored, and wellness can't.  Oh, you can implement some insane, byzantine system to take into account prior conditions, but this will not improve your administration costs.  What you will see--what you do see, among specialists who are monitored for their success rates on procedures--is what liberals complain about with insurance companies:  physicians will compete to get rid of their sicker patients.  Pay for office visits, and you will get a lot of unnecessary office visits.  As David Cutler once told me, it's no coincidence that health care and education are the two fields where outcomes are hardest to monitor, and where costs are growing uncontrollably.

Nor can you simply slash specialty reimbursements as a way of herding people into general practice, because med school applications are already declining; they're down 3.5% since 2001.  Doctors are not, by and large, altruists who dream of living on a GS-13 wage.  Nor can I blame them.


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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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