The conflict over passing a budget for the federal government centers around how we as a society should ensure that all citizens have health insurance. The current Affordable Care Act takes a three-pronged approach. (1) Healthy people will pay more in insurance so that high risk people can pay less insurance. (2) There are government subsidies to supplement the cost of purchasing insurance depending on family income. (3) Set restrictions on how much insurers, doctors, and hospitals can charge. The Democrats are willing to hold the government hostage to defend this marginal approach. Alternatively, the Republicans are willing to hold the government hostage to replace the Affordable Care Act with equally marginal approaches, such as, (1) funneling federal subsidies for health insurance to individuals through tax credits as opposed to funneling federal subsidies through tax free fringe benefits and (2) creating competition in the insurance marketplace by allowing individuals to purchase insurance across state lines. Both of these approaches focus on how to pay for health care. Neither one focuses on how we can reduce the costs of health care.
I don't pretend to be an expert on health insurance policy, but it strikes me that basic principles of supply and demand seem to be ignored on both sides of the aisle. As the population of the U.S. grows, as baby boomers reach retirement age, and as more people get health insurance, the demand for doctor's visits continues to rise. Yet, the supply of doctors has been flat for around 20 years. What students learn in Economics 101 is that when demand rises in the face of fixed supply, the cost of the product or service will rise or supply will be reduced when price is restricted from rising. Policy makers should not be surprised that the cost of doctor's reimbursements in the U.S. are higher than in any other country and we are seeing increasing scarcity of access to doctors.
Since 1990, the U.S. population has risen 25% from 250 million to 310 million. Yet, the number of medical residency slots remains fixed at the 1990 level of around 100,000. Without completing a residency, a medical school graduate cannot practice medicine. Therefore the number of doctors we produce each year is fixed. Currently, the federal government pays for these residencies through medicare. There has even been debate about reducing the number of slots that medicare will fund as a way to reduce medicare expenses. I have not researched the history of the development of the policy of why the federal government pays for all of the residency costs, but it would seem that through some combination of expanded federal funding, funding from insurance companies, and funding from hospitals, we should be able to dramatically increase the number of residency slots and thus the number of doctors will rise. If we end up with a glut of doctors, Economics 101 suggests that access to health services will increase and the price for those services will stabilize or decrease.
One countervailing concept from Managerial Economics is that as you expand the labor supply, there is likely to be a diminishment in the quality of labor, since you have first selected all of the best so the remaining pool is necessarily of lower quality. However, we can expand the supply of doctors significantly without lowering standards. Our population has expanded by 25% in 20 years. Unless our education system is worse than it was 20 years ago, we are producing 25% more qualified candidates of the same quality that we had 20 years ago. In addition, there are many reasons to believe that our education system is better and we are have much higher rates of college completion than we did 20 years ago. So there is plenty of excess capacity to expand the number of doctors. This seems like a straightforward solution to reducing the costs of health care and obviating the need to hold the government hostage over how to pay for health insurance.
The educational benefit of expanding the pool of doctors is that premed faculty would have to shift from being gatekeepers of the medical field to becoming teachers that actually try to get as many people to understand science as possible. We could pass a corresponding legislation called No Doctor Left Behind that holds college faculty accountable for the number of premed students who fail to graduate with medical school acceptances. We can label those colleges with high dropout rates as medical dropout factories. And those with differential passing rates by race and socioeconomic status can be labeled as failed premed programs. One consequence of this policy might be that premed programs will stop wasting doctors' time studying irrelevant content and shape a program around those math and science concepts that relate to human biology. Focus and relevance are the very things that help all students learn.
As we bemoan the hiatus of government services, it would be helpful to shift the focus away from one crisis to the next and begin to direct our focus on long-term solutions that benefit both our health care system and the education of our next generation.
