An Econoclectic Perspective
John, is it possible here that we're seeing the combined effects of a leftward shift in the supply of doctors (due to disgust at dealing with the increasing bureaucratic nonsense of insurance reimbursement, plus the costs of malpractice insurance, etc) and a defacto cap on doctor fees by those same insurance schemes (ie, HMOs, PPOs, et al)?
In other words, might it be that those doctors who would stay in practice and those new doctors that would begin to practice are saying, "Hey, I'm not gonna put up with all of this BS unless I'm compensated appropriately." Their answer, after reading the tea leaves, is that they WON'T be so compensated, so they quit their practices or decide to major in something else (thus shrinking the supply of physicians).
Just my amateur economist's take on it...
I think that is a very plausible explanation of what might happen. The key is the "de facto cap on doctor fees", i.e. a price ceiling, which, if effective, is guaranteed to cause a shortage.
Just makin' conversation, John. Ignore me if you're busy.
What do YOU think about high "barriers to entry" in the medical profession? I've always felt that the AMA (sorry for my US bias) has, in fact, held a virtual monopoly over medical education and, as such, has constrained the supply of physicians, thus driving up their "price." However, doctors are now reaping the whirlwind, as Big Insurance, backed by Big Business, has pretty effectively put into place my aforementioned "defacto price ceilings."
I knew many a pre-med in my undergraduate days, wonderful people all, who had "only" 3.6ish GPAs and couldn't get into Med School. Would they have made lesser physicians? I seriously doubt it. Had they been "allowed in," thus expanding the supply of physicians, prices arguably would have come down, thus potentially reeling in rising doctor fees and, potentially, delaying or eliminating the need for those defacto controls.
This argument, I think, also holds for malpractice insurance. Had physicians not "circled the wagons" so frequently to protect their own, and had they instead more aggressively POLICED their own, malpractice rates would also have had little reason to go up.
It seems to me that free market economies naturally hate monopolies and they will seek to eliminate them one way or another.
A little antitrust enforcement years ago would have done US healthcare a world of good...
I completely agree with you. Here's what I wrote a while ago on this:
click here
Very interesting. So "medical tourism" is yet another way that the Market is seeking to substitute for high western healthcare... Are there any SERIOUS scholars working on these aspects of the healthcare economy with an eye toward healthcare reform that honors basic economics? It would surely be refreshing...
By the way, John, wanted you to know that I really enjoy your site. I'm lecturing in some Micro/Macro sections at a US university (don't have my PhD, but an MBA) and I'm planning to assign your blog to my students. I love to find "real world" examples to substitute the text (Mankiw, which I find terrific), and your blog is terrific for that. Thanks for writing it!
J
Errrrrr....make that "supplement the text," not "substitute the text." Obviously, I've got substitution on the brain...
You might check out The Fraser Institute's Health Section for some serious, market-oriented work.
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