Sunday, August 19, 2012

The Baker-Mankiw Solution to the Impending Doctor Shortage

Uwe Reinhardt lays out what seems to be a central theme in the conservative critique of ObamaCare as he cites this NYTimes discussion:
The Association of American Medical Colleges estimates that in 2015 the country will have 62,900 fewer doctors than needed. And that number will more than double by 2025, as the expansion of insurance coverage and the aging of baby boomers drive up demand for care. Even without the health care law, the shortfall of doctors in 2025 would still exceed 100,000. Health experts, including many who support the law, say there is little that the government or the medical profession will be able to do to close the gap by 2014, when the law begins extending coverage to about 30 million Americans. It typically takes a decade to train a doctor ... The Obama administration has sought to ease the shortage. The health care law increases Medicaid’s primary care payment rates in 2013 and 2014. It also includes money to train new primary care doctors, reward them for working in underserved communities and strengthen community health centers.
Textbook economics suggests that the market addresses shortages by increases in prices – which in this case is the compensation for doctors. Uwe notes this National Review critique of ObamaCare:
Physicians say they simply won’t practice under Obamacare rules that strip away much of their autonomy, drown them in bureaucracy, and leave them even more exposed to lawsuits. Health care already is one of the most highly-regulated industries in the country, and doctors and nurses are forced to devote a significant amount of their day to detailed paperwork, adding to their frustration and taking away from time with patients. Reporting requirements will increase significantly under the health overhaul law, and the penalties for those who run afoul of the avalanche of new rules also will increase. The supply of doctors will dwindle as demand for services reaches an all-time high. Fewer of those in private practice are taking patients on Medicare, and even fewer can afford to see the millions of new patients likely to be enrolled in Medicaid. By increasing demand for care without a comparable increase in the supply of doctors to treat the additional infusion of patients, the law will exacerbate the current physician shortage
Whether government policy is trying to alleviate this predicted shortage or is exacerbating it, the tone of these criticisms is that we cannot increase the supply of doctors quickly. As far as the critiques being pitched in terms of some concern for the poor, I love this snark from Uwe:
the strange theory that having no insurance coverage and ability to pay for care is better than having insurance coverage but having to wait for a doctor’s appointment to get non-emergency care.
These critiques are missing something important, which we noted here. Simply put, doctors in the U.S. are already receiving much higher compensation than highly trained doctors in other nations for reasons noted by both Dean Baker and Greg Mankiw. As Dean notes:
We could have designed trade policy to make it as easy as possible for smart kids from China, India and elsewhere to study to U.S. standards and then practice medicine, law, and economics in the United States. This would put the same downward pressure on the wages of these professions as we have seen for manufacturing workers and non-college educated workers in general.
Allowing highly qualified doctors to immigrate to the U.S. would alleviate this shortage and perhaps allow the market place to lower the monetary cost of hiring a doctor.


Anonymous said...

Creating more supply seems relatively easy. That it isn't happening seems more evidence that that policymakers attend to the rich and powerful.

Allow more immigration

Train more doctors (including building and accrediting more medical schools)

Relax licensing restrictions, for example, allow RNs to do more (with appropriate disclosure).

steve said...

The problem here is that you need to maintain a pretty high gradient to get people to come here. Docs in France make 1/3 to 1/2 what they do here, but you dont see migrating here. A competent doc in in India or China will still make good money by local standards. (Pay varies widely in China, but those at level 3 hospitals are more upper middle class.) Some foreign training programs do not have residencies, so they would need to do one when they get here.


save_the_rustbelt said...


All of the above are wrong on parts of this.

Economists need to get out of their offices and interact with real people (I have a great deal of respect for Reinhardt, FWIW).