Tuesday, April 13, 2010

The Coming Doctor Shortage

WSJ reports on the future doctor shortage, with an incredible lack of understanding of basic economics. A shortage simply can't arise in a free market because price will ultimately balance out supply and demand.

WSJ reports the story as though price doesn't play a factor. Here's WSJ:
The new federal health-care law has raised the stakes for hospitals and schools already scrambling to train more doctors.

Experts warn there won't be enough doctors to treat the millions of people newly insured under the law. At current graduation and training rates, the nation could face a shortage of as many as 150,000 doctors in the next 15 years, according to the Association of American Medical Colleges.

That shortfall is predicted despite a push by teaching hospitals and medical schools to boost the number of U.S. doctors, which now totals about 954,000.

The greatest demand will be for primary-care physicians. These general practitioners, internists, family physicians and pediatricians will have a larger role under the new law, coordinating care for each patient.

The U.S. has 352,908 primary-care doctors now, and the college association estimates that 45,000 more will be needed by 2020. But the number of medical-school students entering family medicine fell more than a quarter between 2002 and 2007.

A shortage of primary-care and other physicians could mean more-limited access to health care and longer wait times for patients.
This is actually a best case scenario, but obviously WSJ and the writers of the report don't get that. What they are doing is extrapolating current patient-to-primary care ratios,but under Obamacare this is not likely to be the case. With basically "free" medical care for everyone after the insurance is paid, primary physicians will be flooded with treatment demands. The ratio will never hold.The demand for primary physicians will skyrocket. The shortage, because pricing will be virtually eliminated, will make a visit to a primary doctor an event something akin to the wait you would have at the Post Office, if the Post Office gave away postage for free. You think dealing with surly postal clerks now is a horror? Wait until you get to deal with ObamaCare health clerks in doctor's offices.


  1. Excellent observations and a telling critique of the WSJ. The only business newspaper worth subscribing to is the Investors Business Daily and even their editorial page drifts off into some fearful military issues.

    The EPJ stands head and shoulders above all.

  2. Efinancial,

    IBD? Really? You mean the guys that are in love with communist China?

    They're like the print edition of Tout TV!

    I think they're all equally horrid, while I am in agreement that EPJ is the ne plus ultra.

  3. HMMMM..."tout." You mean like numerous references to PIMCO or Bloomberg media outlets within the story as done right here at EPJ?

    Touting products that may be of use to your readers is a business model that works for media. Newspapers from Seattle to New York are failing because they have poorly implemented this model and have been unable to generate enough valuable and unique information to survive on subscriptions.

    IBD offers more facts and data per page than most and its touts are obvious...take em or leave em. The price and volume data they list shows when and where people are willing to put their money where their mouth is. Always valuable info. And their stories and editorials are usually more fact than fiction. Not perfect but better than most.

    If you are not comfortable with touting, you'd better find another way to generate revenue or you won't survive in the media biz.

  4. Doctor shortage can and does arise even in free market economy, even when the govt throws its weight in the right direction for a change. I have an example here is Oz. There was (and is) a doctor shortage here, at times to the extent that a hospital opened but could not staff its facilities. Local unis were not producing enough, foreigners were not up to the standards, hence the shortage. Govt threw money at unis, they delivered, BUT it took years (actually, the first wave is coming up in 1-2 years) for new med students to grow into doctors. It takes a lot of time to train a doctor, and it cannot be sped up with any amount of money (=for any price). A good radiologist here could retire in his 30's if he wanted to -- a clean and quiet job, no stress, tons of money, an absolutely great place to live. Still, radiologists are a permanent feature on govt's skilled migrant wish list.

  5. Anon,

    Why, in your example, couldn't the hospital raise the price of its services and raise the salary of doctors until they either attracted more doctors or reduced the number of people who could afford their services?

    Is your hospital in an unregulated free market? If not, why are you using it as an example of how doctor shortages can occur in free markets?

  6. Taylor Conant,

    The prices is not the main problem. The "doctor supply" is - there is just not enough of them. Their salaries are not an obstacle. There is too much work for too few doctors, especially in rural areas, and they cannot work more than they do now. So there is a shortage of "doctor labor", and no free market can create doctors on demand without a 10 year lag or so.

    With that said, govt would fast track any good doctor from abroad, but the standards are not lowered. Nobody wants "doctor Nick" here, at any price: neither hospitals, nor patients or govt. We had one such case recently with an imported doctor who put a few people in an early grave. It's bad for everyone including good doctors and hospitals.

    It is a free market in a sense that any doctor with skills can come and work here for good money and great lifestyle. It is not a free market in a sense that "doctor Nick" can come in and do what he does, as he doesn't qualify to be a doctor here. It is not a free market in a sense that one can build a doctor factory in China and flood the market with supply. Supply of doctors is constrained not by investment, but by the human free will to do that work for a lifetime. Doctors are not conscripts, serfs or slaves. If people don't want to live that (bloody hard and I'd say unrewarding) life, investment won't help attract them. Who needs that money if one don't have a life to spend it?

    Thus the concept of (any kind of) market is heavily stretched in this case, that's why it doesn't work well, although it does ultimately work with lots of kicking of and screaming at.

  7. Anon,

    I am confused by your answer. You say that the "price is not the problem" but rather the supply of doctors is. Basic economic theory tells us that for any given supply there is a price which will allow demand to be equal to it.

    In this particular case, you have said that there is too much work and not enough doctors to do it. What you left out is "at this price." You fail to explain what is preventing the price of doctors from rising so that the amount of work demanded by patients is equal, at that price, to the amount of health services doctors would like to provide.

    You say there are "not enough doctors" as if there is an objectively determinable "correct" number of doctors in any given situation, ie, population of 1000 = 4 doctors are enough, or population 50000 = 20 doctors are enough. I ask you, "enough... for what?" What calculation, that you haven't shared with us, are you using to back up your belief that there are "not enough doctors"?

    Something else you're ignoring-- are doctors necessary for all of the health services people require? Could it be that nurses and nurse practitioners might be able to assist with the caseload, yet are restricted from doing so by law, perhaps?

    Your point that a simple free market in doctors can not necessarily "fast track" the doctor creation process, which takes time no matter what, is well taken. However, I believe you are wrong to assume that any particular market or group of people is owed a particular supply of doctors in the first place.

    Wenzel, as well as myself, are defending the idea of a FREE MARKET in healthcare, in which shortages are impossible because prices will freely rise or fall to equilibrate supply with demand. Your counter-points, referencing current context in Australia, involve instances of immigration restrictions (which artificially raise the transaction costs and availability of doctors immigrating to new markets) and medical licensing (which artificially raise transaction costs and the availability of doctors). These are both aspects of government regulation of the medical services market.

    I am confused why, in arguing that shortages are possible in a free market, you would use examples of an unfree, regulated market, to prove your point?

    I reject those examples because they don't describe a free market. I await a refutation of the decree "Shortages can not exist in a free market" which involves examples or demonstrations of problems with actual, unregulated free markets, not government-regulated unfree markets.

  8. Taylor Conant,

    I am not here to fight for or against economic theories. I come here to read Wenzel and I do occasionally comment. I just commented from the real world on the issue that I know something about. You may reject my comments, I'm OK with that.

    There are no immigration restrictions for qualified doctors here. They are on the wanted list. Here is the govt wanted list, 43% of all positions there are for healthcare: http://www.immi.gov.au/skilled/general-skilled-migration/pdf/critical-skills-list.pdf

    Header: "Critical Skills List. The following is a list of occupations which are in critical shortage and are eligible for priority processing for General Skilled Migration (GSM)."

    Also hospitals can do headhunting themselves and sponsor foreign doctors and nurses for immigration. I think that is the fastest way of all. There are plenty of foreign doctors and staff in hospitals here, most are likely new migrants. In short, there are no obstacles for qualified doctors and nurses. Quacks are not wanted by anyone though. They will end up in prison and be a burden for the society.

    If you take all this as "immigration restrictions", well... that's OK with me.

    Here is the list of current vacancies for a narrow specialist such as radiologist, 338 of them: http://seek.com.au/jobsearch/index.ascx?DateRange=31&catindustry=1211&catoccupation=1493&searchfrom=quickupper&searchtype=again

    I don't know for sure, but I doughtAustralia trains 338 radiologists in a year. The last radiologist I met was native Russian, the last nurse I met was native Czech, and the last outpatient doctor I met was a young asian newbie. That is an indication of how hard it is for qualified medical professionals to migrate here. Anyone who qualifies can apply today, get that job, move here, work for good money and hit the beach in the spare time.

    I'm out.

  9. And I do hope you realize that "free market" is a worthless term if "free market" allows for government regulation, while the opposite of free market, "unfree market", also does. It's akin to saying that the absence of color, black, is the same as the presence of all colors simultaneously, white, by calling the absence of all color both "white" and "black." That leaves no word for "the presence of all colors simultaneously" and therefore it makes discussing such a concept impossible!