Posted on 06/07/2014 7:28:30 AM PDT by 1rudeboy
This is a re-post of an article I wrote in 2012. I am re-posting it to demonstrate that recent stories about doctor shortages and wait times are absolutely inevitable results of government interventions in the health care economy.
My son is in Freshman econ 101, and so I have been posting him some supply and demand curve examples. Here is one for health care. The question at hand: Does government regulation including Obamacare increase access to health care? Certainly it increases access to health care insurance, but does it increase access to actual doctors? We will look at three major interventions.
The first and oldest is the imposition of strong, time-consuming, and costly professional licensing requirements for doctors. At this point we are not arguing whether this is a good or bad thing, just portraying its inevitable effects on the supply and demand for doctors.
I don't think this requires much discussion. For any given price for doctor services, the quantity of doctor hours available is certainly going to increase as the barriers to entry to the profession are raised.
The second intervention is actually a set of interventions, the range of interventions that have encouraged single-payer low-deductible health insurance and have provided subsidies for this insurance. These interventions include historic tax preferences for employer-paid employee health insurance, Medicare, Medicaid, the subsidies in Obamacare as well as the rules in Obamacare that discourage high-deductible policies and require that everyone buy insurance rather than pay as they go. The result is a shift in the demand curve to the right, along with a shift to a more vertical demand curve (meaning people are more price-insensitive, since a third-party is paying).
The result is a substantial rise in prices, as we have seen over the last 30 years as health care prices have risen far faster than inflation
As the government pays more and more of the health care bills, this price rise leads to unsustainably high spending levels, so the government institutes price controls. Medicare has price controls (the famous "doc fix" is related to these) and Obamacare promises many more. This leads to huge doctor shortages, queues, waiting lists, etc. Exactly what we see in other state-run health care systems. The graph below posits a price cap that forces prices back to the free market rate.
So, is this better access to health care?
I know that Obamacare proponents claim that top-down government operation is going to reap all kinds of savings, thus shifting the supply curve to the right. Since this has pretty much never happened in the whole history of government operations, I discount the claim. When pressed for specifics, the ideas typically boil down to price or demand controls. Price controls we discussed. Demand controls are of the sort like "you can't get a transplant if you are over 70" or "we won't approve cancer treatments that only promise a year more life."
Most of these do not affect the chart above, since it is for doctor services and most of these cost control ideas are usually doctor intensive - more doctor time to have fewer tests, operations, drugs. But even if we expanded the viewpoint to be for all health care, it is yet to be demonstrated that the American public will even accept these restrictions. The very first one out of the box, a proposal to have fewer mamographies for women under a certain age, was abandoned in a firestorm of opposition from women's groups. In all likelihood, there will be some mish-mash of demand restrictions, determined less by science and by who (users and providers) have the best lobbying organizations.
My longer series of three Forbes articles on this and other economic issues with Obamacare begin here: Part 1 Information, Part 2 Incentives, Part 3 Rent-Seeking
Update: Pondering on this, it may be that professional licensing also makes the supply curve steeper. It depends on how doctors think about sunk cost.
Or to simplify:
Government is like a baby. An alimentary canal with a big appetite at one end and no responsibility at the other.
— RR
Government is not the solution to our problem; government is the problem
— RR
One of the traditional methods of imposing statism or socialism on a people has been by way of medicine.
— RR
I have a friend that manages an office for 7 or 8 doctors. He told me that under the new ACA guidelines that if the patient doesn’t pay the portion in that they are supposed to that the doctor’s office has to pay it. Now I’m not exactly sure what he was talking about but I’ll get him to tell me more and report back on it. It sounded like the bottom line is that doctors will be turning away a lot of patients that are covered by the ACA.
I have a friend that manages an office for 7 or 8 doctors. He told me that under the new ACA guidelines that if the patient doesn’t pay the portion in that they are supposed to that the doctor’s office has to pay it. Now I’m not exactly sure what he was talking about but I’ll get him to tell me more and report back on it. It sounded like the bottom line is that doctors will be turning away a lot of patients that are covered by the ACA.
“...the doctor’s office has to pay it.”
Now that’s redistribution of wealth in action!
Good for him. His "joblock" was costing him 60-70 hours per week. Now he can be a philosopher-poet.
“Why We Are Seeing Long Waits And Shortages of Doctors and Basic Medicines in Health Care?”
Surely it’s just a coincidence or it’s due to white privilege or it’s Lincoln’s fault.
The same graphs could be applied to the cost of college tuition...
True, although I would state it a little differently, more mechanically. Patient arrives at Doc’s office and the doctor renders (let us say routine) services under the presumption that the patient is insured. Doc submits his bill to insurance provider.
Note: the payment to the Doc barely covers his costs, if even. Some of the reimbursement rates are completely ridiculous, $13.27 or $23.19 or equivalent small sum for what the Doc would charge $75 or $90 or $125 for. If you don’t believe me, go look at a typical Medicare bill and the reimbursements. Almost not worth submitting the bill in the first place. A different but not irrelevant issue.
Ins provider checks to see that patient is paid up as far as his/her copay or premium on the day they are supposed to cut the check to the doc. If patient has not paid, then the doc gets no payment.
In other words, the doctor is not only agreeing to treat patient as essentially no or negative profit on the basis of apparently valid-looking papers, the doc is also taking a risk that the presumption of valid patient insurance is false, or ineffective. The doctor has no way of checking the validity of the patient’s ins to the point of payment at the time he renders service. Patient could very well have good-looking ins ID or whatever papers are nominal, but if he/she has ceased premium payments, the papers could be later deemed void.
And when enough doctors start cutting their the Feds will require doctors to work x amount hours per week.
“For any given price for doctor services, the quantity of doctor hours available is certainly going to increase as the barriers to entry to the profession are raised.”
This seems exactly backwards to me. The harder it is to become a doc, the fewer docs there will be, and the fewer hours of doc time will exist.
Professional licensing requirements are fundamentally protectionist in nature. They limit the pool of providers from expanding to meet demand. But the same amount of (potential) demand exists, so the providers remaining have more work to do. Whether they choose to do it is another matter.
My daughter has what appears to be some serious health issues. We won’t know exactly what is going on until she has tests. Because she’s under 18 none of the doctors around here will take her as a patient because they haven’t paid to be certified as pediatric practitioners. The tests she needs are the same regardless of age; her being under 18 has absolutely no impact on the tests or their interpretation. It’s just another regulation that the lawyers have put into the equation. If my daughter has cancer this delay could be very, very damaging. It’s the government getting in the way of her being able to receive potentially life-saving care.
In the eyes of government, it is better that she die on a waiting list than receive care from a qualified person who is perfectly capable but simply hasn’t paid a certification fee that does nothing to improve their skills.
The VA scandal comes closer to home than most people want to realize. Our family is hoping this delay will not be catastrophic for our daughter, but if it isn’t for her it could easily be for somebody else. The VA scandal is terrible for our vets who definitely deserve better, but the same kind of thing will happen to our young people as doctors leave their fields or reduce their hours because of government regulations.
Those who poo-pooh the VA scandal thinking it’s just about “old geezers who are gonna die anyway” need to rethink and get serious. First, what a low-life-jerkish way to think about our vets. But even if you’re gonna be a low-life towards our vets you’re morons if you think this same thing isn’t going to happen to civilians as well - including young people. It’s already happening and will only get worse.
FDA Current Drug Shortages Index (bookmark for later)
http://www.fda.gov/Drugs/DrugSafety/DrugShortages/ucm050792.htm
And long before Obamacare, the US medicine had moved to the “push” supply system. This costs a lot less, but does involve the risk of shortages. As far as medicine goes, the federal government has long been inhibiting pharmaceutical production, as well as making it extremely more expensive.
Not quite the issue and I can only speak about those covered under Blue Cross Texas Obamacare/Exchange plans.
Patient comes in in January and provides coverage info reflecting OE plan. BC contacted and they verify what coverage may be, although info not yet in their system. Pt pays co-pay, doctor sees and pt leaves. Pt returns in February, March, April and May. BC pays claim for January but not until March or April. BC still hasn’t paid anything on claims for February-May because they have no record of premium payment - even for January.
So BC deducts amount they paid for January from doctors checking account (electronic fund transfers only allowed). Now doctor can try to collect total outstanding balance from patient.
Patient B is in a different type of OE plan. Same as above but doctor receives a letter from BC saying that if the patient did have coverage, the amount allowed for the services provided would be $X and so that is all the doctor can collect minus any co-pay already paid, not their total private pay fee.
Patient C is in yet a different type of plan. Same as above but doctor receives a letter from BC saying that if the patient did have coverage, they are unable to verify but the type of the plan the patient was enrolled in does not allow the collection of any payment (think Medicaid type of plan).
Regardless of which type of plan the patient is in, unless it is a traditional BC plan, the doctor is screwed. And yes, IMO, they are wise to turn away patients covered by ACA or get totally out of the network and see the patient as private pay, albeit at a reduced rate.
The CHIP and/or OE program run by United Behavioral Health is yet another animal and is a type of a Medicaid program which is paid by state funds. Patients do not pay a co-pay at all or deductible and the doctor is paid at a rate much higher than the normal UBH contract rate for providers who see patients with a high deductible and/or co-pay under plans provided by their employer.
In short, Texas taxpayers are taking it on the chin for patients covered by CHIP plans or Medicaid replacement plans when the patients are covered under a plan through United Behavioral Health.
All of the doctor clients I have who are scattered all over Texas accept anyone through the ACA program any more unless they want to be seen as private pay and pay in full at the time of their visit.
For me, these abstractions sort of blur the issue. It’s intuitive, at least for me, that if you make it harder for doctors to run a functioning business, you end up with fewer doctor hours available.
I still believe:
That for about $1 million per copy, a 2500 sq ft neighborhood clinic could be established in leased quarters consisting of:
3 qty RN-grade nurse practitioners @ $80K/year ea, all in salary costs $360K/year.
rent @ $5K/mo * 12 mos = $60K/year
Visiting doctor from local hospital who visits 2-3 of these, salary $200K/year, all in costs $300K
Supplies & common medications @ $150K/year
Startup equipment, simple X-ray machine, furniture $200K
Receptionist $40K/year, all-in, $55K.
Total: $1.125 million.
15-50 patients walk in daily and drop $20 cash into a fishbowl on the receptionist’s desk. Assume 25 patients a day as an average, which accomodates slow days, fast days, and people who cannot pay one stupid nickel for their healthcare. Fishbowl gets $20 * 25 * 200 working days/year = $100K / year.
The thing costs a million a year, ($1.025 MM) there are 50 states, make 100 copies in each state. (Big states more, small states less) That’s 5000 offices.
Total costs including 1 year of operation = 5000 * $1 million = $5.125 billion.
For $5.125 billion you’ve just solved 80% of healthcare.
1/4th of salaries and rent ($775K * .25) come back to the US Tsy as taxes = $193.75K * 5000 = .968 billion.
Net cost: maybe $4.25 billion. 5000 new receptionist jobs created.
Add in 200 bureaucrat jobs @ $150K = $40 million all-in.
Too simple.
I am on Medicare and I have seen these "reimbursements" from Medicare and long ago concluded that the doctors file them only for tax reasons, i.e., they can prove they rendered services worth this much and Medicare gave them this much, so the difference is written off as a loss for tax purposes.
“For me, these abstractions sort of blur the issue. It’s intuitive, at least for me, that if you make it harder for doctors to run a functioning business, you end up with fewer doctor hours available.”
Depends on what the Feds are willing to pay doctors. The reason doctors are leaving the country now is because they won’t pay very well at all. Look at what Medicare/Medicaid pays now which might barely cover costs. Many doctors now do not accept Medicare/Medicaid patients anymore.
This is what is called supply control.
When the Feds start telling the elderly to go home and die because they aren’t worth the cost, like they do in the NHS in the UK, that’s demand control.
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