Wednesday, December 11, 2013

Doctor Shortage?

Copyright, The New York Times Company

The supply and demand for health services will experience a variety of changes in the near future, especially those from the Affordable Care Act. But nobody has quantified their net impact on the market for doctors. The new law pushes demand for physicians in both directions, making it is easy for advocates on either side of the law to cherry-pick provisions they support.

The law is beginning to build new markets for individual insurance policies that in some ways can reduce the demand for health care and doctors.

Participating families above 250 percent of the poverty line will, on average, pay 30 percent of their medical expenses out of pocket, as compared with the 17 percent out of pocket that is typical for employer-sponsored health plans. That gives patients almost twice the incentive to avoid using doctors or to seek treatments that are less expensive and likely less physician-intensive.

In some states, patients are being pushed toward less physician-intensive care because the insurance plans offered on the exchanges have narrower networks that exclude some of the more expensive facilities. Some of these excluded providers may be considered among the best in the industry, because state regulators seek to keep insurance premiums low. This is a force that could help limit the demand for doctorss in narrow-network states.

Other states include their top facilities in the networks accessible by residents who buy their insurance on the exchanges and do not have this force limiting physician demand. Moreover, the broad-network states will likely pull dcotorss away from the narrow network states where demand for them is less.

Although the new law pushes the insured to shoulder a larger share of their health expenses, the law also mandates that insurance pay for a wider range of health goods and services. That mandate by itself could increase the demand for doctors.

The Affordable Care Act is supposed to increase the fraction of the population with health insurance, and it will in the long run because of the individual mandate, the large insurance subsidies and Medicaid expansions in a number of states. (In the short run, the act is reducing the number of people with health insurance, as many longstanding policies have been canceled because they do not conform with the new law.)

It is a mistake to assume that every person getting insurance coverage is an additional person demanding health care, because many of the so-called uninsured are actually insured in one way or another. Take Medicaid enrollment, for example. Sixteen million people were not enrolled in Medicaid in June 2010 yet participated in the program at other times during the fiscal year, largely because they don’t bother enrolling (or know that they can) when they are healthy and turn to it only when need arises.

If and when those who are eligible but unenrolled make contact with hospitals and other providers – when they actually need the coverage – they are reminded to enroll. In an economic sense, these 16 million were, in effect, insured all along, despite their absence from the official statistics. The new law’s individual mandate encourages some of these people to be perpetually enrolled, even when they are healthy, which is more a change in their official classification than a change in their use of health care.

The numbers of slots in medical schools and residency positions, and rules that permit nurses to perform a wider range of services, have important effects on the incomes of doctors, because easier entry into the medical profession reduces physician incomes. I’m not sure that the new law does much to change these entry barriers, though.

Proponents of the Affordable Care Act can point to the provisions that reduce physician demand and help prevent a doctor shortage; opponents can say that more insurance means more demand on an already strained profession.

A good economist should be able to examine all the provisions and tell us the net result. But none have done this. The most we have in terms of a comprehensive calculus of health reform and the demand for physicians is the example of Romneycare from Massachusetts, which Scott Gottlieb and Ezekiel Emanuel hold up as proof that there will be no doctor shortage.

But Romneycare is a different law than the Affordable Care Act and covered a different population. Even without those differences, Massachusetts could increase health care in the state in part by pulling in medical professionals from elsewhere in the nation.

The Affordable Care Act cannot do the same, except to pull medical professionals from abroad, where the barriers to moving are much greater.

If only the payments to physicians were free to adjust in response to the law, entry barriers, demographics and other forces, there would be neither a shortage nor a glut in the sense that doctors would be available to whoever would pay the market price and positions would be available for qualified doctors willing to work for that price.

But the new law limits payments to physicians and other medical providers. If patients are lucky, the demand for doctors will be low enough that the limits will not matter. But if the new law results in a significant net increase in physician demand, the payment limits will help remind us of Soviet-era limits on the price of bread, with queues and black markets to follow.


Patrick Sullivan said...

Oh what a tangled web we've woven!

John Booke said...

Medicare provides a floor on prices so in a way prices are regulated.

Peter Scott Johnson said...

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