Why is Healthcare So Expensive?

[Guest guest]

Below is an essay by Brad Hicks. URL to his blog at the end.

Alobar

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Increase the Supply

Jul. 24th, 2009 at 1:40 AM

There's one criticism that nobody from either party is making of the

Obama/Pelosi health care plan, not the Republicans, and not the Blue

Dog corporate Democrats, either, and it would, ironically, be a fair

complaint. You see a teensy little hint of it in the oft-heard

argument about whether or not there's anything in the plan that would

actually reduce costs. That's important, because if we increase the

customer base by increasing eligibility, but we don't reduce the cost,

then the total cost of healthcare just plain has to go up. Period. But

so far, that argument has taken the form of arguing about whether or

not preventative medicine saves lifetime costs (and contrary to what

Obama and Pelosi would have you believe, experiments in this area have

not been conclusive), arguing about just how many dollars can be saved

by upgrading and standardizing billing and patient records systems.

What's missing from that argument is the single most obvious question:

why does it cost so much in the first place?

And, frankly, if there weren't a massive political taboo about

answering that question, if the answer to that question weren't deeply

Forbidden Lore and completely off-limits in polite company, the answer

would be quite obvious, because it's the same answer as every other

time you ask the question about why any other fill-in-the-blank is so

expensive: demand is high, supply is low. Well, then, you ask whenever

demand is high and supply is low, why is the supply so low? Here's

what nobody, from either political party, has the guts to say to you:

because the dominant cost in the health care industry is set by two of

the most untouchable, politically powerful price-fixing cartels, the

two most corrupt unions in the entire country: the American Medical

Association and the American Dental Association. Even the similarly

collusive and equally greedy price-fixing cartel that is made up of

the tiny number of CEOs of pharmaceutical companies lives in awe of

the clout, and the brazenness, of the AMA and the ADA.

Here is what nobody has the guts to tell you, for fear of what would

happen to them if they did. Back in the 1970s, the ADA and the AMA

decided that there was something morally wrong about having doctors

and dentists earn a middle class salary. And, they concluded quite

rightly, there was a reason why attempts to price-fix the salaries of

doctors and dentists weren't working: there were just too many

doctors, and far too many dentists. The barriers to entry to the field

were too low. So what they did about it was adopt a political position

of absolute and total opposition to any expansion of medical schools

or dental schools. In 1970, the US population was 203 million. Now,

the US population is 309 million, slightly more than 1.5 times as high

.... but thanks to the unceasing efforts of the ADA and the AMA, we

graduate the same number of doctors and dentists per year that we did

back in 1970.

They say that if they didn't restrict the number of classroom openings

in medical school, too many unqualified people would become doctors.

But the number of medical scandals hasn't declined as admissions

standards have climbed, as medical schools mobbed with 50% more

applicants per seat than they had in 1970 get to be more picky. No, on

the contrary, even with the tougher admissions standards we have

today, you can be entirely qualified to enter medical school, you can

demonstrate through your grades and your test scores in pre-med that

you are entirely capable of becoming a doctor ... and get turned away,

in favor of someone more qualified. But saying it that way doesn't

change the fact that you were still perfectly qualified to be a

doctor, and would have made a perfectly good doctor, as good as any

doctor that's graduating today, and maybe even better than some, but

you won't be; at best, you'll be a nurse practitioner, or a medical

technician.

Confronted with this ... which they almost never are ... the medical

associations would argue that we must restrict the supply of doctors

per capita, of dentists per capita, because if neurosurgeons couldn't

look forward to a salary of $950,000 per year or more, nobody would

want to become a neurosurgeon, because if dentists couldn't look

forward to a salary of $175,000 per year or more, nobody would be

willing to become a dentist. (And yes, those numbers are after

operating expenses, including malpractice insurance, and long after

the medical school loans are paid off.) They insist, contrary to all

evidence, that there is nobody who'd be perfectly willing to save

lives for, say, $500,000 per year, that nobody would be willing to

repair teeth for a measly $90,000 per year. Which is deranged, or else

the wouldn't have to be stopping people from trying to do so, so they

can support those salaries! Nor can they erase the historical evidence

that, back when medical schools and dental schools were expanding as

the US population expanded, there were in fact no shortage of

perfectly happy, perfectly comfortable middle-class dentists and

upper-middle-class surgeons; indeed, the great advances in heart

repair and transplant surgery were made by surgeons who made a great

deal less than today's doctors do.

Greg Mankiw, the tireless (and tiresome) supply side economist,

recently blogged that all the proof he needed of how the superior

American health care system is the best in the world can be found in

two readily available facts. First of all, he pointed out, American

doctors must be the best in the world, or else they wouldn't be

getting paid twice as much! And secondly, if American doctors weren't

the best in the world, we wouldn't be able to deliver the quality of

health care we do with half as many doctors per capita as every other

industrialized nation! This tells you all you need to know about the

intellectual rigor behind supply-side economics: the man who literally

wrote the standard textbook on Chicago-School economics (a) thinks

that American health outcomes are as good as the rest of the

industrialized world, when our actual statistical outcomes are closer

to third-world levels, and ( he isn't enough of an economist to

realize that the reason doctors doubled their salaries, relative to

inflation, isn't because they became twice as good, but because (as he

himself knows) they became twice as scarce.

When I was a kid in the 1970s, as (arguably) one of the very last of

the Baby Boomers, I was told that part of the promise of America was

that no matter what color you are, what gender you are, what

neighborhood you were born in, or what your parent(s) did for a

living, if you did the work, if you learned the material, if you

proved that you were good enough, there was nothing you couldn't do.

And maybe, in the 1970s, that was almost sort of true, or at least

more so if you were white and male. But in the intervening time, we

allowed powerful price-fixing cartels to set quotas for just how many

people, regardless of whether or not they did the work, regardless of

whether or not they learned the material, no matter how good they

proved they were, would be allowed to become doctors or dentists. Once

those quotas are filled, ideally with privileged children of the

upper-middle class, everybody else who was capable of being a doctor

gets shunted back down to become a nurse practitioner, a physician's

aide, a medical technician. Once those quotas are filled, ideally with

the somewhat privileged children of the middle class, everybody else

who was capable of becoming a dentist gets shunted back down to become

a dental assistant, a dental technician, a dental hygienist. In other

words, only half of our qualified people are allowed the artificially

scarce privilege of being real doctors or real dentists, so that the

person working on the $15,000 a year telemarketer's teeth can be

guaranteed a salary ten times as high, so that the person stitching

the replacement veins onto a $90,000 a year computer programmer's

heart can be guaranteed a salary ten times as high. All of the missing

doctors and missing dentists who might have done it for half as much

(and still lived quite comfortable lives!) must, instead, serve as the

barely-working-class, chronically emotionally abused servant class of

the doctors and dentists.

I don't care if we import enough doctors and dentists from overseas to

double their numbers. (I had the good fortune to have my dentist

before-last be a Russian Cold-War refugee, and don't let anybody tell

you that there are no med schools as good as ours; she was a better

dentist than almost any other dentist I've ever had work on my teeth.)

I don't care if we do it the more reliable, and maybe safer, and

certainly less internationally politically explosive way by doubling

the number of medical and dental school classrooms, even if we have to

temporarily import doctors and dentists to teach in them. All I know

is this: whenever anybody, any politician or spokesman or journalist

or think-tank intellectual or author, from either party, either

pro-reform or anti-reform, talks about health care, the question you

ought to be asking them the first is: " what do you plan to do to

increase the amount of health care available in the United States? "

Because you can't solve even the tiniest of the problems with health

care costs, let alone the main problem, if you don't increase the

supply. That's just basic economics.

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