Doctor shortages and medical-school loan payoffs

The LA Times reports, "California doesn’t have enough doctors. To recruit them, the state is paying off medical school debt."

Federal, state and local governments have increasingly turned to loan forgiveness programs as the competition for doctors has become more aggressive nationwide. Two-thirds of physicians finishing their training said they’d been contacted more than 50 times by job recruiters, according to a 2019 survey by physician staffing firm Merritt Hawkins.

California will spend $340 million paying off doctors’ debts using Proposition 56 tobacco tax revenue. This month, the state offered its first awards — 40 dentists received $10.5 million in debt relief while 247 physicians received $58.6 million.

California’s program is aimed at increasing the number of doctors who see Medi-Cal patients in a state experiencing a shortage of healthcare providers. The number of physicians who accept Medi-Cal patients — and the low reimbursement rate that comes with them — hasn’t kept pace with the rapid expansion of the state’s healthcare program for the poor, which covers 1 in 3 residents in the state.

One of my son's medical degree was paid by the US Air Force. He owes them years of service for the payoff. He is presently an Air Force surgeon, and by the time his years of payback are done, he will have 13 years on active duty - more if he elects to pursue a medical fellowship certification.

The states' doctor shortage (California is not the only one) was fully predictable. I even predicted it 10 years ago in my essay, "Doctor shortages and health-care price controls." (I have to say, though, that I was far from the only voice saying this.)

However one might describe the economic system of American health care, "full free market" ain't it. Probably the best description of how we get medical care is that it is brokered to us: "Health care does not equal health insurance."

The costliness of health care rests largely on the fact that its provision became brokered long ago by insurance companies. We buy "coverage" from insurance companies instead of medical care from providers. The insurance company is intermediate between the consumer and the provider. Unlike say, stock brokerages, which have to compete with each other for consumers and so lower both costs and price, health insurance companies operate in monopolistic fashion. The competition between health-insurance companies is so low that there are no competitive pressures to reduce price, only internal costs. The result? Lower reimbursements to providers and higher premiums to consumers.

We have almost a doubling effect of price controls in play here. First, the government, command rations medical care by controlling the prices its insurance programs will pay, especially Medicaid but also Medicare. Then we have health-insurance companies effectively price controlling medical care because they often, if not usually, tell doctors that they won't pay more (or much more) than the Medicare rate. As Healthsymphony.com puts it, Medicare is such an important part of the health-care economy "because of the precedence set by its claims payment practices."

The inevitable result of price controls, no matter by what mechanism implemented, is shortage of the price-controlled good or service. That doesn't mean that the service is scarcer, that is, physically rarer. Medicaid's low payments schedules have not reduced the total number of doctors. It has produced a shortage of medical care available to patients by halving the number of doctors who will accept Medicaid payments.

We are in the mess we are in because we make two (at least) critical errors of understanding. The first is that health care is a resource that is simply available for those who need it, or that can be made mostly-equally available through proper legislation and regulation. The second error is that medical care and access to it can be rationed by command more equally, economically and fairly than by demand.

But health care is not a resource to be exploited. Medical facilities and doctors are not phenomena of nature, like water or petroleum are. Hospitals don’t just appear. They are produced. Medical care is not a resource that can be "mined" through more regulation to be more plentiful. Medical care is a contracted, individual service.

Hence, before we uncritically head-nod to the claim that health care is a human right, we might ponder what commentator Philip Niles observed: the real question is not whether health care is a human right, but "How much health care is a human right?" Good question, since health care is finite.

Medical care is always going to depend on these three things:

1. Availability -- Can you see a doctor reasonably quickly and reasonably near?
2. Quality -- Will you receive good, appropriate, and effective medical care?
3. Price -- Can you afford to pay for it, either through insurance or through the massively-higher taxes that, for example, candidate Bernie Sanders said would have to be enacted?

Basically, pick two. Because no matter how medical care is structured, all three will not operating at the same time, and it may not even be two of the three.