Wednesday, July 30, 2008

Healthcare Crisis- America's Lack of Planning

In a market-driven system, increases in demand and a relatively fixed supply will result in an increase in price. This is basically Economics 101. Following World War II, the United States experienced what is referred to as the baby boom. Boomers as they are called have aged over time, and because of their demographics, have put a larger and larger burden on our health care system. We as nation anticipated this and new it was coming. We knew that the payouts to social security would grow as the boomers retired and we knew the costs of medicare and basic health care costs would grow as well. But what we as a nation didn't do, was deal with the supply-side of this issue. For example, Utah had one medical school in 1960. It still has one medical school. The demand for doctors has overtaken the supply, and medical schools never expanded to the degree necessary prevent the costs of doctor-care to increase significantly.

This has been a boon for doctors, living a standard of living that previous generations of doctors could only have dreamed about. And though some doctors claim that high malpractice insurance costs have eaten into that standard of living, I have not met any doctors (outside of residents) living from paycheck to paycheck. In fact, as a management consultant in my younger days, I was told to get to know as many medical doctors as possible, because, they were the investor class that I could call on to help clients get seed capital for their new ventures.

This lack of planning is coming home to roost. Many doctors have more patients than they can handle and no longer accept new patients. For some doctors, by the time you get to see them, you are either dead or better. With the aging boomer population, business is "booming." And still, I don't hear of a national push to increase the number of doctors. The market reaction, has been to force alot of medical tasks that used to be performed by doctors, to be now performed by Physicians Assistants and Nurse Practitioners.

To a great extent, the same market forces that come from increased gas prices from a shortage of oil production, also has affected health care costs. The demands are increasing, and the supply isn't keeping up. The result is a decline in the quality of health care we are able to secure, even if we do have insurance. And facing the economic pressures of increased prices, insurance companies are under pressure to decrease costs by denying claims and forestalling procedures, some of them essential to one's survival.

This crisis facing our nation will not improve in the short-term. Unless there is an expansion in the number of people admitted to medical schools accross the country, a continued growing demand will intersect with a stagnant supply, and create future cost increases and degradation of service. And even Democrats, proposing universal health care coverage, need to be aware, that in order to manage the costs of their proposal, they must do something about the supply-side of this basically economic equation.


Urban Koda said...

I found it interesting that as you were describing the problems resulting from this increasing shortage of doctors that the results are very similar to those being used as reasons against Universal Health Care by those opoosed to it.

I suspect that you may be closer to the core of our Healthcare problems that anyone in Washington...

Obi wan liberali said...

I remember back in the graduate school of business, we talked about future macro-demographic trends and what they would mean for business. One of the big ones, was the aging of the boomer generation and the windfall that pharmaceutical companies and health care providers would likely receive from this.

If we could see it in the late 80's, why didn't the government do something to expand our medical schools and open new schools.

And though talking about market forces, you need to remember, that though increased prices paid for doctors might make competition for those positions fierce, it doesn't alleviate the supply problem.