August 17, 2012
The Anatomy of a Shortage
“If you think health care is expensive now, wait until you see what it costs when it’s free.”
I distinctly remember that in first grade I had an idea of breathtaking wisdom and profundity. Candy should be free. You may have had a similar thought at the same age. This idea was supported by an incontrovertible rationale, namely that I really liked candy. Tragically, it only took a moment for my parents to expose a flaw in my otherwise revolutionary scheme. They suggested that if candy were free, no one would bother making candy. All candy makers would do something else that allowed them to make a living. Thus exposed to the painful realities of life, I put the thought out of my head for about forty years.
But now I realize that modern bureaucracy makes my vision more possible than ever. Candy makers obviously won’t work for nothing, but they could be paid to give away candy by a national program (Candycare or maybe the Affordable Candy Act). Employees through their work could contract with third party payers (like Blue Candy) to pay for their candy needs. Thus candy would still be free to the consumer and no first grader would ever have to be denied his gummy bears.
Complications may still arise in this ingenious scheme. Prices, after all, play a critical role in marketplaces. They reflect the resources consumed and risks taken in producing a product. They force consumers to make important decisions about what they need and what they can do without. And they encourage conservation. The only reason we don’t all buy the most expensive product in any class of products (cars, houses, shoes, whatever) is because we’d rather do something else with the money we save. Prices also give producers a powerful incentive to improve quantity and keep prices low, that is they cause competition between producers.
In the absence of prices, all these details become corrupted in our otherwise idyllic candy utopia. Customers would demand more candy than they ever ate before. They may simply eat more candy, but much would just go to waste. If it’s free, no one will stop to think about whether they really want another Snickers bar. Attention to quality would also decline for two reasons. Consumers would not be able to pay more for better candy, so they would have to be satisfied with whatever they got. And candy makers would no longer have to compete since they would suddenly have all the business they could handle.
There would be a dramatic imbalance between supply and the very high demand. Economists call this imbalance a shortage. Long lines would form at candy stores and supplies would not last until the end of the day. Lots of people who previously were content paying for their candy would now not be able to get any. And though the costs to the consumer would be zero, the cost to society would keep escalating as candy makers would consume ever more resources trying to meet a bottomless demand. In a few years candy would become both mediocre and, for society, disastrously expensive.
Healthcare in general, and especially primary care, is operating in exactly such a system. I’ve been writing for years (see links below) about the shortage of primary care doctors that will happen as the baby boom ages. But with the implementation of the Affordable Care Act (ACA) looming in 2014 the shortage promises to worsen dramatically and is receiving some media attention.
An opinion piece in the Wall Street Journal warns that 30 million people will acquire health plans starting in 2014. The article predicts “the result will be gridlock.” Waits for care will lengthen, and many practices will close to new patients. The author predicts that concierge medicine will grow rapidly as patients flock to doctors who promise them attention and access. I urge you to read the very sobering article.
A recent Medical Economics article asks how an influx of 30 million patients will impact primary care. New physicians certainly will not be trained in time. The article suggests various bureaucratic solutions and states “nurse practitioners know they are about to be elevated in the national healthcare dialogue.” This is jargon for “patients should not expect to see a doctor.” The article warns that in Massachusetts, a leader in experimenting with universal health insurance, only half of primary care practices are accepting new patients.
Finally, The Doctor’s Company, a medical malpractice insurance company recently released a survey of 5,000 physicians to measure doctors’ opinions and thoughts about the coming ACA implementation. 60% of respondents thought that the increased patient volume will hurt the level of care they can provide. 43% said they are thinking about retiring in the next five years. And nine out of ten said they would discourage friends and family members from pursuing a career in medicine.
Sooner or later we will be forced to rediscover the credo that there’s no such thing as a free lunch. Shifting costs from one person to another doesn’t lower costs. A central plan to make something affordable always makes it unaffordable.
Until then, patients should find a primary care doctor who they really like. They should do so right now. And they should ask frankly how he or she plans to handle the coming wave of newly-insured patients. And now that I’m thinking of it, they should buy him some candy.
John C. Goodman: Why the Doctor Can’t See You (Wall Street Journal Opinion)
My previous posts on the primary care shortage and the economics of healthcare:
Important legal mumbo jumbo: