Inevitable Result of Price Controls, Health Care Edition

Well, it turns out that the laws of supply and demand do indeed apply in the health care field.  Obamacare and before it Romneycare combine government subsidies of demand with cost controls mainly consisting of price caps on suppliers.  The results are exactly what any college student could predict after even one week of microeconomics 101:  shortages.

First, from the WSJ

A new survey released yesterday by the Massachusetts Medical Society reveals that fewer than half of the state's primary care practices are accepting new patients, down from 70% in 2007, before former Governor Mitt Romney's health-care plan came online. The average wait time for a routine checkup with an internist is 48 days. It takes 43 days to secure an appointment with a gastroenterologist for chronic heartburn, up from 36 last year, and 41 days to see an OB/GYN, up from 34 last year....

Massachusetts health regulators also estimate that emergency room visits jumped 9% between 2004 and 2008, in part due to the lack of routine access to providers. The Romney-Obama theory was that if everyone is insured by the government, costs would fall by squeezing out uncompensated care. Yet emergency medicine accounts for only 2% of all national health spending.

The emergency room data is fascinating, as crowded emergency rooms supposedly overwhelmed by the uninsured was such an important image in the campaign to pass Obamacare.  More on this from Q&O:

Hospital emergency rooms, the theory goes, get overcrowded because people without health insurance have no place else to go.

But that’s not the view of the doctors who staff those emergency departments.
The real problem, according to a new survey from the American College of Emergency Physicians,isn’t caused by people who don’t have insurance — it’s caused by people who do, but still can’t find a doctor to treat them.

A full 97 percent of ER doctors who responded to the ACEP survey said they treated patients "daily" who have Medicaid (the federal-state health plan for the low-income), but who can’t find a doctors who will accept their insurance…."The results are significant," said ACEP President Sandra Schneider in prepared comments. "They confirm what we are witnessing in Massachusetts — that visits to emergency rooms are going to increase across the country, despite the advent of health care reform, and that health insurance coverage does not guarantee access to medical care."

As I have been saying for a long time, the Obama health care nuts do not have any secret, magical idea or plan for cutting health care costs.  In fact, as I have written here and here, we should expect Federalization to exacerbate the bad information and incentives that make health care more expensive.  The only idea they have, in fact, is the only one that anyone ever has in government for this kind of thing -- price controls

Over the weekend, The Washington Postpublished a Q&A-style explainer on the Independent Payment Advisory Board—the panel of federal health care technocrats charged with keeping down spending growth on Medicare.

The details are complicated, but the gist is simple: If spending on Medicare is projected to grow beyond certain yearly targets, then it’s IPAB to the rescue: The 15-member panel appointed by the president has to come up with a package of cuts that will hold Medicare’s growth in check. If Congress want to override that package, it only has two options: Vote to pass a different but equally large package of cuts or kill the package entirely with a three-fifths supermajority in the Senate.

The Post lays out the basic framework above. But what it doesn’t explain in any detail is exactly how those cuts will be achieved. And that, of course, is where the difficulty begins: Here’s how The Wall Street Journal’s editorial board explained it last month: “Since the board is not allowed by law to restrict treatments, ask seniors to pay more, or raise taxes or the retirement age, it can mean only one thing: arbitrarily paying less for the services seniors receive, via fiat pricing.” Medicare already centrally sets the prices it pays for the services of doctors and hospitals. Given the board's limitations, the most likely cuts we’ll see from IPAB, then, will be arbitrary, quality-blind reductions in these payments (though hospitals will be exempt from cuts for the first couple years).

We know what happens next: Providers stop taking on new Medicare patients, or drop out of the system entirely. In Medicaid, which pays far lower rates than Medicare (which pays somewhat lower rates than private insurance), this is already common: As one emergency physician recently told The New York Times, “Having a Medicaid card in no way assures access to care.” If IPAB cuts Medicare provider payments down to the bone, it could end up transforming Medicare into a seniors’-version of Medicaid.

  • Dr. T

    I'm a clinical pathologist, and I've observed that physicians cope with increased workload (in their offices, in ERs, and in hospitals) by doing the following:

    1. Decreasing the amount of time spent talking with and examining each patient.
    2. Ordering more lab tests, imaging studies, and consults to make up for the lack of a detailed history and a thorough exam.
    3. Shoehorning (misclassifying) patients into common patterns because they lack the time (or the ability) to diagnose the more difficult cases.

    The bottom line: More office visits are needed to nail down correct diagnoses, more unneeded tests and procedures, and more misdiagnosed patients who sometimes go for years without being correctly treated. This wasteful process is responsible for a large portion of our increased health care costs. We need more physicians to spread the workload and to reduce costs through competition. But, the federal government believes we have too many physicians and blocks all attempts to increase their numbers: no new medical schools, no expansions of existing medical schools, no increases in residency training slots, and tight restrictions on the number of foreign medical graduates allowed into the USA. I believe that the federal government has longed for and worked to create a health care crisis to justify stepping in and nationalizing the entire health care system.

  • Fred Z

    I'm Canadian and I had hoped you Americans were smarter than us.

    It seems that you are in fact even more stupid than we are, because you had our example to look at, the UK too, before you jumped in.

  • NormD

    Re: Dr T

    "But, the federal government believes we have too many physicians and blocks all attempts to increase their numbers: no new medical schools, no expansions of existing medical schools, no increases in residency training slots,"

    How does the government do this?

    "and tight restrictions on the number of foreign medical graduates allowed into the USA."

    I understand how the Feds could do this, but I wonder if someone (existing docs?) is lobbying for this restriction?

    I have read that ObamaCare will try to limit medical tourism to force people to use American docs.

    More and more docs seem like a guild.

  • tomw

    NormD and Dr T.... isn't it the AMA that is lobbying for fewer slots and the restriction on foreign medical graduates? I know I read during the WJC administration that the Feds were paying the medical schools to offer fewer slots, and I thought it was at the behest of the AMA, trying to keep their incomes higher by reducing competition.
    Thing is they forgot that old people are more prone to ailments, and the clump of old people that result from the 'WWII Baby Boom' are just starting to fill those Medicare compensated waiting rooms.
    Real Soon Now I am sure that the pResident or minions will announce a panel to determine the solution to non-availability of health care to Medicare clients. Likely result, the Feds will announce that state licensing must be approved by the Federal Government to insure equality of service, and all licensees must agree to provide Medicare clients service to keep their license active. The docs will not work for them self any more, but will be Fed stooges. I can hardly wait.
    Most will quit. Declare bankruptcy on their practice and duck any of their school loans that have yet to be repaid. { I know Docs with loans that date back 20 years .... }
    tom

  • Dr. T

    @NormD: The federal government provides a significant portion of the funding for medical schools. The funding is based on student enrollment. However, if a medical school tries to increase the numbers of students, the federal government threatens to reduce funding. If a university tries to create a medical school, it will be denied federal funds.

    Hospital residency training positions have been federally funded (via Medicare) for decades. The federal government decides how many residencies of each specialty it will fund at each participating hospital. When the feds decided that there were too many specialists, it eliminated many residency slots for specialties (surgery, cardiology, neurology, gastroenterology, pathology, etc.) and reassigned those slots to internal medicine, pediatrics, and family practice. The federal government also reduced residency slots that can be filled by foreign medical graduates.

    @tomw: The AMA wishes it had the powers ascribed to it by the general public. It isn't very powerful and has only moderate lobbying clout. Fewer than 25% of practicing physicians belong to the AMA. The AMA has no control of physician licensure (state governments do that), boarding and credentialing of physicians (independent specialty boards do that), or funding of residency slots (hospitals and the federal government do that). The AMA is a partner in the organization that accredits medical schools, but the accreditation process doesn't control class size.

    In the past, the AMA opposed the expansion of medical schools and the increased admittance of foreign medical graduates, but it was only the federal government's opposition that mattered. The AMA of today sucks up to the federal government and lobbies for higher payment rates from Medicare and Medicaid. The AMA is not trying to restrict the numbers of practicing physicians because too many physicians now complain about workload more than they complain about income. Many physicians work over 60 hours a week to keep up with their practices, and some of them would cut back on hours if they could transfer patients to other physicians.

  • Gentian Violet

    Dr T,
    What you describe is also what is happening in Canada, where the provincial governments are responsible for administering health care along with extra money and certain guidelines from the federal government. The result is the same --- shortages of doctors. But the doctors are not responsible for this situation. They are overworked, burning out, and retiring early. This is entirely due to cost-saving by the federal government, whose only plan to control costs is to starve the system, leaving it to the providers to figure out how to deal with it. Just as NormD and tomw, the government has found it useful to demonize the doctors in order to get the public to back the national scheme. I'm surprised there are any doctors left in this country.
    As it is, there is a very large and undocumented loss of human productivity caused by the fact that a significant percentage of the population is always on a awaiting list. This cost is not included when calculating the cost of the medical care system. I have just spent 4 months waiting to see an orthopedic surgeon, and will wait another four months to have simple standard arthroscopic surgery done. Until then I am in constant pain and am taking large amounts of medication, which could have long-term or permanent impact on my health in itself. What works for the system in the short term does not work for the patient. It also leads to inefficiencies because your medical condition is changing as you sit on a waiting list. The specialist wants up-to-date results, and so you end up having to go back to the lab or the imaging center for a repeat of your diagnostics.
    Whatever you end up doing for your health care system, do not copy Canada.

  • Jon

    @NormD,

    "How does the government do this?"

    It's called licensing. Read Murray Rothbard on government backed monopolies if you are more interested in the topic.

    @Tomw,

    It doesn't matter who lobbies for it, in the end it is the government that creates the monopolies and enforces the monopolies.

  • Scott MD

    The shortages in medicine are also exacerbated by the male to female ratios in medical schools.
    There is ample documentation that women do not practice medicine for as many years as men do.
    On a weekly basis, they see on average fewer patients.
    the creation of shortages feeds directly into the hands of those who wish to control the practice of medicine.
    Less medical care given, the less the overall system will cost.

  • chuck martel

    Wait a minute. Barak Hussein Obama, Kathleen Sibelius and Nancy-Ann DeParle are really smart, cool people that know lots of stuff about health care and economics and other important things. Are you intimating that these dedicated public servants could have goofed up a simple thing like the health care market for only 300 million people? You're just being picky.

  • IgotBupkis, President, United Anarchist Society

    they treated patients “daily” who have Medicaid (the federal-state health plan for the low-income), but who can’t find a doctors who will accept their insurance….

    I believe the answer here is clearly obvious. FORCE doctors to take Medicaid...

    Right?

    :-/

    (That whistling sound you hear is "Bridge on the River Kwai" as we march down The Road to Serfdom...)

  • IgotBupkis, President, United Anarchist Society

    >>> But, the federal government believes we have too many physicians and blocks all attempts to increase their numbers: no new medical schools, no expansions of existing medical schools, no increases in residency training slots, and tight restrictions on the number of foreign medical graduates allowed into the USA. I believe that the federal government has longed for and worked to create a health care crisis to justify stepping in and nationalizing the entire health care system.

    Uh, Doc, I'm pretty sure the AMA has had a strong hand in this, too. I seem to recall there was a lot of lobbying back some 15-20 years ago in terms of
    a) how doctor salaries were calculated for "reporting" purposes... the docs could see that people thought their actual salaries/incomes were outrageous (not that fully I agree with that assessment) and thus people were heavily resentful of it.
    b) The development of the Nurse Practitioner and other related semi-doctoral functions -- The conceded this but did so with the contraction of the med schools classes and the number of students allowed therein.

    This, I believe, is a case where you have a defacto Medical Guild, in the classic sense of the word, 'guild', and the government is more than happy to consort and conspire with them to do things to f*** with the natural economic adjustments that would result in a truly free-market system.

  • IgotBupkis, President, United Anarchist Society

    >> It seems that you are in fact even more stupid than we are, because you had our example to look at, the UK too, before you jumped in.

    Not all of us are stupid, Fred, just the libtards. Unfortunately, they have been steadily growing in power over key systems used to shape and form public opinion.

    And the lure of "Free Stuff" appeals to anyone young enough not to know better, and particularly those not trained to think critically and ask intelligent questions, as well as to the libtards.

  • IgotBupkis, President, United Anarchist Society

    > More and more docs seem like a guild.

    DUUUUUUUDE!!!!

    They've been a freakin' guild for more than 40 to 50 years!! Probably since well before that. There were just limits on what people would tolerate from their government until the 50s or 60s kicked in.

  • caseyboy

    Obamacare makes perfect sense if you focus on the true objective, a complete government takeover of the health care system. Once Obamacare screws everything up to a fairthewell and insurance companies close shop the serfs will beg for the government to take it all over. For a good old progressive the phrase "the ends justify the means" is appropriate.

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  • Sam L.

    Fred, my good man, many of us do see the problems you have up there. Unfortunately, and stupidly, we have elected Democrats--and that's what THEY want, because they know better than we do what we should have. IgotBupkis knows that.