What Private Sector?

by Dave Schuler on May 25, 2014

In a bit of damage control over the criticism of VA waiting times Tim Noah retorts that the private sector is little better:

News stories about the Phoenix VA and some other bad actors indicate the wait can be many months, but an internal VA estimate—one based on “hard” time stamps and therefore less vulnerable to manipulation than the records allegedly falsified — puts the average wait at about 21 days.

Directly comparable data for the private sector are unavailable. But a 2014 survey of physician wait times found the average private-sector wait time to be 18.5 days – two and a half days less than at the VA. In Boston, which has a high concentration of top-quality private-sector hospitals, the average wait time was 45.4 days.

He’s right that there are potentially long waiting times in healthcare beyond the Veterans Administration. He’s wrong in thinking of it as the “private sector”.

The number, size, and placement of hospitals aren’t determined by market forces. They’re determined by state regulators and physicians in collaboration. The same is the case with the number of doctors and nurses. Med schools are accredited by the Liaison Committee on Medical Education, essentially an arm of the American Medical Association, the physicians’ guild. It’s a little more complicated in nursing but the final outcome is the same: the number of nurses that are trained is determined by a guild.

Add to that the two-thirds of healthcare spending that derives from government in one form or another and you have our healthcare system. Describing any part of it as “the private sector” is, at the very least, a great exaggeration. It’s as centrally planned as Stalin’s Soviet Union.

Note that I’m not arguing for a free market healthcare system. I’m just the little boy pointing out that the emperor has no clothes, in this case that there is no private sector healthcare worthy of the name.

Rather than setting up false dichotomies between government healthcare and private sector healthcare I think we would be much better served by wondering why so large a proportion of the total welfare produced by our system is reaped in the form of producer surplus.

{ 5 comments… read them below or add one }

Will Truman May 25, 2014 at 10:39 am

Medical schools aren’t the throttle point for doctors. Plus, the AOA also licenses med schools and would love to see more DO programs. But medical schools are expensive which is a problem and even if we added more the end result would be fewer foreign med students in residencies. Residency slots are the bottleneck.

... May 25, 2014 at 10:58 am

Describing any part of it as “the private sector” is, at the very least, a great exaggeration. It’s as centrally planned as Stalin’s Soviet Union.

Okay, that last is a bit of an exaggeration.

Frankly the US medical system reminds me of a scene from that greatest of American comedies, Apocalypse: NOW!:

Willard: They told me that you had gone totally insane, and that your methods were unsound.

Kurtz: Are my methods unsound?

Willard: I don’t see any method at all, sir.

Dave Schuler May 25, 2014 at 11:45 am

Residency slots are the bottleneck.

The Medicare system subsidizes each and every medical resident to the tune of approximately $80,000 a head.

I think that importing foreign-trained medical professionals is immoral but that’s another subject.

It’s arguable that the bottleneck is due to the limits on Medicare’s funding of residencies but I think that places the cart before the horse. The relationship between residencies and Medicare funding was part of the Faustian, Fordist bargain that created the Medicare system.

steve May 25, 2014 at 2:13 pm

“The Medicare system subsidizes each and every medical resident to the tune of approximately $80,000 a head.”

Medicare funding for residencies has been frozen since 1997, and it is correct that the bottleneck is at the residency level. The AMA does not really control the number of slots. We can start a residency anytime we want. I have looked into it. However, we wont get funding so no way it will happen. (New med schools are popping up pretty quickly. Not that hard to get approved. We just went through that process. The hard part is the funding.)



Will Truman May 25, 2014 at 10:46 pm

Wow, thanks for that link, Steve. It confirms a lot of what I have been saying about the doctor shortage.

My Alma Mater has been wanting a med school for years and finance has always been the biggest obstacle. I have also lived in states without med schools and when it comes up the two biggest issues are money and population centers. Maybe accreditation would have been a further issue, but med schools are not like law schools when it comes to operational costs.

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