Steven Chapman points out the awful truth on universal coverage in an op-ed in the Chicago Tribune:
There are only three ways to pay for this expansion of health-insurance coverage: increased taxes, reduced benefits or shiny gold ingots falling out of the sky. Voters emphatically prefer the latter option, so that is the one most likely to be embraced by Congress and the administration.
Actually, there is another way: increased supply. Nobody seems interested in taking the steps that would lead to that.
It is possible for costs to go down. We’ve seen that happen in any number of industries and it has always been a consequence of increased supply, usually brought about by a combination of eliminating monopolies and technology.
The AMA is now attacking the public option precisely because it fears it will lower compensation for doctors. So at least they seem convinced costs could go down.
It does not necessarily follow that aggregate expenditures on health care will decline due to increased supply, it is just highly likely that unit prices will decline.
From the perspective of the nation as a whole may spend more on health care services, although we will receive more “heath care.”
As an individual consumer I’m more concerned that unit costs go down.
The key point is that a larger supply, particularly a larger supply of primary care (however supplied) and especially considering the increased demand in the form of universal coverage, is likely to reduce aggregate expenditures from what they would be in the absence of the supply increase.
Unless you prefer price controls, which I think is the alternative.
While I was mowing the lawn this afternoon I thought about your observation, Drew, and, yes, that’s true as far as it goes. If the increase in supply is no more than to effect a 20% reduction in demand and the increase in the demand is 20%, it’s a wash. I’m thinking of a significantly larger increase in supply than that. That’s been achievable to one degree or another for decades.
There are lots of areas that used to be labor intensive that are now much less so. Agriculture is a perfect example. Telephony used to be labor intensive—all those switchboard operators have been replaced by analog and now digital switches.
I think that physicians will always be necessary, we will always have physicians, and that they will always be more highly compensated than they were, say, a century ago relative to median income. However, I think what they’ll be doing will be different than what they’ve been doing for the last couple of decades, a lot of which could have been automated to a much greater extent than it is now.
My comment wasn’t intended to be metaphysical, just Econ 101.
If today we purchase 10,000 “units” of health care for $10 per unit, we (the country) spend $100,000.
If, with more physicians, price goes to $9 (-10%) but purchases go to 12,000 (after all, that’s the complaint: people don’t get health care because its “unaffordable”) then expenditures end up at $108,000, an increase.
This is one reason single payer systems ration, they didn’t accomplish the goal of overall expenditure reduction. And they didn’t introduce price to the buyer…………hence demand.
I’m open to the notion of increasing physician supply, but beware systems that do not allow all mechanisms of basic economics to operate.
BTW – How’s the lawn look? And did you wear your sunscrean young man??
I took Econ 101, too, although more years ago than I’d care to admit to. Suffice it to say that the term “rent-seeking” hadn’t been coined yet and in 9 quarters of economics I didn’t hear the words “externality” or “incentive” once. Although physician supply is a component of the supply of healthcare I don’t believe it’s the only component.
The lawn looks great considering that it was started from seed in November 2008. I should take pictures. It’s almost ready for the dogs to run on, at which they will be very much relieved. They have had few chances to run in the last year.
I didn’t wear sunscreen but I have something of a southern habit: I wear long pants, long sleeves, hat in all but the hottest weather.