I wanted to draw your attention to a paper from David Cutler and Dan Ly published in the Journal of Economic Perspectives analyzing U. S. healthcare costs (hat tip: James Hamilton). The paper is well worth reading in it entirety—it’s chockful of interesting tidbits, e.g.
Currently, the United States imports a significant share of its physicians. Almost one-quarter of U.S. physicians were trained abroad (Simoens and Hurst, 2004). The
leading supplier is India, though a significant number are U.S. residents who go abroad for training. The shortfall of U.S. doctors seems to be driven not by a lack of supply but by a lack of medical school openings (AAMC, 2010a).
or
Differences in demand do not appear to drive much of the international variation in use of medical services. While the U.S. population is sicker than the Canadian population in some ways (for example, obesity rates are higher in the United States), the difference in care provision seems to occur even conditional on health status. For example, the greater use of intensive medical therapy after a heart attack is true even controlling for the characteristics of the heart attack patient (Ko et al., 2007). Similarly, people in the United States use mental health services more than people in Canada, but the additional use is entirely accounted for by the population with less-severe illness (Kessler, Frank, Edlund, Katz, Lin, and Leaf, 1997). People with severe needs are treated similarly in the two countries. Nor are out-of-pocket prices lower in the United States; out-of-pocket payments in the United States are actually higher than in most countries.
The paper can be summarized as finding that about 40% of the difference between U. S. healthcare costs and those of other OECD countries can be attributed to higher administrative costs in the U. S., 31% can be attributed to higher provider costs, and 14% to more procedures for hospitalized patients. An even shorter summary would be: incentives matter.
We are unlikely to bring our healthcare costs within an affordable range by tweaking the healthcare system around the edges. We could achieve costs comparable to those of other countries by going to a single-payer model and abandoning the fee-for-service compensation model in favor of a capitation system. Those aren’t tweaks.
Unfortunately, even those substantial reforms are unlikely to be enough. They would only slow the growth in healthcare costs while reducing the cost basis over time if politicians had the political will to do so which is not apparent. In addition, healthcare costs are rising not only in the U. S. but everywhere. I believe that some of that can be attributed to the perverse U. S. healthcare system but not all of it. The urgency for a technologically-driven radical revision in how healthcare services are provided could hardly be more urgent.
Regarding the original article, if we increase the number of med schools without increasing the number of residency slots, all we’re doing is replacing foreign-trained doctors with American-trained. Might be worth doing for other reasons, but residency is the real bottleneck. With residency slots, you can import what you need if it comes down to it.
(Sometimes I wonder if the path to mid-level providers being the first-tier solution for care isn’t by way of having all of the primary care docs being foreign. People may gawk at not seeing a “real doctor”, but they’re less likely to if the MLP is American and the MD is not.)
(Oh, and I agree with your point about biting around the edges.)
A corollary of what you say in both this and the surrounding posts: changing the incentives for technological innovation in this field could also result in a bunch of job growth – especially the sort of medium-skill technical jobs that are most needed nowadays.
Not sure how you change those incentives from where we are now. Blow it up and start all over? I’d rather not, but I can see that being the only way forward.