Why do many doctors’ offices have answering machines with this initial response? Price controls. Why does it take so long to get an appointment, if one is even available? Price controls. What will happen if our next president, in the name of universal healthcare, increases third-party responsibility for medical care? More price controls.
United States healthcare spending is escalating faster than growth in our gross domestic product. This trend, mixed with technological advancement and an aging population distribution, is unsustainable. Our government finances approximately 50 percent of healthcare spending. The Centers for Medicare and Medicaid Services reported medical spending was more than 16 percent of GDP in 2007. In 10 years it is projected to exceed $4 trillion and comprise nearly 20 percent of GDP. The Medicare trust fund is expected to become insolvent by 2019. As a result, Medicare and Medicaid control prices to restrain spending. Market forces are foregone. Price controls lead to shortages. Quality of care deteriorates, and you have difficulty getting to talk to a nurse or doctor.
This week Congress is debating further cuts to Medicare reimbursement superimposed on annual inflationary erosion of fee schedules. Physicians’ office rent, employee, and other overhead costs continue to increase. They are relying upon answering machines rather than nurses to triage phone calls. Subsequently, access to care is further jeopardized for many Americans. Increasing overhead and liability concerns, in the face of declining reimbursement, lead physicians to decrease availability for the indigent and uninsured. Only half the nation's doctors are accepting new Medicaid patients, because reimbursement is insufficient to cover the costs and inherent risks of providing care. Michigan, where I practice, is expected to face a 12 percent doctor shortage by 2020. National studies reach similar conclusions regarding physician shortfalls. Graduating medical students, with debt up to $200,000, are rationally less likely to consider careers in lower paying primary care specialties.
Medicare price controls and Byzantine bureaucracy have resulted in a misallocation of healthcare resources. Primary care shortage is a perverse outcome. Over two-thirds of healthcare expenses are influenced by behavioral factors. Two-thirds of U.S. citizens are overweight, 20 percent smoke tobacco, and alcohol consumption is epidemic. People need their internists, family physicians, and pediatricians. They are the most qualified to help patients with preventative health care and chronic disease management. These primary care coaches can help them with expensive health problems potentially under personal control, yet primary care residency positions remain vacant, and emergency rooms are overcrowded.
Some argue that medical care demand is inelastic, the quantity of care demanded is not sufficiently influenced by prices, and increasing consumer responsibility for payment will not curb healthcare spending. However, much of healthcare is not emergent. Many patients are sophisticated enough to become informed healthcare consumers, as they are for other goods and service. Prices effectively allocate scarce resources. Half of the United States population spends very little on healthcare, while five percent of the population consumes almost half of the total amount. There is opportunity for a more just allocation of the $2 trillion dollars spent annually, on healthcare in the United States. The RAND Health Insurance Experiment, completed in 1982, identified considerable price elasticity, wherein some personal financial responsibility for health care did not significantly affect quality of care.
Galen Institute founder Grace-Marie Turner, at this year’s Acton University, prioritized three social justice principles for healthcare reform: human dignity, subsidiarity, and charity. As humans created in the image of God, we have the responsibility to care for our health. Secondly, care of the poor, vulnerable, and those unable to care for themselves ought to occur at a level of society closest to those in need. Government should be the provider of last resort, not the first. Finally, charity must be sustainable: resources are not unlimited and so in health care as in every other form of charity, it is important to match the available assistance with genuine need.
The common good would be better served by market oriented reforms coupled with compassionate subsidization for the poor and vulnerable, rather than by expanding third-party healthcare. The American Medical Association proposal for healthcare reform, which incorporates these precepts, is compelling. Tax law changes could more justly allocate the $120 billion federal tax subsidy for employer-provided health care to provide millions with access to health insurance, and improve family security. Insurance industry reform, including measures increasing inter-state competition, could foster premium affordability. People might take better care of themselves with increased incentives for improving personal health and with the help of primary care physicians.
It will take sound economics working in concert with good intentions to bring about real health care reform that provides more and better access to the people who need it. Government expansion and price controls won’t take us toward that goal.